If it's been a wild ride for frequent travelers generally, it's been even wilder for those whose fortunes rise and fall in lockstep with the balance in their frequent-flyer mile accounts.

With three of the Big Six airlines in or on the verge of bankruptcy, millions of frequent-flyer program members face the possibility that billions of miles will disappear altogether. And if that uncertainty weren't enough, airlines have been tacking on extra fees and restrictions, further dulling the allure of the loyalty programs which, until recently, were routinely referred to as the most successful marketing programs ever devised.

Recognizing the programs' importance to their bottom lines, the airlines have been put on the defensive, especially concerning the recurring, and apparently escalating, complaints from program members unable to procure award seats when it comes time to redeem their miles.

Typical of the negative sentiments from frequent flyers is the following from Eric M., an independent systems consultant who makes three to four business trips monthly from Cleveland: "Over the past few years, the value of these programs has fallen way off. Elite upgrades are now few and far between. And on each of my last three award trips, I was forced to use double miles to circumvent the capacity controls. Why bother being loyal?"

In response to such complaints, the airlines point out that they are issuing mileage awards at unprecedented levels.

American boasts that the AAdvantage program, the world's largest, gave away 4,163,400 awards in 2003. United reports its 2003 frequent-flyer program performance in mileage terms: Mileage Plus members redeemed 117.5 billion miles for awards; and award travel accounted for 9 percent of the airline's flown miles for the year.

Whether measured in award tickets or miles, the numbers are undeniably impressive.

What the airlines' publicly disclosed data fails to shed light on, of course, is the degree of difficulty in obtaining awards—a key measure of a program's real-world utility. How often do consumers receive their first choice of award? How often must they settle for flights on alternative dates, or to alternative destinations? How often are they forced to use twice as many miles for an unrestricted award, because there were no seats available at the restricted level? How often were they stymied completely, forced to abandon the pursuit of an award trip altogether, due to strict capacity controls?

As a reality check, to get beyond the anecdotal feedback from travelers and the self-serving pronouncements of the airlines themselves, OAG again turned to e-Rewards to determine what real road warriors are really thinking, and feeling, about mileage programs. And to get a handle on the programs' future, we spoke to a number of industry experts, all of whom are frequent travelers as well.

Feedback from the Frontlines of Travel

In December 2004, e-Rewards fielded a survey addressing frequent-flyer program issues to a statistically significant subset of its members, all of whom reported taking at least 12 roundtrip business trips over the past 12 months. Since this was a follow-up to a similar survey conducted in August 2003 with a comparable segment of the e-Rewards membership, the results were telling not only in isolation but for the year-over-year trends they indicated. (Individual survey questions and response breakdown may be viewed here.)

The findings, according to e-Rewards general manager Bill Russo, summarize as follows:

·         Frequent travelers continue to report a downward trend in satisfaction with their primary frequent-flyer program, but the rate of decline appears to have decreased from what was indicated in the August 2003 survey (Question 1).

·         Compared to 12 months ago, frequent-flyer mileage is playing a modestly larger role in the airline-purchase decision. This represents a reversal from August 2003 when the survey results indicated that frequent-flyer mileage was less influential (Question 2).

·         Respondents attach slightly more value to their mileage than they did a year earlier—another reversal from the August 2003 survey, which showed travelers assigning less value to their miles than they had in the past (Question 3).

·         The degree of difficulty associated with redeeming miles for free airline tickets, while still significant, has dropped from the levels reported in August 2003 (Questions 4 and 5).

·         As was the case in August 2003, the strong majority of respondents are not redeeming their miles faster due to airline financial uncertainties (Question 6).

While the 2004 results are slightly improved over 2003, the big picture is of a generally low degree of member satisfaction with the programs.

Looking Ahead

Mileage programs’ mediocre performance in the eyes of their key constituency raises the question: Where do the programs go from here? Have they so disenfranchised their members that there's nothing left for them but a slow, painful decline and death, as predicted by some doomsayers? Not according to most experts.

Rolfe Shellenberger, now a management and marketing consultant, spent 31 years working for American Airlines, including a stint as project manager for the launch of American's AAdvantage program.

Shellenberger acknowledges the programs’ shortcomings and cautions there's no light at the end of the tunnel for mileage-program members. “As the cost of travel has declined, effectively lowering the cost of earning miles, the airlines have raised the ante for awards. And that trend will continue.”

But while Shellenberger admits “the delivery of awards has been compromised by bad management,” and the nickel-and-diming has risen to the level of gouging, he argues that such negatives are offset by the ease of earning miles (more partners) and the low cost of earning them (low ticket prices).

Steve Grosvald is a principal at Grosvald & Associates, a loyalty marketing consultancy, and was a marketing executive with United and Continental during the launch of both carriers’ mileage programs.

Grosvald contends that, notwithstanding a rise in consumer dissatisfaction, the programs are still winners, both for the airlines which operate them and for travelers who participate in them.

Noting that it costs the airlines less than 1¢ to discharge a frequent-flyer mile, and that miles can be sold to program members and business partners for as much as 3¢ each, he points out that the major mileage programs are important profit centers for the airlines which operate them.  “The business of selling miles is very, very profitable.”

And for the traveling public, Grosvald notes that whereas frequent-buyer programs in the retail arena typically offer paybacks between 0.75 percent and 1.25 percent, airline programs reward members with paybacks of 3 percent to as much as 35 percent, "if you play the game properly.” Bottom line: “Airline programs are a very good deal.”

Joel Widzer, author of The Penny Pincher's Passport to Luxury Travel and an elite member of Delta’s program, is critical of what he sees as the airlines’ misguided devaluation of their loyalty programs. “The value of air miles and other incentive-based points has fallen quicker than the dollar to the Euro. The sheer barrage of outstanding miles and points, which many experts estimate exceed 9 trillion, have been devalued from 2¢ to .5¢. Going for the miles seems foolish, at best.”

Nevertheless, he participates actively in Delta’s SkyMiles program, and admits he sometimes pays for higher-priced tickets in order to earn more elite-qualifying miles. “Sometimes it’s worth it.”

Harris Turner, executive director of the Frequent Travel Marketing Association, sees ever-expanding opportunities for consumers to benefit from loyalty programs—and not only programs in the travel sector. He recently paid $9.99 to join Best Buy’s newly launched Reward Zone frequent-buyer program. And he eats regularly at Charleston’s in Indianapolis to earn rebates through the Rewards Network (formerly iDine).

But he sees challenges for the travel-industry programs: The proliferation of loyalty programs threatens to distract consumers’ attention from programs operated by airlines and hotels.

For all the belly-aching about frequent-flyer programs’ decline in value, it appears the programs’ future is in no jeopardy. Consumers’ love-hate relationship with airline loyalty programs will continue for the foreseeable future, as will the programs themselves.