Mileage Pro The Insider's Guide to Frequent Flyer Programs

RAISE THE SUBJECT OF AIRLINE alliances in a group of travel savvy consumers and watch the sparks fly. The universe of frequent flyers divides roughly evenly between those who give alliances a thumbs up and those who think alliances are an empty promise or, worse, a sinister sleight of hand.

We cannot contest the fact that alliances have been good for airlines fortunate enough to qualify for membership. The cost savings and revenue increases are demonstrable and substantial.

But what are the real benefits to the traveling public?

Certainly the airlines themselves have been guilty of overhyping alliance benefits to their customers, eliciting a healthy dose of skepticism from wary travelers.

The principal accusation of alliance detractors—that the cooperation among alliance partners is anti-competitive and inevitably leads to higher ticket prices—is a valid concern, albeit an as yet unsubstantiated one. The jury is still out on whether groups of airlines working together as alliances can charge more for tickets than airlines operating, and competing, independently.

Naysayers notwithstanding, we are in the camp that believes alliances are, on balance, positive for travelers and especially so for frequent flyer program participants.

Background: Where Alliances Came From
Close relationships between airlines are nothing new. For all the smash mouth competition among airlines, the industry operates within a highly cooperative framework. Airlines routinely sell and accept each other’s tickets, transfer luggage between each other’s flights and offer other conveniences. It always seems logical for non-competitive airlines to take that kind of cooperation to the next level, sharing codes, creating joint fares and participating in each other’s frequent flyer programs. Airline alliances were just another step in that direction.

The history of airline alliances goes back to 1993 when Northwest and KLM were granted antitrust immunity to operate almost as a single carrier. They began by sharing codes on selected flights to the United States and to Europe, following that by integrating their mileage programs. By the end of the year, the two carriers were jointly operating all U.S. and

European services. Some called it a virtual merger.
By whatever name, the tie-up was a financial success. In 1994, the first full year of operating cooperatively with KLM, Northwest posted a $295.5 million profit, the most of any U.S. carrier that year.

That outsized performance was attributed in large part to alliance-driven effects such as enhanced revenues and pared-down costs. These trends captured the attention of other large airlines, both in the United States and abroad, leading to the subsequent move toward more airline partner networks.

It was envisioned that the Northwest/KLM tie-up would expand to include Continental, Alitalia and others, and operate under the banner of Wings, a working name for the group. But Wings never fully materialized, and by 2004, Northwest, KLM, Continental and Alitalia had all signed on to the Delta led alliance, SkyTeam.

(Another alliance, Qualiflyer, which at one point included Air Europe, Air Littoral, AOM, Austrian, Crossair, Lauda Air, Swissair, Sabena, TAP Air Portugal, Turkish and Tyrolean, never truly reached global scale and was finally disbanded in 2003.)

The Promise of Alliances
Love ’em or loathe ’em, global alliances are a fact of travel life. By the end of 2005, approximately 80 percent of the world’s airline seats will be offered by airlines participating in one of the three alliances: oneworld, SkyTeam and Star Alliance. (See the accompanying table on page 129 for profiles including participating airlines).
In each alliance, the member airlines work closely together in three broad areas, as follows.

Many Airlines, One Network
From a consumer standpoint, the main goal of the alliances is seamless worldwide travel. To that end, participating airlines have more or less integrated their flight routes, coordinating their schedules and flying from common terminals at shared hub airports so passengers connecting from one alliance partner to another can do so with minimal effort and inconvenience.

With an integrated route network in place, airlines in an alliance offer fares that favor a combination of alliance partners, including round-the-world fares that showcase the alliance’s global network, permitting travelers to circumnavigate the earth exclusively using members of a single alliance. And the airlines link their mileage programs to reward travelers for flying within the alliance network.

What all this cooperation means to international flyers is a streamlined travel experience.

Following is a list of the key alliance consumer benefits and a note in parentheses on how they are obtained:

• Travelers can fly between hundreds of countries using a combination of alliance airlines (integrated route network).
• Travelers have the ability to buy a single competitively priced ticket (pricing coordination, marketing co-op).
•  Because alliance partners share airport terminals, connections require no change of terminals (terminal co-location).
•  If it is necessary to change planes en route, the connecting time will be short but adequate (coordinated schedules).
• Check in once on the outbound, once on the return. Each time, baggage is checked through to the final destination (terminal co-location, interline baggage coordination).
• Elite program members and first and business class passengers have access to lounge facilities at most airports (mileage program integration, lounge sharing).
• Travelers receive a uniform minimum standard of service and safety from alliance members (alliance-wide standards must be met by all participating members).
• Travelers enjoy expanded frequent flyer program benefits (enhanced multilateral program participation).

Frequent Flyer Program Integration
The core alliance “product” is a single global flight network cobbled together from the route systems of participating carriers. The key incentive when traveling with alliance partners is the link-up among the alliance carriers’ frequent flyer programs.

For starters, every airline partner of each alliance is an earning and redemption partner in the mileage programs of every other member of the same alliance.

So, for example, a member of American’s AAdvantage program can earn and redeem AAdvantage miles on the flights of all airlines participating in the oneworld alliance, of which American is a member. And members of the programs of all other oneworld airlines may earn and redeem miles for flights on American. (Note that American has partners in its program that are not members of the oneworld alliance including Alaska Airlines, El Al, Hawaiian and Japan Airlines. As you will see, miles earned for flights on alliance partners are more valuable than miles earned on non-alliance carriers, since the former count toward elite status and the latter do not.)

The alliance benefit goes beyond simply pumping up the roster of earning and redemption partners of the alliance airlines’ programs. To distinguish alliance partners from mere marketing partners, and to increase the cachet of the alliances themselves, special alliance-linked benefits are reserved for the most frequent travelers.

Elite Qualifying Miles on Alliance Partners
In a telling sign of the commitment to their respective alliances, member airlines award elite qualifying miles in their programs for flights on any and all alliance airline flights. This is significant alliance benefit and a powerful incentive for travelers to focus their travel on members of a single alliance.

For instance, rather than being restricted to flying Delta to earn elite qualifying miles, members of Delta’s SkyMiles program can earn elite status by flying any SkyTeam airline, including Continental and Northwest.

Caveat: As one alliance Web site warns: “Accrual is subject to each airline’s program rules. Some restrictions apply.” In particular, program members should be aware of restrictions regarding “eligible fares.” U.S. programs tend to award actual flown miles for both reward and elite qualification for most, if not all, published coach fares. When they launched their programs, many European and Asian carriers awarded only a portion of flown miles for discounted coach fares, or none at all, reasoning that low prices should be incentive enough. While there has been some movement to match U.S. carriers’ more inclusive policy, fare restrictions remain in place at some airlines, which can trip up unwary consumers.

Alliance-Wide Elite Status and Perks
Based on the elite status a traveler has earned in a specific airline program, he or she is awarded separate elite status within the alliances. This entitles travelers to special benefits and recognition when they fly on any airline within the same alliance.

The qualification criteria and benefits vary by airline and alliance as follows:

oneworld
Elite members of oneworld airlines are awarded Ruby, Sapphire or Emerald status in the alliance, which entitles them to the following on all oneworld airlines:

• Ruby members receive priority check-in at business class counters, preferred seating, priority standby for whichever class of service they are booked in when flying on any oneworld airline. 
• Sapphire members receive the same benefits as Ruby, plus access to business class airport lounges when international travel is involved.
• Emerald members receive Ruby benefits, plus access to first class airport lounges when international travel is involved.

oneworld status is awarded according to the status earned in the programs of participating airlines. For example, members of American’s AAdvantage program who have earned Gold elite status receive Ruby status in oneworld while Platinum members earn Sapphire status and Platinum Executive members earn Emerald status.

Star Alliance
Star Alliance has two elite tiers: Silver and Gold.

• Silver members receive priority waitlisting on sold-out flights.
• Gold members receive Silver benefits plus priority airport check-in, priority baggage handling, extra baggage allowance, priority boarding and airport lounge access.
• Members of United’s loyalty program who have reached the two highest tiers in Mileage Plus, 1K or Premier Executive, automatically receive Gold status. Premier members of Mileage Plus are accorded Silver status.
• Silver Preferred members of US Airways’ Dividend Miles program earn Silver status; Gold Preferred and Chairman’s Preferred members are given Gold status.

SkyTeam
SkyTeam has two elite tiers: Elite and Elite Plus.

• Elite members receive access to airport lounges when flying international first or business class, preferred seating, priority waitlist and standby, priority check-in and priority boarding.
• Elite Plus members receive Elite benefits plus access to airport lounges when flying on or connecting to/from an international flight operated by a SkyTeam carrier, priority baggage handling, and a guaranteed full-fare economy reservation even on sold-out long-haul flights (requires 24-hour notice).

Members of the programs of Continental, Delta and Northwest who have reached Silver or Gold status automatically receive Elite status. Platinum members of those programs receive Elite Plus status.

Cost Savings
While of little interest to consumers, airlines participating in alliances can realize significant cost savings by sharing facilities such as sales and ticket offices, by using their combined purchasing power to wrest volume discounts from suppliers of everything from jet fuel to in-flight meals, and by otherwise capitalizing on economies of scale realized through alliance participation.
In theory, those savings are ultimately passed along to all travelers by offering lower ticket prices.

The Payoff for (Some) Frequent Flyers
In the early stages of the alliances, benefits were limited to those traveling internationally. That is simply because the initial alliances never included more than one carrier from any single country.
That concept is still true for the oneworld alliance. An American AAdvantage member who lives in the United States and does not travel internationally will never earn elite qualifying miles on other oneworld carriers or otherwise benefit from the oneworld’s global route network.

However, the situation has changed for the better at SkyTeam and Star.

Both alliances now have more than one U.S. airline partner. Continental, Delta and Northwest are all SkyTeam members. Both United and US Airways participate in the Star Alliance. That means even domestic-only travelers can still receive significant added value from these groups. A member of United’s Mileage Plus program, for instance, can earn elite qualifying miles for flying on US Airways. And having achieved elite status in the Star Alliance, he or she would be granted special recognition and benefits when traveling with US Airways.

Still, the biggest payoff from alliances is reserved for those travelers who regularly fly beyond the borders of their home countries. When everything works as advertised, flying on alliance partners is likely to be the quickest, most comfortable and hassle-free way of getting from point A to point B, short of a nonstop flight.

And from a miles and benefits standpoint, travel within the alliance networks can be uncommonly rewarding.

REMEMBER THIS:

• Global airline alliances are a fact of travel life. Use them to your benefit.
• Given a choice between an airline that participates in a global alliance and one that does not, choose the former. You will benefit from a worldwide network of flights when earning miles and when redeeming them for free flights.
• Familiarize yourself with the partners associated with your primary carrier’s alliance. Use them whenever possible to earn elite qualifying miles.