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Saturday, April 1, 2023

As Airline Rollovers End, Buyers Assess Status-Loss Fallout

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The pandemic-era rollovers of elite loyalty status and looser qualification rules among U.S. airlines are coming to an end, potentially jeopardizing the perks of millions of frequent travelers. While some travel managers report being “bombarded” with emails from travelers asking for help in retaining their status, they also are looking for ways to mitigate the fallout, including shifting share or paying to recoup lost amenities. 

Several U.S. airlines last year ended their rollovers of elite status and in some cases increased qualification levels for certain tiers. For Delta Air Lines and United Airlines, that rollover period ended Jan. 31; for American Airlines, it ends Feb. 28. It’s likely a good number of travelers either have been downgraded in status or have lost it completely because still-recovering 2022 business travel volume didn’t enable them to requalify for 2023 status.

StatusMatch, which automates the status match-request process for individuals and airlines, estimates that there are 55 million airline elite status members globally, about 15 million of whom have such status with American, Delta or United. The technology company also estimates that about 15 million elite members globally could lose their status during the first half of 2023.

Fewer Favors

At the same time, U.S. carriers are being less flexible with corporate status exceptions, sources told BTN.

“After granting waivers in 2020 and 2021, [airlines] started to pull back last year and started dropping people’s status based on activity,” Partnership Travel Consulting SVP of global supplier engagement Bob Brindley said. “If you complained to the frequent-flyer department, last year they were a little more lenient to grant you another extension. This year, they are really pulling back on those exceptions.”

Some travel buyers agreed with that assessment. 

“Some of my people didn’t make their status, and it’s so much harder to get exceptions to the rule now because it’s so much easier to earn through credit cards,” said The Segal Group director of business operations Tracie Saunders, who cited a recent call with one carrier regarding this issue. ” ‘Don’t go asking for an exception because people are earning points through all these other avenues,’ ” she said, quoting the airline account rep. “I’m not getting the exception upgrades I would get that aren’t part of my program but had been a standard operating process of the airlines.” 

ITW director of global travel and expense management services Cathy Sharpe said, “The main takeaway now is that all the big three [U.S. airlines] have an electronic process and anything ad hoc from a relationship perspective of them doing you a favor, that has gone away.”

Delta and United representatives declined comment for this report. American would not comment on status exceptions but did explain its new process for qualifications and perks. 

It’s always hard to take a perk away. It will cause a lot of friction and dissatisfaction. For a lot of travel managers, it’s a headache they would rather not have.”

– Partnership Travel Consulting’s Bob Brindley

Still, some sources called the airlines’ shift understandable, noting that when loyalty programs are diluted with too many members, the value of the elite status is weakened. 

“At some point, this was going to take place,” JLL global category leader for travel and corporate procurement Leslie Andrews said. “The carriers couldn’t [keep] rolling them over because the value of elite status would diminish. They are at a point where they have to evaluate who is really flying.”

Some buyers, however, noted a lack of complete clarity into the airlines’ actions and pointed to different approaches by carriers.

“The way we structure corporate contracts … will include a number of statuses,” Takeda global head of meetings and travel center of excellence Michelle De Costa said. “We are finding that there is less transparency in how those are being given to us to give to travelers. [One carrier] doesn’t even let us know how we can earn more or their [calculation method]. The lack of transparency makes it really difficult.”

All three U.S. carriers have changed some loyalty program qualifications and perks, but the carrier with the biggest changes this year is American, which switched to loyalty points beginning in 2022 “to make it easier to achieve status,” according to the airline, and in December announced additional reward tiers for 2023, with the first tier starting at 15,000 points.

Programs for corporate clients changed, too. Sources said that American now gives travel managers “buckets of points” based on their negotiated contract. American confirmed there are three points categories—Loyalty Exception Points; Flex Funds, for items such as upgrades and bags; and Complimentary Unlimited Service Offerings, for items including name corrections and schedule-change servicing. 

Travel managers can redeem those points as needed, so “there is flexibility in how the travel manager can use [them],” Brindley said. 

Depending on a company’s expected travel and negotiations, the Loyalty Exception Points could add up to the same number of status nominations as last year, more or fewer. 

For carriers with fund pools that are for more than just nominations, “those funds are flexible and that makes it more applicable to your program,” Andrews said. “That gives your program very specific meaning that is tied to what your program goals are.”

Airlines generally want to limit perks, Brindley said, “but it’s always hard to take a perk away,” he said. “It will cause a lot of friction and dissatisfaction. For a lot of travel managers, it’s a headache they would rather not have.”

Status Match, Share Shift Potential

That loss-of-status headache could lead to new or expanded partnerships with competing airlines.

“I do see it impacting carrier choice,” Brindley said. A traveler who loses status, especially if that carrier was their employer’s preferred, “instead of doing all that’s possible to fly the corporate preferred carrier and take advantage of status, now they will have other considerations on who they will pick. More times they will say, ‘I’m not going to bend over backwards to fly the [preferred] carrier’ because another carrier has a similar price. They’ll get home a little earlier, and it takes that loyalty component out of it.”

De Costa said travel managers use status as a way to help move share, and “based on loyalty, there are other perks that allow for the easier journey for travelers,” she said. “Not having those tools available will drive us to move market share to the carriers that are working with us on those things and being transparent about it.”

De Costa recently started data modeling to see which travelers would not receive elevated status this year and to determine whether using other carriers could “still meet the needs of their travel patterns.” 

Saunders said that she has “travelers talking to me about switching airlines to match status.”

Indeed, StatusMatch in January saw a record 70 percent month-over-month increase in high-value travelers, many of whom the company said likely are business travelers, inquiring about obtaining status with a new airline. “It shows how this topic has become front of mind again,” StatusMatch CEO Mark Ross-Smith said in an email. 

Sharpe added that some carriers “are smart” and are putting out short-term status matches. Brindley explained that in this scenario, a carrier will give a traveler a low-level status for a defined short period, and if that traveler flies a certain amount, they will qualify for the next status level up for the next “match” period or even for the rest of the year. 

Not having those tools available will drive us to move market share to the carriers that are working with us on those things and being transparent about it.”

– Takeda’s Michelle De Costa

Company and Traveler Expenses

A lack of status for business travelers could lead to more expenses in other ways. 

Some business travelers use loyalty points to upgrade from economy class to premium economy, Sharpe said. “From a budgetary perspective, that could cost us more money. If you allow premium economy for six hours-plus for somebody who is an average person in the organization, then you are paying the difference between economy and premium instead of an upgrade or points,” she said.

In addition to upgrades, status also can give a traveler expedited security, free Wi-Fi, airline lounge access, free bags, meal and drink perks, better boarding and preferred seating with extra legroom. 

“If [travelers] can get on and off the plane faster, that adds up to an incremental cost savings or avoidance,” De Costa said.

“All of us will have to decide what we are going to pay for if the travelers didn’t earn it,” Saunders said. “The organization will have to decide if they want to continue to provide that qualify of experience even if they have to pay for it.”

The consensus among sources was that companies would not allow most of those items if purchased separately to be included in expense reports. “It will cost us a bit, but it absolutely will cost the traveler more if they can’t expense these things,” Sharpe said.

Still, some companies during the pandemic were more lenient with travel policies for those who continued to travel. “I think that could be a trend that could continue, but if we hit a recession, those benefits are quick to go by the wayside,” Brindley said. “People are hyperfocusing again on costs.”

How to Cope

Sharpe said she has been advising her travelers for six months on the possibility of not making status. Saunders has been sharing tips on an internal Teams channel about ways to get reduced costs for Clear expedited security lanes, ways to get Transportation Security Administration PreCheck trusted-traveler membership, and how to maximize the value of credit cards. 

“I’ve been intending to educate people about all the ways they can earn benefits in the travel arena because I do think a lot of our people who are traveling less will have a hard time figuring out how to earn points,” she said. 

Andrews suggested a buffer between the travel manager and traveler could determine who is awarded status.

“It depends on how the program is managed internally,” she said. “If the travel group is always doling out upgrades or making sure [certain employees] have the right status, that puts you in a position of, ‘You are not providing me with something I am used to.’ But if HR is the mediator or some other entity in the institution is the person granting that … it takes some of the exposure from the travel program. It gives you shelter.”

Nonetheless, “status is an important element,” Sharpe said. “I absolutely think there is a cost hit we are taking. I don’t think it’s the smartest decision the airlines made to not roll it one more time. I say that because you don’t want to give the other guy an opportunity to steal your business.”

A few buyers wondered if tightening status might be the sign that airlines are putting more of their resources behind leisure travel rather than corporate, “which I don’t agree with,” Sharpe said. “A leisure traveler is probably on that carrier because they do business with that carrier. Don’t discount the business travel because companies couldn’t travel the past two-and-a-half to three years. If you took business out completely, there would be a lot less leisure to be had, too.”

Saunders added that businesses still pay for blended travel. “The reason why people do leisure [with business] is because they don’t have to pay for the airfare,” she said.

Brindley can see the airlines’ perspective as well as the buyers’ who think that corporate travel will return long-term. “I think [business] is a higher yield than leisure,” he said. “Though leisure has gone up and is more than business, is it higher than business travel pricing? I find that hard to believe. And this is the hard part about these programs. If [travelers] are used to getting something and it’s taken away, that creates hardship and ill will. The carriers should be careful and prudent in how they do it.”

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