- The Washington Times - Friday, June 30, 2006

ATLANTA — The first frequent-flier program began in 1981 with American Airlines’ AAdvantage as a way to keep profitable business travelers flying the same airline.

Twenty-five years later, travelers and industry specialists say the programs have flown far off course from their original purpose.

Yet it’s doubtful the airlines will ever change from their present direction because the programs have turned into huge revenue producers on their own, a $4 billion industry that’s even been listed by airlines as assets in bankruptcy and merger and acquisitions negotiations.

Airlines have created a big business out of selling frequent-flier miles to outside companies that, in turn, use miles to woo their own customers.

“In the 1990s, the programs probably changed from less of a loyalty program — that’s what it was all about — more into a rewards program that now the masses of people that just don’t fly 20 times a year have the ability to earn free tickets,” said Jeff Robertson, managing director of Delta’s SkyMiles program.

Frequent-flier programs have grown to include nearly 430 million members worldwide, said Randy Petersen, editor of Inside Flyer magazine. More than 14.2 trillion frequent-flier miles are still in circulation worldwide, for an average of 33,035 miles per program member — typically enough for one free domestic round-trip ticket in the United States.

“Every single frequent-flier program in North America is profitable. It’s the best thing that ever happened to airlines,” he said. “There’s no doubt that without those programs, maybe two or three airlines wouldn’t be around today.”

The proliferation of frequent-flier-program members has prompted frequent travelers to complain the programs are flooding the skies with travelers who may be flying for free without ever having left the ground to earn a free ticket, such as earning miles through credit-card purchases or eating at certain restaurants.

Frequent fliers say the perks aren’t the same as in the past.

“What the airlines did was put so many seats in first class, when somebody puts their seat back you have the same problems you did in coach,” said Todd Good, 46, who flies 200,000 miles each year for his real estate auction business in Newport Beach, Calif. He uses his miles for emergencies, rather than pay for a full-price domestic ticket, or he donates them to charities.

But it now costs Mr. Good 50,000 frequent-flier miles to get a domestic ticket anytime he wants, as opposed to the previous cost of 25,000 miles, a level now reserved for a limited number of “saver” seats.

“From a business standpoint, they’re losing money and they have to do what they have to do to stay in business,” said Mr. Good. “On the other hand, the miles I have from years ago that I’m trying to use today don’t have the same weight.”

Delta’s Mr. Robertson said airlines haven’t communicated well the value behind the evolution of the frequent-flier program’s airline partnerships, which allow the airlines to reward loyalty in different ways.

United, American and Delta each rake in an estimated $1 billion a year from the partnerships between airlines and credit cards, restaurants and other companies that pay cash to purchase frequent-flier miles. The companies then give them to their customers, Mr. Robertson said.

“They have changed quite a bit, a transformation from ‘frequent flier’ to ‘frequent buyer,’” Mr. Petersen said of the programs.

At the same time, airlines say they try to provide perks that their most frequent fliers want, such as upgrades, advance boarding and special lines through airport security. They also work to make sure all travelers are able to use their miles for free tickets.

“Ninety percent of the time somebody asks for a flight, they’re able to get the flight they want. Eighty percent at the time they wanted,” said American spokesman Billy Sanez of AAdvantage participants.

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