Frequent-Flyer Manipulators: Airlines Cut the Perks

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June 10 (Bloomberg) -- Brian Kelly, founder of, and Bloomberg's George Ferguson discuss United Continental's move to base frequent-flier rewards on fares instead of distance flown and debate the best credit card for rewards. They speak with Pimm Fox on Bloomberg Television's "Taking Stock." (Source: Bloomberg)

Your frequent-flier miles.

And defense analyst george ferguson.

What is united proposing and why?

They are proposing tracking people by the number -- amount they spend rather than the amount they fly.

They want to pursue the business traveler that pays their bills.

That is how they deal with big data, the ability to capture data and save it cheaply.

They can track all the money that customers spend and want to make sure they are rewarding the highest paying customers.

Five miles i believe will get you one point.

For every dollar you spend you get five miles.

In the new program someone with that -- with elite status will have to spend $1000 on their transcontinental flight.

I see this as a revenue play.

If they wanted to target business-class travelers they could up their top level elite status programs.

They have been rewarding high revenue passengers in the past.

If you fly business or economy you get a bonus.

What is happening is united is saying most travelers will earn a lot les miles starting next year.

They seem to have baited the situation by all these enticements.

You fly and pay a certain fair.

It is really not on the miles flown because they are manipulating this program.

Once they get you into it.

What happens to all these miles that have been accumulating?

There are so many miles out there.

Every time someone buys a pack of gum there is a new mile.

The market is over-flooded.

Last year they put in revenue requirements for elite status.

You have to spend a certain amount, it is not just about flying.

Now you have to spend a certain amount to get miles.

My guess is the third leg of the triangle is when it comes time to redeem the miles you will have to pay a certain number of miles based on how much that ticket costs.

Gone are the days that you could get a business-class ticket for less than $5,000. they have changed to revenue base.

Any smart person can see that they are taking out the luster.

I will fly to asia on a cheap fare and they're trying to equalize the cost of the ticket.

It could come back to haunt them.

People will start flying united.

They have better on time records.

The traditional carriers have gotten away because of the miles.

Why not fly version or the american west -- vigrinrgin or america west?

Tiit is a way to generate new revenue.

They got tired of giving away tickets to people who could game the system.

I think they're trying to distill back to that core customer and united, delta, and american have not added capacity and focused on their business hubs to get active that business traveler where they earn their money.

I agree with you.

It has turned into a program where it is based -- >they are getting back to their core which is a good thing.


does it make sense, it has been one of those anomalies where you can sit in a plane x to someone or surrounded by five people, all of whom have paid five different prices for the same seat in the same service.

That becomes a problem if you redeem these miles and they tell you what the trip would have cost.

It probably gets a lot harder.

I do not know that they are so much worried about that.

I hear your discussion about going to virgin america.

If you are a regular is this traveler and you are spending that money on a carrier i will fly a lot of united because i leaf through newark and i accrue a lot of miles.

I have to be somewhat loyal.

That single traveler would be more likely -- you have to book the cheapest coach fare so i think a lot of business travelers will get cut here.

If you're earning 40% less miles you have to hustle harder.

That was considered a perk.

Why stick with an airline -- the idea of loyalty will be lost in all this.

What about the credit card companies?

It is one thing to see get the miles you get the perks but a lot of people get the miles not because of the -- if you want to talk about gaming the system you would think the airlines would cut off the credit card companies.

You can still get a united credit card fee waived the first year.

That is not gaming.

They want to have their cake and eat it too.

What is the best credit card to have right now if you want to use all these miles?

Rex the best tip is to get a card that gets you flexible transferable points.

Chase sapphire preferred is one of the best cards out there.

And berkeley card arrival is a new card out there.

You do not have to worry about these programs and you get 40,000 point signing up for it.

Do you buy the idea that these miles of virtual currency?

Rex they are currency because -- it is not quite like bitcoin.

I have read stats before that.

It is more than the gdp of most european nations of all the unredeemed miles out there.

Small european nations.

This text has been automatically generated. It may not be 100% accurate.


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