There’s one undeniable thing about trends: people love to follow them. Whether it’s only eating cardboard to become thin and beautiful, wearing t-shirts down to your knees to be trendy (?) or earning airline miles not based on how far you fly, but how much you spend; people and brands will follow a trend. Especially when it saves them money. What started as a list of one has become an impressive list of airlines, now including Aer Lingus, basing frequent flyer miles on revenue spent, not flying. In March of 2016 the Aer Lingus Gold Circle loyalty program will disappear and revenue based AerClub will rise in it’s place. Of course, here’s everything you need to know…
The good news is that Aer Lingus will join British Airways and Iberia by offering Avios as their mileage currency, giving greater flexibility in earning and redeeming miles with Aer Lingus’ new partners. Speaking of which, Aer Lingus will join the OneWorld alliance, formally becoming partner to many top international airlines. The bad news is that these moves create an all but foregone conclusion that British Airways and Iberia will move to a revenue based model of earning as well. After all, they have the same owner. You undoubtedly have questions…
There are three distinctive brands of revenue based: earning, redeeming and both. Earning miles in a revenue based system is actually quite simple. You will receive a certain amount of miles for a certain amount of spend. It doesn’t matter where you’re going, how many flights, or how long your lower back has been throbbing in the air, it’s just about what you spend. Naturally, the more you spend, the more miles and programs in a revenue based system can offer bonuses for buying certain types of tickets. For example: a general member buying an economy ticket may earn 5 miles per dollar. On a $500 ticket they would earn 2,500 miles, whether the flight is 100 miles or 10,000 miles. Alternately, a top tier flyer might earn 9 miles per dollar spent, and when buying a business class ticket, may be eligible for an extra 2 miles per dollar. It’s relatively simple and although it undermines the current system of earning, which has been very generous, is somewhat fair. Sorry.
The real a** kicker is revenue based redemptions, otherwise known as a revenue based system for using your miles. Presently, most airlines allow you to use your miles at a fixed rate. It doesn’t matter what the ticket costs in cash, there’s a standard rate it requires in miles. A ticket could be $200 or $200,000, but it could carry the same 40,000 mile rate, whatever the asking price. It’s a good system in which experts such as myself have found opportunity. Using the example above, you can use 40,000 American Airlines miles to snag a seat on Etihad’s First Class Apartment, a seat which never goes for less than $2,000 one way, often much more. If and when airlines move to revenue based redemptions, a $2,000 ticket would likely require 200,000 miles. A $5,000 ticket would require 500,000 miles, a $120 ticket would as you might have guessed, require 12,000 miles. What you see is that there is no room for maximum value, your miles simply have a fixed rate, likely one cent per mile, in which you can use them.
This is scary, because just a year or two ago only Delta went revenue based for earning. Just months later so too joined United, now American Airlines, yesterday Aer Lingus and we can expect the list to grow. Like I said, it’s somewhat fair (whether we like it or not) for earning, but for redeeming, it undermines a perceived opportunity to create value out of loyalty. Will British Airways and Iberia follow Aer Lingus’s suit? Very likely. Will the rest join as well. It’s a safe bet. Let’s just hope no one moves to revenue based redemtpions anytime soon. I sure wouldn’t have much to write about…
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