"Elite-flier status is getting less elite"

Tuesday, December 13, 2005

Elite-flier status is getting less elite 
By Scott McCartney
The Wall Street Journal


Being an elite-level frequent flier won't be quite as special next year.

Eager to raise cash and satisfy their credit-card company partners - who
have propped up struggling airlines financially - several carriers have made
it easier to qualify for premium-level status as an enticement to spend more
on credit cards. Some recent offers have also made it a banner year for
"mileage runs," trips made solely to push mileage totals over qualifying
thresholds.

As a result, the ranks of premium travelers who get perks like upgrades,
exit-row seating and preboarding privileges are swelling - eroding the
exclusivity long associated with elite status.

By one count, the number of elites could grow by more than 300,000 travelers
in 2006 - an 8 percent increase. This comes at a time when many frequent
travelers are already nursing a raft of complaints: That first-class
upgrades are harder to score. That crowds of premium customers elbow each
other when boarding some flights. And that special elite-only lines for
security screening sometimes move slower than regular queues.

Travelers say peak business-travel flights at hub airports already typically
produce crowds of premium passengers. "For Delta in Atlanta," says
frequent-flier Geoff Williams, "everybody seems to have elite status."

AMR Corp.'s American Airlines says it knows that same perception exists in
its Dallas-Fort Worth hub, which has seen more elite congestion after Delta
Air Lines closed its hub operation there a year ago, sending more business
travelers to American.

Another reason for the swelling elite ranks: As airlines have formed
alliances, it has become easier to earn miles in a single program by flying
several carriers and to qualify for premium status on several airlines
sharing reciprocal rights.

Elite-level frequent fliers on Alaska Air Group Inc.'s Alaska Airlines, for
example, can often claim some privileges like priority boarding at four of
the nation's five biggest airlines: American, Delta, Northwest Airlines and
Continental Airlines. Delta, Northwest and Continental are wrapped up in
their own alliance. American took in TWA fliers, and US Airways and America
West pooled their frequent-flier programs together as they merged.

Randy Petersen, chief executive of Frequent Flyer Services, a publisher of
newsletters and Web sites, estimates there are already more than four
million elite-level frequent fliers in the U.S. He predicts the 300,000
increase based on aggressive credit card offers and qualifying mileage
promotions. (Airlines don't disclose numbers for competitive reasons.)

The credit-card deals reward big spenders with elite-level-qualifying miles.
In the past, only miles actually flown counted toward qualifying for elite
status. That changed as financially struggling airlines turned to
credit-card partners for financial help, and saw frequent-flier miles as a
way to raise cash.

Delta, for example, presold $500 million of SkyMiles to American Express Co.
last year. Now, to drive business to American Express, Delta is offering
customers 10,000 elite-qualifying miles if they charge at least $25,000 on a
platinum SkyMiles credit card. That means a customer needs to fly only
15,000 miles in a year - in addition to making the credit-card charge
minimum - to qualify for elite status.

UAL Corp.'s United Airlines, which entered bankruptcy reorganization in
2002, is offering elite qualifying miles for Visa purchases made in November
and December to any frequent flier who pays a $50 fee to the airline. United
is also offering double elite-qualifying miles for flights if customers pay
the airline an extra $200 fee. That offer ends this Thursday.

Despite the crowds, elite-level status remains one of the most important
perks to travelers and a major factor in customer loyalty to airlines. But
carriers risk diluting the allure of elite status as it becomes more
widespread.

Tim Winship, publisher of FrequentFlier.com, agrees that there will be more
premium-level qualifiers next year, and thinks airlines may be walking on
thin ice. "More elite members fighting over fewer first-class seats has got
to be a recipe for elevated frustration and exasperation on the part of an
airline's best customers," he says.

Airlines are trying to sell more first-class seats by cutting ticket prices,
and they're confirming passengers in first class when they buy full-fare
coach tickets - both of which make it harder for frequent fliers to get
first-class upgrades. Carriers have had to turn over more first-class seats
to federal air marshals as well. And as they've cut domestic capacity,
they've replaced big jets with first-class cabins with small regional jets
on many routes. Most regional jets have only coach seats.

American says the number of elites in its AAdvantage program is going up,
but the increase is manageable and the percentage of elites has remained at
2 percent to 3 percent of active members. Spokesman A.J. Dennis says the
airline did take in a flock of elite-level business travelers when Delta
shut down its Dallas hub. American isn't changing anything in Dallas to
address the issue, he says, since changes have to be made systemwide.

Another reason for an elite buildup at American is that customers who reach
one million miles - both flown miles and credit-card miles - qualify to be
gold-level members for life. With the AAdvantage program approaching its
25th anniversary next year, the number of lifetime gold members is
increasing.

Delta says it had a slight increase in elite-level qualifiers this year and
doesn't expect a substantial difference in 2006. Like other carriers, Delta
says it carefully monitors the availability of benefits to elite members and
crowds at its Atlanta hub. The airline recently said it will expand
complimentary upgrades to Central and South American flights after Jan. 1, a
spokesman noted, and will open an additional airport club facility in
Atlanta next year to accommodate more premium customers.

A United spokeswoman says that over the past two years, the carrier has
increased the number of preferable seats offered to elite-level fliers,
despite its capacity reductions. Premium customers get access to "Economy
Plus" seats in coach, which have additional legroom, and the airline has
added premium seating on transcontinental routes as well as a number of
70-seat regional jets with first-class cabins.

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