The Money in Airline Miles

Posted by: Justin Bachman on August 06

No matter what you say about U.S. airlines – and plenty is said, most of it negative – you cannot say that their revenue-generation people have not been working overtime. The ideas for prying extra dollars from our pockets have been coming fast and furious. This week has been especially bountiful: JetBlue said it will sell pillow and blanket sets for $7, and US Airways incited new derision by beginning to charge $1-$2 for water, tea, soda and coffee. Blogger Rick Seaney was on a US Airways flight last Friday when this policy took effect, and quotes a dejected flight attendant on the subject. United was scrutinized in some corners of the blogosphere for polling travelers on how much they’d pay for restaurant-style meals on international flights. (Leaving aside the issue, of course, that it would be well-nigh impossible to deliver such a thing at 35,000 feet.)

So I was intrigued today by two ancillary revenue schemes that floated through my inbox.

The first, from Delta, offers members of its SkyMiles program a 100% mileage bonus for miles purchased this month. (Unless you have bought miles from the company before. This “special” applies only to newbies.) Delta sells mileage chunks ranging from 2,000 to 50,000, the latter costing $1,478. This effort tells me that miles are nothing but a useful bit of financial engineering for the legacy airlines these days, wholly divorced from seat awards. Three weeks ago, United sold a chunk of miles to credit card partner Chase for $600 million, a cash infusion that will likely prevent its bankruptcy this year or early next.

The second mileage scheme is from United, which is touting an “Award Accelerator” to give you more Mileage Plus miles from your flights. The idea is that you will pay extra to “accelerate” how many miles you earn on a given flight. For example, give UAL $9 more on your flight from Cleveland to O’Hare and you earn double the 316 miles on the route. Fly D.C. to London and for $110 you can double the 3,677 miles you’ll earn or treble it for $221. This is essentially a fare increase for which you can opt in, and I think it will appeal to many travelers – especially the business ones who did not pay for their ticket but get to keep the miles. The only real downside to the airline – and no one in the domestic industry cares about this – is that it further highlights the sheer beggarly state of our airlines, which now as an industry are no different from a malodorous vagrant panhandling. “Anyone have $9 to spare, please?”

Now, of course, these mileage schemes lead to the obvious timing issue. We're being enticed to amass them just as the majors are vowing to dump huge capacity from their networks this fall. In other words, good luck actually using those miles for flights or upgrades.