Bloomberg News

United Sweetens Frequent-Flier Perks From Continental Merger

September 21, 2011

(Updates with share price in last paragraph.)

Sept. 21 (Bloomberg) -- United Continental Holdings Inc. is adding rewards to lure high-fare corporate travelers as it blends the frequent-flier programs of the carriers that merged to create the world’s largest airline.

The highest-level members of the MileagePlus program will receive confirmed upgrades to business class sooner and more bonus miles when they purchase first-class or full-fare business or coach tickets starting in 2012, the Chicago-based company said today in a statement.

United, formed in last year’s tie-up between United Airlines and Continental Airlines, is working to align the carriers’ programs and lure customers from rivals such as Delta Air Lines Inc. Business passengers are airlines’ most profitable customers because they fly often and pay the highest ticket prices.

The aim was “number one, to include better recognition and reward for our top-value customers” and to add more benefits as passengers achieve higher levels, said Jeff Foland, president of MileagePlus.

The program, which is keeping the MileagePlus name it had at United Airlines, has about 85 million members combined. The carrier did several focus groups with members in all of its key cities, such as its hometown of Chicago and New York. The airline wanted to determine their wants and frustrations, and why they stay loyal to a particular carrier, Foland said.

Silver Status

MileagePlus will adopt a four-tier system, where those flying 25,000 miles earn silver status, 50,000-milers achieve gold, 75,000-milers get platinum and 100,000-mile status is called 1K.

MileagePlus and Continental’s OnePass program currently have three tiers, with 100,000 miles and 75,000 miles as the highest levels, respectively.

Higher-level elite fliers will receive more bonus miles starting in 2012 when they buy the most expensive tickets on the plane.

For example, a person with 1K status who buys a first-class international ticket on a 1,000-mile route now receives 2,500 miles: 1,000 for the distance flown, 1,000 just for being a 1K elite and a bonus of 500 miles. Under the new plan, that same person gets an additional 1,000 bonus miles, for a total of 3,500, or 40 percent more miles than the same ticket would earn today.

Challenging Competitors

That reward is a salvo at competitors. Delta, which doesn’t have three-cabin service and instead offers just business and coach, has a premium cabin bonus amount of 50 percent. AMR Corp.’s American Airlines offers a 50 percent bonus to its most elite customers who buy first-class international tickets.

“We intend to compete for the top customers in the industry and the loyalty program is an important component,” Foland said. The mileage plans “provide an incentive to those passengers who have a choice on which cabin and which airline they fly.”

United is also making changes to the Million Miler program, which grants lifetime benefits to passengers who reach certain markers. United’s program counted only paid miles flown by the passenger on its own planes, while Continental’s program also counted miles flown on partner carriers such as Deutsche Lufthansa AG.

United will combine all the miles customers have earned over their lifetimes on each carrier, and retroactively add miles that United passengers have accrued on partners to mimic Continental’s program in a one-time adjustment.

Bump in Balance

The result is that most Million Miler passengers will see a bump in their outstanding balance, said Rahsaan Johnson, a spokesman for the carrier.

United will also extend a Million Miler’s status to spouses or domestic partners, which Continental’s program did and United’s previously didn’t. Travelers who reach 1 million miles will have gold status for life, 2 million will mean platinum for life and 3 million will be 1K for life.

Flying 4 million miles earns an invitation to United’s Global Services program, which is dedicated to its top spenders and includes a dedicated reservation hotline and concierge service to escort them through airports and help speed gate changes.

Some passengers will see their rewards or perks diminish. United is restricting lower-tier silver elite passengers’ opportunity to get EconomyPlus coach seats with more legroom.

Mid-level elites also will get smaller mileage bonuses under the plans for gold and platinum levels.

United shares fell 94 cents, or 4.5 percent, to $19.83 at 4:15 p.m. in New York Stock Exchange trading as the Bloomberg U.S. Airlines Index tumbled 3.8 percent for the biggest drop in a month.

--Editors: Donna Alvarado, Niamh Ring

To contact the reporter on this story: Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net.

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net.


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