Air travelers cash in frequent flier miles

Published:Monday, June 9, 2008

Using frequent flier miles during the summer can be difficult.

Minneapolis Star Tribune

Higher airfares are prompting consumers to try to cash in frequent flier miles.

Travelers have been sitting on a mountain of frequent flier miles that can be turned into millions of free tickets. But many chose not to redeem those miles when they could buy round-trip tickets to the East Coast for as low as $200. Now that some prices have doubled, using the miles makes more sense.

“If people want to avoid buying a higher fare, perhaps they are more likely to turn to their miles as money in the bank to redeem,” said Jay Sorensen, who just completed a study on frequent flier programs.

At Northwest Airlines, Bob Soukup, managing director of WorldPerks marketing, said frequent flier redemptions are up about 10 percent in recent months. “As the fares are going up, WorldPerks miles do become more valuable,” Soukup said.

The increase, he said, has been driven by a program introduced in February called PerkChoice, which allows a customer to pay for a trip half in cash and half in miles.

“We are continually trying to improve the program, to make it easier for our members to earn their miles and burn their miles,” he said.

Enrollment for Northwest’s WorldPerks Visa card program, which generates airline miles for purchases made with the card, is up 19.3 percent this year — another indicator of strong consumer desire to earn miles.

Northwest and American Airlines, the world’s largest airline, both indicated that about 7 percent to 8 percent of their passengers typically are traveling on award tickets from their frequent flier programs.

In 2007, American customers booked about 4.8 million award tickets, up from 4.5 million the year before.

Sorensen, who runs Wisconsin-based IdeaWorks, had heard plenty of anecdotes from people who couldn’t book the trips they wanted using miles. So his company made 5,000 booking queries to assess the seat availability for reward tickets on eight large airlines.

He found that a family of four traveling in the summer could book tickets to key markets more than 46 percent of the time. A couple flying outside the summer season could book reward tickets on American, Alaska, United and Southwest more than 96 percent of the time.

Among the big six network carriers, he found that American had the best award seat availability. US Airways got the lowest score and Northwest finished in the middle.

Travelers can expect an even tougher fare climate as the year unfolds.

Tom Parsons, CEO of bestfares.com, said the cheapest nonstop fares on selected routes on big carriers had risen by 100 percent to more than 300 percent for travel during the week of July 22.

For example, a year ago, a round-trip ticket between Minneapolis-St. Paul and Philadelphia could be had for $198 on Northwest. Now, he said that ticket for travel in mid-July would cost $583.

With fares expected to rise as airlines cut back sharply on flight schedules in the fall, it will make increasing sense for travelers with miles to avoid the price increases by cashing in miles for tickets.

Oil prices have doubled within a year, but even the higher fares that carriers are now charging are not generating enough revenue to cover astronomical jet fuel bills.

“The industry needs to raise average fares 15 to 25 percent to be profitable with crude at $125 a barrel, Credit Suisse analyst Daniel McKenzie said this week in a report.