United Airlines reward program: Boom or Bust?


I came across an article from this past week talking about how United Airlines is implementing new levels and requirements on its loyalty rewards program, MileagePlus. In short, airlines have historically rewarded their customers based on miles flown. United is now adding a twist to it where the number of miles flown is not the only requirement to achieve elite status. Aside from adding a minimum number of flights flown, they have now created “premier qualifying dollar” (PQD), which is simply the money you spend on flights. Below is a brief outline of the tiers of their program as well as what the requirements are to reach a specific level:

  • Premier Silver: 25,000 miles or 30 segments flown annually, and $2,500 PQDs
  • Premier Gold: 50,000 miles or 60 segments flown annually, and $5,000 PQDs
  • Premier Platinum: 75,000 miles or 90 segments flown annually, and $7,500 PQDs
  • Premier 1K: 100,000 miles or 120 segments flown annually, and $10,000 PQDs

I am a loyal southwest customer and in turn am part of their “rapid rewards” club. Their idea is very simple as you simply collect points based on the price of your flight, with the price of your flight directly related to the distance between the two cities you are flying to/from. Not to mention if you are close to  meeting the point total for a free flight but are not quite there, you have the option to purchases additional points without having to purchases a flight. This is a very simple, easy to understand, flexible and relatively non-exclusive program which is the way I envision a rewards program being. As a traveler, I am very comfortable with the program and I feel free flights are attainable. I  travel enough where I am concerned about earning rewards of some kind and a program such as United’s is completely unrealistic for me.  Unless I have to travel frequently for my job, I would not have this same level of comfort ability with rewards programs such as United’s outline above. I definitely connect better with Southwest’s rapid reward program and I feel that my business is valued and taken seriously by the airline, something I cannot say for United

In a sluggish economy, why is United (and other major airlines such as Delta) pursuing programs that are raising the bar and basically shrinking the pool of travelers who can qualify for these elite rewards? Why is prestige becoming such a major factor in the programs decision making process? I understand you do not want to give away your product easily but I feel programs like these do more harm than good by emitting a highly arrogant vibe. The airline is trying to gain a competitive advantage but I feel it is sacrificing business while trying to gain that advantage. The decision to pursue a program such as this was bad one almost from conception as I do believe the project managers were too focused on the specific issue of creating a prestigious rewards program  and as a result ignored the bigger picture. Focusing on differentiating yourself from a competitor is good but not at the expense of long-term sustainability. Especially given the fragility of the airline industry (and the economy as a whole) in recent times I would think decisions would be better thought out, more universal and simply more accessible to the average traveler as a means to entice new business and grow existing business.

What do you think of this new plan? Do you think it will be successful?



7 thoughts on “United Airlines reward program: Boom or Bust?

  1. I think this whole tried is simply a matter of trying to find ever more creative ways to increase the bottom line for the airline industry. Think about the economics of the airline industry as a whole. Airlines know that they need to increase the fares to ensure they can become sustainable over the long term but there is a significant risk to such movements. A perfect example is when jet fuel went up in price. The airlines knew they could not sustain the added costs of such an obviously critical component of their industry so firms began to find creative ways that were implemented industry wide to capture the added revenue to maintain profitability. Say hello to the fuel surcharge and the checked baggage fees. This itemization of flying is simply a measured risk by the firms to find ways to offset their rising costs and simply this move with rewards is moving that same direction.

    To address the Southwest comparison, I think there is a slight note to be made. Southwest was very VERY smart in their fuel cost hedging strategy that had taken place when fuel costs were very low. This provided them with an incredible ability to operate under a significantly lower cost as compared to their competitors. Additionally, they saved an incredible amount of money from offering a significantly lower level of service as compared to the flagship carriers as well as concentrating on a single type of aircraft (737) series which allowed them to use a standard airframe and common part inventories. Unfortunately, the flag ship carriers cannot match this because of their differences in strategies. You simply cannot fly to Tokyo from Chicago with a 737. There are added benefits to a diverse fleet through mission specific aircraft but costs associated with this strategy reduce the overall benefit.

  2. Wow, that’s an odd thing that United put into place. While it’s another way for airlines to make money, I feel another reason for it is to create a further exclusivity aspect to these premier categories. While many people can qualify for the lower levels of premier categories, especially if they are a business traveler, adding the spending requirement to the requirements for these levels, it adds to that

    The prestige associated with the tiers of these premium levels is also so important because it’s targeting customers who have the potential to spend lots of money with major airlines like United, American and Delta. While the airlines might lose some customers as a result of these new requirements, I don’t think it will lose many customers at those levels. I’m not too familiar with the rewards programs for Southwest or other airlines that are considered “smaller”, but I don’t think they offer many perks of being a member aside from the free flights and discounted prices on other goods and services (e.g. a lounge in the airports, free drinks on-board, etc).

  3. I agree with Richard that United is trying to find ways to increase its bottom line. Southwest is known for its low fare and good crew service. However, I am loyal United customer that they do reward every dollar and mile I spend. I enjoy that fact that once you reach the premier elite status that they will upgrade you every time you fly. In addition, I know lots of business travelers love to use points for upgrading purpose. One thing that I don’t like about Southwest is they don’t assign seating, there was couple times that I cannot sit with friends or family members.

  4. OH wow… So let me get this straight. So in order to achieve “elite” status in United Airline’s eyes, not only do I have to spend my last dollar to catch a flight, but I also have to buy the crappy food they offer. Well, its not so crappy but you get my point. After reading this article, I feel as though I’m not worthy to even step onto a UAL flight.

  5. There are so many tiers in this program, that it doesn’t seem to be very user friendly. When you compare it to Southwest, you essentially have a basic rapid rewards program, and then a program that goes beyond that if you fly more than 20 times per year. I think the reason Southwest has been successful is not just because of their low fares, but because it is easy to understand, and there is a consistent expectation on what to expect for every Southwest flight. I’m not sure you get that with United’s new program.

  6. I understand what they are trying to do but it seems odd – because if you think about it, it would be difficult to fly 30 flights without spending at least $2500. All it will really do is keep a few leisure travelers (who fly 15 round trips annually between very close cities) out from qualifying for maybe the lowest tier. Anyone flying 60 segments or more is a business traveler and will easily meet the PQD requirement. So why make a statement that totally reinforces the fact that they really only value you for the money you spend? (Of course, we already knew that but this really drives it home)

    As a 1K on United for the past 7 years, I have seen how the program has changed a lot in a short time. Some of the benefits have shrunk or disappeared over time. The addition of Continental makes for a huge pool of status fliers, so 2 years ago they increased some of the requirements for the tiers. But I still prefer to fly United because 1) they can get me just about anywhere; 2) I am taken care of to the best of their ability when things go bad (weather, cancellations, etc); 3) the benefits of having higher status on a big airline blows away anything that Southwest can offer.

    I do like Southwest for their simplicity, but they too are not immune to change. The points system that they now use is far more complicated than the old system that just tracked the # of flights you flew and gave a free one-way for every 8 segments flown. They now pay attention to dates on drink tickets and usually won’t take expired ones. Speaking of which, when they switched to the new rewards system they left me with a useless stack of unexpired coupons – enough to show our whole class a good time and have some left over! That’s probably the main reason I usually avoid flying them. That and let’s face it, when you are traveling for business it’s a little annoying to be on a large plane filled with kids, high school groups, and tons of people in shorts and flip-flops. The attitude of Southwest’s employees always impresses me though.

  7. I was thinking the same thing as Viv. I’ve been Gold on United for the past 3 years, and I think it would be difficult not to spend $5k on flights as I’m flying 50,000+ miles per year. I’m a business traveler and very rarely pay less than $500/flight, and I fly 3x per month. That’s $18k a year on flights. And that’s not any leisure flights. So how are these dollar thresholds going to be difficult to attain?

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