The old frequent flyer model was rooted in distance, where a passenger flying 5,000 miles could reasonably expect to earn something close to 5,000 redeemable miles. This system was imperfect but easy to understand. The airplane did the work, and the loyalty program reflected the journey. As a result, passengers had a clear strategic choice between different airlines based on mileage earnings.
The modern model is much more transactional, with miles earned on the eligible ticket price, excluding government-imposed taxes and fees. This means that even if a passenger flies a long distance, they may only earn a fraction of that in redeemable miles if they book a deeply discounted economy fare. For example, a passenger flying from Atlanta to Dubai may travel over 15,000 miles round-trip but earn only a small fraction of that.
The central shift behind the Big Three's loyalty convergence is the move away from distance-based earning and towards revenue-based earning. Delta moved decisively to this model years ago, followed by American shortly thereafter. United has now pushed its own version even further by tying more of the best earning power to co-branded card ownership.
The details might differ slightly, but the philosophy is almost identical: loyalty is no longer primarily about how far a passenger flies, but about how much money the passenger and their wallet can generate. This identical loyalty math is removing all differentiation from the market.
As a result, passengers are now faced with a less strategic choice when it comes to choosing an airline based on mileage earnings. The convergence of the Big Three's loyalty logic makes it harder for passengers to make informed decisions about which airline to choose.
This shift in loyalty logic has significant implications for the industry as a whole. With the old model being phased out, airlines will need to adapt their strategies and marketing tactics to reflect this new reality.
The modern loyalty model prioritizes transactional earning over distance flown, making it more challenging for passengers to compare the value of different airline loyalty programs. This could lead to a decrease in customer loyalty and satisfaction as passengers become less invested in their chosen airline.
Ultimately, the Big Three's convergence on loyalty logic is a sign of the evolving nature of the airline industry. As airlines continue to adapt to changing consumer behaviors and technological advancements, they will need to prioritize loyalty and rewards programs that reflect this new reality.
The convergence of the Big Three's loyalty logic removes strategic differentiation from the market, making it harder for passengers to choose an airline based on mileage earnings.
