Elite Status: Nears Final Descent

Great for the airlines, delusional for most.

I’m not really in the opinion business. I generally trade in exclusive perspectives based on data and let you decide how to apply them.

I step outside pop-culture think on one topic more than any other, belittling elite status. I have to, given the way airlines have devalued it year after year—and now, month by month.

The New Year should bring a re-evaluation of “investment in airline loyalty”, even for trapped elites, because low domestic First Class fares and purchased-upgrade trends are killing the return on loyalty investment.

Case in point: At Delta’s Investor’s Day 2015, CEO Richard Anderson beamed with pride at how well Delta’s “Up Sell” is doing for First Class (and Comfort+). He pointed out that when Delta started up-selling, the paid First Class load factor was only 11%. (That was because Delta back then was still in the mindset of giving out free elite upgrades to First Class instead of selling First Class cheap.) In 2015, though, paid First Class seats came to 57%. In 2018, Delta’s goal is 70%.

Anderson also said, “We have increased paid upgrades and we have not disturbed the happiness of the Medallions.” How can Delta’s elites be happy that the carrier is selling more First Class seats, ones that were formerly free to elites?

The simple truth: Elites are married to an airline, but the airline is not married to them. The airlines use elites—sweet talk them at every opportunity—but are only interested in the bottom line.

Let’s face it: The major reason passengers still go after elite status is the allure of getting bumped up to a premium cabin, but how often do low- and mid-tier elites get an upgrade these days, given the sharp drop in First Class domestic fares and other low-cost upgrade opportunities? Now that those fares are available to every Tom, Dick, and Harry willing to pay up, elite is just an ego boost of dangled promises. Seduced and abandoned are elites, for the most part.

Coupled with this is the fact that most travelers don’t have a choice anymore, given industry consolidation and fortress hubs. If you live in Phoenix, you are (or should be) an AAdvantage member.

So with that in mind, this piece is about how to make the best of elite status, starting with the paradox that what is bad for elites is good for the loyalty-free traveler.

Rule 1: Do not be married to your elite program, just live together.

What Does “Free Unlimited Upgrades” for Elites Really Equal?

For most of the last 22 years that I’ve been following domestic First Class fares, they’ve largely been high enough to make playing elite status roulette worth the gamble for many, as not many fliers were willing to pay for a domestic First Class ticket. When elite upgrades cost money, the upgrade line was relatively short, and the frequency of confirmed elite upgrades—when competition and capacity existed— confirmed the wisdom of maintaining elite status.

That started changing when Delta began giving away free, unlimited complimentary upgrades. Then when United followed suit in 2009, there went the neighborhood. Everyone got in the for-free, elite-upgrade line, meaning there was much more demand for a limited supply.

That’s Being Undercut By Two Other Powerful Currents

1. The nosedive in domestic FirstClass fares, and
2. The increasing class-upsell offers at point-of-sale online and at check-in.

While those seeking elite status must strive to meet the spending requirements, the Loyalty-Free Traveler—and bottom- and mid-tier program members if they’re smart— will go for the increasing number of low-cost upgrade opportunities.

In effect, the airlines have taken down the velvet price rope to First Class. So what’s the point of striving for elite status if you have the budget for the seat, and can confirm it at time of booking in many or most cases reasonably?

New Lines Drawn for Domestic First Class

There are only as many elite upgrades as there are empty premium seats near departure time. That in itself is not new, but in the old days, when most domestic First Class fares went for $1,600 to $2,300, the cabin was usually wide open. Many of these seats are now starting at only $39 more oneway than economy (for more on this see July report).

The number of First Class seats available for elite upgrades will continue to decrease because airlines are getting increasingly more creative about not giving away elite upgrades except to the top-tier. But even top-tier elites are not insulated. Delta and United no longer offer upgrades on their transcons, one of the few routes on which it still made sense to pursue an elite upgrade, since fares start at $1,200+.

The Blindingly Simple Antidote: Just Pay the Fare Difference

The “difference” between First Class and economy, given all of the fees that have been imposed in the latter cabin, is at an all-time low. Fare-Difference Upgrades (FDUs) can be astonishingly low when you compare apples to apples (see FCF’s Aug. report, page 7 and March report, page 1 for more).

Paying cash can also be a much better value than mileage upgrades on many routes. Short of premium transcon flights, save your miles for international travel, where they still count.

Business Travelers Still Pay the Rent

Sure, the airlines are increasingly creative in how this all works. The lowest First Class fares require a 7- to 30-day advance purchase, and they come with other rules and availability restrictions. But if you’re even a bit flexible, and not married to one airline, you can make this New Fare World work for you.

Let’s take the Chicago-New York route, for example, a leisure traveler’s lowest First Class fare booked 14 days out on United is $354. But if you have no advance, which is often the case with business travelers, the fare jumps to $850+; but if business travelers can book 7 days in advance the fare drops to $477, so a bit of flexibility on when you book your flight can save you 44%.

Loyalty-Free Agency Starts with the Right Credit Cards

Using a Multi-Currency Card (MAC) is the place to start becoming a loyalty-program free agent, as these cards allow you to transfer points to numerous mileage programs. For more on which card is right for the loyalty-free traveler, see our March report.

Final Thoughts

Still not convinced? Okay, then give American’s elite program a second look if you have options, as it currently:

1. Does not have a minimum-spend requirement for elite status, and
2. It still allows elite upgrades on its transcon, and
3. Upgrades are available on any published economy fare, and
4. Elite upgrades are, for the most part, not free and unlimited (a good thing because it cuts the line of seekers in half).