Why Alaska Will Innovate Mileage Plan But Won’t Go Revenue Based

In mid-November American announced their AAdvantage program would go revenue based in the second half of 2016, meaning that all three of the “global” US carriers will have revenue based programs.

Alaska Mileage Plan has long been an extremely lucrative frequent flyer program. Given their unique mix of partner airlines (including American and Delta), they’re also a great program for crediting partner flights to, even if you don’t often fly Alaska.

Alaska-Partners

For example, their MVP Gold 75K members (status which requires 75,000 flown miles on Alaska or 90,000 flown miles on partners) earn a 125% mileage bonus. On top of that, upon qualifying for MVP Gold 75K you earn 50,000 bonus miles. This means that crediting 90,000 elite qualifying partner miles to Alaska will net you 252,500 redeemable miles. That’s the equivalent of a ~180% mileage bonus, which is incredible.

In late November I posed the question of whether Alaska’s Mileage Plan program will go revenue based, following in the footsteps of their partners/competitors. My conclusion was basically that it wouldn’t surprise me if they continue to award miles based on distance flown, given that they really do run their airline a bit differently than the competition.

I’ve put some more thought into this, and have some updated thoughts, since I know this is a program many are considering switching to.

Alaska-Seattle

Why Alaska Mileage Plan won’t go (strictly) revenue based

I can say with near certainty that Alaska Mileage Plan won’t go revenue based. The airlines that do have revenue based programs issue miles based on revenue when you book flights on their own ticket stock. In other words, United issues miles based on revenue if you’re flying United, or if you’re flying a United issued ticket on Lufthansa, Swiss, etc. That’s because otherwise they have no practical way of tracking how much a ticket cost.

For the most part, Alaska doesn’t issue revenue tickets for travel on partner airlines. Specifically, you can’t book a revenue ticket to an international destination not served by Alaska on their own website. So you can’t use Alaska’s website to book a revenue ticket on Cathay Pacific to Hong Kong, on Emirates to Dubai, on Air France to Paris, etc.

Therefore Alaska could only really consistently issue miles based on revenue for travel on Alaska, which seems impractical as a metric of qualification given how many Alaska miles are earned through travel on partner airlines (and that’s an advantage they don’t want to lose, given that Alaska doesn’t fly everywhere — their lucrative program is what sets them apart and makes them unique).

Why Alaska Mileage Plan will innovate

Over time most frequent flyer programs align to some degree. This is especially true when there’s an arbitrage opportunity between partner programs. For example, Alaska credits 100% of flown miles for travel on American in economy:

Alaska-American

There’s no way that will continue to be the case after American goes revenue based, or else most people would credit to Alaska. Instead I think we’ll see something similar to what Alaska did to mileage earnings on Delta:

Alaska-Delta

I mean, American already cut the number of elite qualifying miles you earn for travel on Alaska, for example:

AAdvantage-Alaska

With that in mind, how do I see Alaska Mileage Plan potentially “innovating?”

They could add a flying requirement on Alaska

Presently you can earn Alaska status exclusively through travel on partner airlines, so Alaska could add a certain mileage or revenue requirement for travel on their own flights. This is something similar to what Air Canada used to require, and also what JetBlue requires.

With JetBlue you earn status based on how much you spend on their own flights, though can still earn points for travel on partner airlines. Alaska could adopt that strategy to some extent.

JetBlue

In other words, I don’t think Alaska is making any money off of MVP Gold 75K members who are earning miles exclusively for travel on partner airlines, given that they’re not being reimbursed by those partners for the entire ~280% mileage they’re essentially issuing (for example, the 50,000 bonus miles that MVP Gold 75K members get is a cost incurred exclusively by them).

They could stay mileage based but cut earnings rates

One thing is for sure — Alaska won’t continue to award 100% mileage for travel on all American flights, while American awards miles based on revenue. So Alaska could do something similar to what they’re doing with Delta, where you earn 25-50% of flown miles for many fare classes, and maybe even apply that to their own flights.

If you look at Virgin America Elevate, for example, they have a points based system, and you earn points as a percentage of miles flown. Here are the Virgin America Elevate earnings rates for travel on Virgin Atlantic, for example:

Virgin-earnings-rates

I’m not saying they’ll adopt either of these strategies completely, but rather perhaps use them as inspiration when they figure out their own program.

Bottom line

I think it’s inevitable that Mileage Plan will change over time. While it will likely remain better than the competition, they won’t continue to award 100% mileage on partners which don’t even award that to their own members.

Alaska Mileage Plan is an extremely generous program, and I do think they’ll innovate in some ways. I wouldn’t be surprised if they indirectly add a revenue requirement by requiring you to spend a certain amount on Alaska flights, as I can’t imagine they’re making any money off of MVP Gold 75K members who fly 90,000 miles per year on partner airlines and are earning what essentially amounts to ~280% of flown miles.

On the plus side, a strict revenue based program doesn’t seem practical, given that they issue very few revenue tickets for travel on partner airlines, which would make the tracking virtually impossible.

Do you think Alaska Mileage Plan will be “innovated,” and if so, how?

Comments

  1. I think it would be fair to require that to obtain ANY status level, no matter how many miles you fly, at least 20,000 of those miles have to be flown on Alaska Airlines.

  2. I think As will continue to innovate and this is why Capitalism works.I am curious how the revenue programs will affect Ben and those of you who travel as much as he does.

  3. Continue to provide 100 percent miles earning for Alaska metal, but cut partners to 25 percent for deep discount economy similar to delta award chart.

    This will encourage Alaska flying while making partner flying harder to achieve status (not to mention partner miles already have a higher bar to clear)

    Perhaps add a token Alaska metal requirement like BA does

  4. I am considering switching my miles earning to Alaska for 2016, and I have a question about it…I have an upcoming itinerary to Europe that is ticketed through American, however the flights are on AA, BA, and Iberia.
    If I choose to credit these flights as Alaska mileage, will I earn miles based on the Alaska partner earning rates for American?
    Basically, would Alaska credit the miles based on the actual airlines flown, or the ticketing airline?

  5. “On the plus side, a strict revenue based program doesn’t seem practical, given that they issue very few revenue tickets for travel on partner airlines, which would make the tracking virtually impossible.”

    I had an impression that most people use alaska miles for otherwise expensive international tickets on alliance airlines (Emirates, Cathay Pacific First Class) but I could be wrong.

  6. I would fully support the requirement that “x” number of miles be on AS metal. 10,000 for MVP, 20,000 for MVP Gold, 40,000 for Gold 75k. If you are listening Alaska 😉

    Also, stop straight status matches to Gold and above!

  7. Mike, your comment:

    “I had an impression that most people use alaska miles for otherwise expensive international tickets on alliance airlines (Emirates, Cathay Pacific First Class) but I could be wrong.”

    I think that is true for “travel hacker” types, but for most Alaska passengers I know (I am in Seattle), they don’t even realize that you can use miles for other airlines. I would say 100% of my non-travel hacking friends ONLY redeem their miles for either Alaska or American flights.

  8. Ben, I just requalified for EXP with AA and have fly to Hong Kong on Cathay at least 3 times a year. I’ve historically flown Cathay-AA codeshares and accumulated 100% mileage bonuses to afford F award tickets for family. With the AAdvantage changes in 2016 would it make sense to status match (is it even possible), and start crediting the Cathay or Cathay-AA codeshare flights to Alaska? Does one earn 100% mileage credit for an AA-codeshare on Cathay credited to Alaska?

  9. @DJ – operating airline (so no miles for Iberia)
    @Mike – Investor day stats usually show that something like 95% of all redemptions are domestic (I’m doing this off the top of my head)

    Whatever the change is, it will hurt me. I am loyal to AS and my home base is SEA. However, AS just doesn’t fly to the places I need to go for work. I will fly AS 100% of the time if they are within $100 of the least logical fare (work) but they don’t have a wide enough network. Additionally, their prices to places like DTW, MSP, DFW, and ATL are usually significantly undercut by DL and AA.

  10. @LarryinNYC That’s a great question that I asked myself when booking my HKG flight for later this month.

    My extensive reading on the website says the answer is no. Why? The specific CX codeshare flights (at least the ones from LAX and SFO) are specifically NOT included in the AA flight numbers eligible for earning miles on MileagePlan.

    You can still earn AS miles on CX, but directly through CX and only in certain fare classes (I think full fare economy, premium economy, business, and first)

  11. @Jon W

    Are you saying that the CX flights from LAX and SFO do not have AA codeshares or that they are in fare buckets that cannot be credited to AS? I fly out of JFK on CX-AA codeshares and even the discount economy buckets (Q,L etc) seems to be eligible to be credited to AS. Just curious if Ben knows whether or not those will earn 100% mileage credit (if flying economy, would rather get 35k AS miles on RT to Asia rather than the new ~11k or so as EXPLAT on AA if I can credit AA codeshares to Alaska)

  12. @LarryinNYC Here’s the info from AS’ website on mileage accrual via AA: https://www.alaskaair.com/content/mileage-plan/partners/american.aspx

    AA codeshares on CX are the following AA flight numbers:
    SFO: 8929-8932
    LAX: 8933-8938,8940-8941
    JFK: 8923-28
    BOS: 8891-8892
    EWR: 8938-8939
    ORD: 8921-8922

    As you can see, none of those flight numbers match the flight numbers on the mileage chart from AS so no AS accruals on AA codeshares with CX (which makes sense).

    Though again you can accrue AS miles booking directly with CX: https://www.alaskaair.com/content/mileage-plan/partners/cathay.aspx In fact AS accrual on CX is more generous than AA accrual as more fare classes are eligible (though discount L, M, or V fares only accrue 50%)

  13. You got it, Lucky. This is my last year with American after ten or so as EXPL. The loss of over water upgrades, I live in Hawaii, and reduction of the quality of the program has me looking for the exit. I will qualify for lifetime Platinum this year, so now is the time! I am having a tough time deciding whether to flee to Alaska or Delta. If ONLY Alaska flew to Orange County SNA my problem would be solved. I work in Anaheim and would have to fly into SAN as Alaska doesn’t serve my island LIH from the LA area. I love Alaska and dreamed that AA would have bought them instead of USAir, the junker of the legacy airlines.

  14. As a MileagePlan member (and seriously in love with it!) living outside the USA, I don’t give a toss about any of this navel-gazing article. So long as one can still buy miles, with attractive bonus miles, at a good price, which can be redeemed across their partner airlines at very fair redemption rates, I’m super happy! I am winding down, cleaning out my AAdvantage account, in preparation for the savage devaluation in March. When they come to their senses, and stop listening to the idiots from ex-US Airways (where is that airline these days, hmm??) they employed, I will consider their plan again. In the meantime it’s snapped-shut-wallet time!

  15. @DJ
    @Nurse Traveler
    LarryinNYC
    Actually AS will only credits miles if the ticket is issued for the metal flown. So for instance a AA codeshare operated by BA will not count. That’s why the CA codeshares don’t count. I know it’s crazy since both AA and BA/CA are Alaska partners but that’s how it works. I learned this the hard way….. 🙁

    But I still love MileagePlan and am happy to see that they haven’t changed anything yet. Alaska has the best staff and still has that quirky company spirit that Lucky mentioned.

  16. There is a pi-chart on Flyer Talk that shows that 96% of AS awards are for coach seats on AS!!!!
    We are a special breed.

  17. @ Terry R ; Yes that’s an amazing fact! I recall recently a bloggeress on this site described us as being “somewhat elite” ! Who would have thought?

  18. Also I think to compete with Delta, they will remain non-revenue based. In fact I think Alaska will begin to advertise how they actually credit you miles you fly, and deserve, as oppose to DL with this “battle in (for?) Seattle” with each other.

    I know many SEA based frequent flyers who are not mile whores (I am in SEA) who got pissed that DL turned their program into what they did, and jumped ship for AS. With AS expanding it’s network across the country, I think it’s very wise to switch programs if your currently with AA or DL. AS’s program is the most lucrative for now, and I don’t forsee them making any changes. To boot, while you might not get upgrades a lot, or upgrades on AA or DL, you still get the extra legroom seats in coach when flying partners if you end up having to fly DL or AA.

    It’s been fine for me, and I have been so happy after I switched to AS three years ago.

  19. You’ve ovestated total miles earned while aiming for MVP Gold 75K. Assuming flying with no class of service bonus, on partners, you earn 0% bonus on first 25k, 50% on next 25, 100% on next 40. I get to 142,500 before 50k final bonus. The 125% bonus kicks in after having reached MVP Gold 75K, right?

  20. This article is fine – but the title is extremely misleading – it suggests that you have received information that Alaska will not go revenue based as opposed to your assumption. You should instead use a title such as “OMAAT Analysis suggests…”, “Lucky’s Educated Guess is that….” or “Alaska is unlikely to go revenue based.”

    I don’t recall having had this issue with titles before, but this one is egregious.

  21. Slight correction to the miles. The miles you posted is for a MVP Gold who flies 75K miles at 100% fare earning. If you fly a partner, say American, and fly business class on AA you would earn 125% for the business class BUT the MVP 75K bonus is ONLY on the miles flown. So if you flew entirely on American metal in business class paid fares you would earn about 25% less then your calculated MVP Gold 75K estimation of about 250K miles or in other words you would earn only about 185K miles for flying the 90K to qualify.

  22. Of course lots of folks want AS to incentivize the activities they engage in and punish activities they won’t effect them. There is a strong tendency to see elite status as a zero sum game–someone else being elite somehow makes me less elite. Well folks that don’t fly AS a lot aren’t taking AS upgrades, etc. The reality is also that AS needs partners more than a lot of other airlines. Their MP reflects this.
    I’m an AS MVPGold that earns most of his EQM on partners. It’s very hard to fly AS metal out of my city. When I can, I do. It is/will be so much harder to earn AS status on partner miles as not only RDM is calculated based on fare class but also EQM. There is no need to further disadvantage it. The circle will be complete when AA cheap tickets get RDM/EQM reductions later this year. This is the situation now on DL crediting to AS–fly to Europe on anything than a very expensive ticket and you’re not only earning 50% RDM but 50% EQM crediting to AS–of course the same ticket credited to DL SM still earn 100% (now of course RDM and MQD are another story) If folks are flying high priced tickets, I’m not sure that AS wants to drive those folks away at all. Today’s high priced ticket flyer on a partner is more likely to buy a high priced ticket on AS.

Leave a Reply

Your email address will not be published. Required fields are marked *