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Business

Airline benefits and elite status will be harder to earn this year




The new Delta SkyClub at Los Angeles International Airport (LAX), Terminals 2 and 3, where the newly created, state-of-the-art facilities will soon welcome millions of guests each year.

Media News Group | Long Beach Press-Telegram via Getty Images

When United Airlines Street agents call the first boarding group, and Ted Cohen notices something he’s never seen in decades of criss-crossing the globe as a music industry executive: crowds.

The “Preboarding” group includes members of United Global Services, an invitation-only status for top customers, and United Premier 1K, a top tier of the airline’s Mileage Plus frequent flyer program.

“There used to be two or three people and you used to say, ‘Who’s that?’ And now it’s a small army,” said Cohen, who heads a digital entertainment consulting firm and has lifetime elite status at United and American Airlines.

Welcome to air travel’s era of mass luxury.

Travelers willing to shell out more for tickets and popular rewards credit cards are growing in the queues in front of cabins and airport lounges. Now airlines are scrambling to handle the wave of heavy users — without compromising the appeal of their lucrative loyalty programs and priciest seats. This year, not everyone makes the cut.

The largest US carriers – Delta Air LinesAmerican and United – are increasing spending requirements to earn some elite bonus tiers that provide free upgrades, early boarding, discounted or free lounge memberships and other benefits.

Executives say the richer demands are the product of the pandemic. Airlines had extended frequent flyer status without requiring travelers to meet the usual annual thresholds because potential passengers were sidelined. Meanwhile, customers continued to spend on their rewards credit cards, racking up points and benefits along the way.

“We feel like royalty even though we’re not rich at all,” said Damaris Osorio, a 27-year-old based in New York who runs a vintage clothing business.

Osorio visits airport lounges on trips booked with rewards points she’s earned through strategic credit card use and sign-up bonuses. Last year she and her fiancé traveled to Brazil, Chile, Argentina and Italy, all on flights she paid for with points.

She said she doesn’t mind sitting at the front of the plane, but prefers the American Express Centurion Lounges, which she gets into with one of her Amex cards. Osorio realizes she is not alone.

“You notice how much busier it gets in the salons,” she said. “I leave as early as possible to maximize what I take away.”

Next month, Amex Platinum cardholders will be charged $50 for each guest they bring to a Centurion Lounge. These cardholders can currently admit two guests for free.

“If everyone is special, no one feels special”

For airlines, hordes of spenders are a good problem to have two years after the pandemic drove them into a $35 billion hole, despite billions in taxpayer support. Airlines are profitable again, with travel roaring back and flyers willing to pay for a little more space or privacy on their trip.

The airlines’ lucrative credit card partnerships helped them stay afloat during the pandemic. They sell miles to credit card companies, bringing in billions of dollars.

Now they have many travelers itching to make money.

If they call biz class boarding and it’s like the start of the Indy 500…it’s not going to be a pleasant experience.

Henry Hartveldt

founder of the Atmosphere Research Group

Delta said in an investor presentation last month that premium products and non-ticket revenue will make up 57% of sales this year, up from 44% in 2014 and 53% in 2019, before the pandemic. This category includes revenue from premium international business class seats, extra legroom seats and other sources, such as the partnership with American Express.

After some customers complained about crowds and long lines at Sky Club airport lounges, Delta said late last year it would raise fares and requirements to access those facilities. Earlier in 2022, it also introduced a three-hour time limit on lounge use and created a VIP line for high-status holders.

CEO Ed Bastian said recent policy changes aim to address pandemic-era status expansions and the rise of customers spending more on travel.

“We have to address it somehow to be fair to everyone, because as they say, ‘If everyone is special, no one feels special,'” Bastian said in an interview last month. “We try to do it in a fair way.”

United’s chief customer officer, Linda Jojo, said the same thing at a recent industry conference. “If everyone has status, no one has status,” she said.

In November, United said it was raising the requirements to gain status and benefits.

United also opened a new mini-lounge at its hub at Denver International Airport, serving on-the-go customers flying on regional feeder jets, a move that could help free up space in larger facilities for travelers with longer layovers.

United Airlines Polaris lounge at Newark Liberty International Airport

Leslie Joseph’s | CNBC

Last month, American Airlines said customers must spend or fly more to reach the lowest elite tier of its AAdvantage frequent flyer program. Customers will soon need 40,000 so-called loyalty points instead of 30,000 for Gold status.

Larger space for large users

Delta, American, United and American Express have opened larger airport lounges to accommodate more travelers.

In November, American and its transatlantic partner British Airways opened new, exclusive lounges at John F. Kennedy International Airport with showers, bars and lots of work space. The three lounges roughly double the square footage American previously offered at JFK to about 65,000 square feet, an airline spokeswoman said.

“There’s a huge demand for it, and we have to make sure we’re taking care of customers the way they want to be taken care of,” American Airlines CEO Robert Isom said at the opening of the JFK lounge.

Several full-service carriers have also moved away from long-haul first-class cabins in favor of more premium economy seats – between business-class and standard coach seats – and larger business-class cabins that fit many travelers, especially on long flights.

Many of the newer business-class seats are more spacious and come with more amenities than first-class seats of the past.

A new American Airlines and British Airways lounge at John F. Kennedy International Airport, November 29, 2022.

Leslie Joseph’s | CNBC

American Airlines plans to get rid of a separate first class on some older planes used to fly longer routes in favor of a simple, expanded business class with new suites with doors.

The airline said premium seats on its long-haul fleet will increase by more than 45% by 2026.

But with the expansion of the cabin comes the risk of diluting the premium feel, said Henry Harteveldt, a former airline executive and founder of the Atmosphere Research Group.

“If they call biz class boarding and it’s like the start of the Indy 500 and you have 70 people scrambling to get down the jet bridge, it’s not going to be a pleasant experience,” he said.

“I don’t sit behind the wing”

With demand still strong, it may cost more to redeem miles for flights this year.

Michael Calarco, a part-time consultant who helps travelers book travel with their rewards points, said it’s been harder to find seats lately because planes are so full after travel restrictions are lifted, including to international destinations.

He advises flyers to be as flexible as possible with dates if they want to earn their points for a trip, and to avoid major holidays.

“There’s not much I can do if someone wants to go to the Maldives two months away,” he said.

Some travelers say comfort is worth earning some of the points they’ve been sitting on.

“I’m not sitting behind the wing,” said Mark Ophaug, 40, who works at an educational technology company and has top status with United’s Mileage Plus program. He and his husband plan to visit the in-laws in Buenos Aires this year and plan to use United PlusPoints to upgrade to lie-flat seats.

“It’s a long flight and I want to go to bed,” Ophaug said.



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