Airlines, including American Airlines, are offering frequent fliers alternatives to a free trip. Passengers with enough miles are now able to use their points to bid on experiences, pay their credit card's annual fee and even download music. (Spencer Platt / Getty Images)
You’ve racked up plenty of frequent-flier miles, and now you’re ready to cash them in.
But instead of a free flight, how about using them to snag a free iPad, or tickets to the Daytime Emmy Awards, or even a chance to meet Rod Stewart?
It’s been 32 years since American Airlines launched the world’s first frequent-flier loyalty program, and with the programs now ubiquitous throughout the industry, tens of millions of travelers have the formula down cold: Earn miles or points on every trip, and when you have enough built up, redeem them for a free flight.
Now, airlines are increasingly offering their frequent fliers alternatives to a free trip, from one-of-a-kind experiences that travelers can bid on — using miles instead of cash — through online auctions, to upscale electronics to the ability to use miles for smaller perks, such as downloading music or paying your credit card’s annual fee.
“More options are good for frequent fliers,” said Gary Leff, co-founder of the frequent-flier community Milepoint.com, who’s noticed the trend building over the past three or four years. “Not everyone wants to fly throughout the year for business and be rewarded with another flight. Sometimes they’d just like to stay home and use their miles for a retail treat.”
And with many frequent fliers complaining that it’s difficult to redeem miles for a free flight when, and for the amount, they want, industry experts say alternative perks and rewards could allay some of those frustrations.
“The U.S. airlines have realized they have a reward availability issue, and this is one way to deal with it,” said Jay Sorensen of IdeaWorksCompany, a consulting company specializing in airline revenue.
A survey conducted by IdeaWorks for Switchfly, a car and hotel reward platform, noted that free flights are the most important loyalty program perk to a majority of fliers. But it found that miles and points are easier to redeem for flights on a low-cost carrier than with a network airline.
The survey of 25 airlines across the globe for flights taking off between June and October 2013, ranked Southwest No. 1, with 100 percent of queries finding a reward seat available. The low-cost giant tied with GOL and Air Berlin. Delta and US Airways were tied at the bottom, with reward seats found only 36.4 percent of the time, according to the survey.
U.S. airline officials contend that if passengers are willing to be flexible, they should have no problem redeeming their miles for a free trip. But they said that they are also heeding the demand by some frequent fliers for more varied reward options.
“We do know that air redemption is one of the preferred options, but at the same time there are folks who, after spending so much time in the air, would want to use their miles on something else,” said Praveen Sharma, United’s vice president of loyalty. “So we want to give them options for non-air related redemption awards.”
Reward flights are still widely available, Sharma said. Still, with United’s expanding menu of choices, “if you believe that for various reasons you’re not able to use those miles for an air award, it at least provides an alternative.”
United, whose loyalty program has roughly 90 million members, has been steadily beefing up its offerings over the past four years, Sharma said. Its online auction allows frequent fliers to bid miles for unique experiences, such as two recent offers to spend time in the simulator used to train United’s pilots. Another experience, offered earlier this month, gave the highest bidder the chance to meet Rod Stewart and get tickets to his concert at Caesars Palace in Las Vegas. The closing bid: 305,000 miles.
Like most carriers, United allows miles to be used for merchandise. United has made a concerted effort to upgrade its items with its spring catalog, including Tumi luggage and MacBook Pro computers.
On June 3, United announced that starting at 65,000 miles, or $500, frequent fliers could buy a year-long membership in the airline’s clubs. And miles can also be used to pay the annual fee on United’s co-branded credit card or even for songs downloaded to an MP3 player.
Sharma says United’s frequent fliers like the additional choices, with the amount of miles redeemed for non-air rewards rising roughly 17 percent between 2010 and 2012.
And those additional offers are creating more ways to connect with their frequent fliers, Sharma said.
Other carriers are also boosting their reward menus. Since 2010, American Airlines has offered its loyalty program members the option of using miles, on their own or combined with cash, to pay for hotel rooms or to rent a car at more than 10,000 locations across the globe, said Suzanne Rubin, vice president of customer insights and loyalty and president of the airline’s AAdvantage Loyalty Program.
The airline also has online auctions and allows passengers to use miles to join its Admirals Club.
“Many AAdvantage members told us they’d like to be able to use their miles as currency for other things,” Rubin said in an e-mail. “Such as vacation packages, car and hotel reservations, gift cards, magazines and newspapers, and charitable donations.”
In January, Delta announced that its online auction for loyalty program members was going from a quarterly offering to one available year-round.
“By providing several ways for our customers to redeem miles, we put the power in their hands and they can choose what is best for them, whether it’s redeeming for a family vacation, a spontaneous weekend getaway or a meet-and-greet with a ballplayer,” Jeff Robertson, vice president of Delta’s SkyMiles program, said in the statement announcing the change.
Choices a hit with some
Frequent flier Mike Maloney likes having redemption choices that go beyond free flights. “It just broadens the spectrum of offerings that I can use my miles on,” said Maloney, a senior manager in the beverage industry, living in Overland Park, Kan. He has used his miles to purchase gift cards.
“When you travel extensively, it is easy to build up miles. ... It sometimes gets to a point where you cannot use them quickly enough,” he said.
But the alternative rewards are making some frequent fliers suspicious.
Jim Wilson, a training and research company facilitator who lives in Scottsdale, Ariz., views it as part of the airlines’ “plan to get us to use mileage for something else so they can sell the seat.”
Lauretta Reeves, a former portfolio manager and analyst who lives in Islamorada, Fla., said, “Rather than alternative awards, I would rather have more options to use my points on travel.” Reeves, who is traveling this month to Istanbul on Delta, initially could not find a reward seat in business class when she looked online for the final leg of her trip from London.
Some loyalty program members may also feel they get more bang for their miles when they use them for a free trip as opposed to an appliance or piece of jewelry.
Jeff Rosenthal has done the math and would rather have a free flight.
“The bottom line is how much I save with whatever award I take,” said Rosenthal, who is in the apparel business and lives in New York and Dubai. “If the airline is offering a $1,000 television or a pair of $250 U.S. Open tickets for 100,000 miles, I am still much better off getting a free first- or business-class international ticket that would cost me ($5,000) to $10,000.”
Unique experiences, however, could be perceived as a better deal, Leff said.
“When you’re leveraging the connections, the sponsorship, or other clout that a multibillion-dollar business has to open doors you can’t open on your own,” Leff said, “there tends to be much greater value.”
Dan DeRiemer, who has more than 4 million miles with Delta, said he’d rarely looked at its online auction site, until he got an e-mail about a Broadway show he and his wife, Laura, were interested in.
That’s when he saw that he could bid for the chance to help build a home, with Habitat for Humanity International, in Puebla, Mexico. DeRiemer, who owns a car business and lives in Roswell, Ga., won with a bid of 324,500 miles. He and Laura headed to Mexico in March, and the miles he spent will be donated to the organization.
“Yes, it’s a lot of points,” he said. But “we came home with an experience under the belt that I don’t think any amount of money can buy.”