People ready to fly again may want to prioritize redeeming their airline miles, rather than trying to earn new ones.
A glut of unused reward miles may push airlines to change their frequent flyer programs in ways that could disadvantage some customers, warns ValuePenguin, one of LendingTree’s financial research websites.
A review of annual filings of five U.S. airlines — Delta Air Lines, American Airlines, United Airlines, Southwest Airlines and JetBlue — shows reward program liabilities grew to a combined $27.5 billion last year, a spike of 11.6% over the year before, according to ValuePenguin.
Additionally, a rush to redeem miles is expected at a time when the badly battered airline industry needs cash-paying customers at the ticket counter.
Miles earned, but not redeemed
Flying was one of the industries hit hardest by the coronavirus pandemic, but customers of the five analyzed programs still managed to amass about half (46.2%) the volume of miles in 2020 that they did in 2019. That was largely due to points earned from credit card spending, said Matt Schulz, LendingTree’s chief credit analyst.
VALUE OF MILES EARNED
2020 2019 2018 2019 TO 2020 % CHANGE
DELTA AIR LINES’ SKYMILES $1.4 billion $3.2 billion $3.1 billion -54.5%
AMERICAN AIRLINES’ AADVANTAGE $1.8 billion $3.4 billion $3.1 billion -47.3%
UNITED AIRLINES’ MILEAGEPLUS $1.3 billion $2.6 billion $2.5 billion -49.0%
SOUTHWEST AIRLINES’ RAPID REWARDS $2.0 billion $2.9 billion $2.7 billion -33.4%
JETBLUE’S TRUEBLUE $0.3 billion $0.5 billion $0.4 billion -$46.2
TOTAL $6.8 billion $12.6 billion $11.8 billion -$46.2
SOURCE: VALUEPENGUIN
Only a small portion of those miles were redeemed.
“Americans redeemed only about a tenth of their available miles last year,” Schulz said. “There were undoubtedly many people who … cashed in rewards points for statement credits for groceries and other necessities, but many people simply held on to their miles, waiting eagerly for the day when they could travel again.”
PERCENT OF EARNED MILES REDEEMED
2020 2019 2018
DELTA AIR LINES’ SKYMILES 10.8% 29.3% 27.1%
AMERICAN AIRLINES’ AADVANTAGE 9.6% 26.4% 27.7%
UNITED AIRLINES’ MILEAGEPLUS 8.7% 29.8% 29.9%
SOUTHWEST AIRLINES’ RAPID REWARDS 16.6% 40.6% 41.4%
JETBLUE’S TRUEBLUE 18.4% 34.5% 32.7%
TOTAL 11.3% 30.5% 30.3%
SOURCE: VALUEPENGUIN
JetBlue customers redeemed the most miles (18.4%) last year, about half the miles its customers redeemed in 2019, according to ValuePenguin. United’s members redeemed the least, less than 9%, down from nearly 30% in both 2018 and 2019.
A spike in reward liabilities
With reward miles accumulating without being used, that 11.6% rise in liabilities translates to a total increase of $2.9 billion that took place last year, which is roughly three times the increase that took place the year prior, according to ValuePenguin.
REWARD PROGRAM LIABILITIES
2020 2019 2018 2019 TO 2020 % CHANGE
DELTA AIR LINES’ SKYMILES $7.2 billion $6.7 billion $6.6 billion 6.7%
AMERICAN AIRLINES’ AADVANTAGE $9.2 billion $8.6 billion $8.5 billion 6.7%
UNITED AIRLINES’ MILEAGEPLUS $6.0 billion $5.3 billion $5.0 billion 13.2%
SOUTHWEST AIRLINES’ RAPID REWARDS $4.4 billion $3.4 billion $3.0 billion 31.4%
JETBLUE’S TRUEBLUE $0.7 billion $0.7 billion $0.6 billion 10.9%
TOTAL $27.5 billion $24.7 billion $23.8 billion 11.6%
SOURCE: VALUEPENGUIN
NOTE: LIABILITIES MAY NOT ADD UP DUE TO ROUNDING.
Southwest’s Rapid Rewards liabilities grew by $1.1 billion, the most of any of the analyzed airlines. Its customers redeemed the most miles of all programs, but they earned the most miles too.
JetBlue’s TrueBlue program — the smallest of the five — was the only airline that saw its loyalty liabilities grow less in 2020 than they did in 2019.
More points, less value
Delta, United and Southwest have all devalued their rewards points during the pandemic, meaning members must now pay more points for the same flights, said Sophia Mendel, a travel specialist at ValuePenguin. And further changes may be in store.
“Southwest, in particular, is getting a significant amount of heat for having changed their points program without prior warning to its members,” she said, adding that several international carriers, such as Qatar Airways, have done the same.
CNBC asked the airlines analyzed by ValuePenguin on Wednesday if they have plans to alter their rewards programs this year. Delta said it has no plans to change its loyalty program. Southwest verified to CNBC that since April 14 it has required more Rapid Rewards points to redeem flights on all types of fares.
Mendel said she believes devaluing miles or capping award redemptions is a response to airlines having too many unused miles on the books.
loyalty points website Straight to the Points, isn’t so sure. He said the risk of devaluation is always present, regardless of economic or global health conditions.
“Airlines devalued prior to and during the pandemic and will do so after we’ve gotten out of the pandemic,” he said. “Devaluations are inevitable.”
Howard agrees that customers have more miles now, but he said airlines can exercise control over when they’re redeemed.
