Some summer vacation travelers may have sticker shock if they’ve looked at airfares lately, and those higher prices are prompting more consumers to try to cash in frequent flier miles.
Tom Parsons, CEO of bestfares.com, warned Wednesday that some Twin Cities travelers could pay double what they did to fly last July. Northwest Airlines and other big carriers have been raising fares in response to record oil prices.
Travelers have been sitting on a mountain of frequent flier miles that can be turned into millions of free tickets. But many chose not to redeem those miles when they could buy round-trip tickets to the East Coast for as low as $200. Now that some prices have doubled, using the miles makes more sense.
“If people want to avoid buying a higher fare, perhaps they are more likely to turn to their miles as money in the bank to redeem,” said Jay Sorensen, who just completed a study on frequent flier programs.
At Northwest, Bob Soukup, managing director of WorldPerks marketing, said frequent flier redemptions are up about 10 percent in recent months. “As the fares are going up, WorldPerks miles do become more valuable,” Soukup said.
The increase, he said, has been driven by a program introduced in February called PerkChoice, which allows a customer to pay for a trip half in cash and half in miles.
“We are continually trying to improve the program, to make it easier for our members to earn their miles and burn their miles,” he said.
Enrollment for Northwest’s WorldPerks Visa card program, which generates airline miles for purchases made with the card, is up 19.3 percent this year — another indicator of strong consumer desire to earn miles.
Northwest and American, the world’s largest airline, both indicated that about 7 to 8 percent of their passengers typically are traveling on award tickets from their frequent flier programs.
In 2007, American customers booked about 4.8 million award tickets, up from 4.5 million the year before.
Sorensen, who runs Wisconsin-based IdeaWorks, had heard plenty of anecdotes from people who couldn’t book the trips they wanted using miles. So his company made 5,000 booking queries to assess the seat availability for reward tickets on eight large airlines.
He found that a family of four traveling in the summer could book tickets to key markets more than 46 percent of the time. A couple flying outside the summer season could book reward tickets on American, Alaska, United and Southwest more than 96 percent of the time.
Among the big six network carriers, he found that American had the best award seat availability. US Airways got the lowest score and Northwest finished in the middle.
Even higher fares on tap
Travelers can expect an even tougher fare climate as the year unfolds.
On Wednesday, fare watcher Parsons said the cheapest nonstop fares on selected routes on big carriers had risen by 100 percent to more than 300 percent for travel during the week of July 22. In the Twin Cities market, he looked at travel to 13 cities during that July week.
For example, a year ago, a round-trip ticket between the Twin Cities and Philadelphia could be had for $198 on Northwest. Now, he said that ticket for travel in mid-July would cost $583.
With fares expected to rise as airlines cut back sharply on flight schedules in the fall, it will make increasing sense for travelers with miles to avoid the price increases by cashing in miles for tickets.
Oil prices have doubled within a year, but even the higher fares that carriers are now charging are not generating enough revenue to cover astronomical jet-fuel bills.
“The industry needs to raise average fares 15 to 25 percent to be profitable with crude at $125” a barrel, Credit Suisse analyst Daniel McKenzie said in a Wednesday report.
United Airlines announced Wednesday that it will remove about 100 airplanes from its fleet and cut domestic capacity by 14 percent in the fourth quarter. Previously, Northwest said it would shrink its U.S. seat capacity by 12.6 percent in the fourth quarter, and it has signaled that more cuts are coming if oil prices remain high.
Delta Air Lines is planning domestic cuts of about 10 percent after the busy summer travel season, and Delta spokeswoman Betsy Talton said there will be a proportional cut in the number of award seats available to customers.
But Delta, Northwest and other big carriers continue to build loyalty among customers by expanding the ways people can earn miles.
In Northwest’s case, Soukup said the carrier has more than 275 WorldPerks partners worldwide, and its customers can earn bonus miles for credit card transactions and expenditures on hotel stays, rental cars, home mortgages, gas, home energy and a variety of other goods and services.
Northwest also operates a WorldPerks Mall. Consumers can earn bonus miles by making purchases they planned to make anyway through about 200 online retailers such as Macy’s, Target, Best Buy and Land’s End.
In a year defined by a weak U.S. economy, purchases through the WorldPerks Mall are up 30 percent over 2007.