United Airlines has just announced a major devaluation of its MileagePlus frequent flyer program. The changes, which go into effect immediately, will increase the number of miles required to book award flights on both United and its partner airlines.
The devaluation is not a surprise. Travel demand is at an all-time high, and airlines are looking for ways to capitalize on that demand and generate more revenue before an anticipated economic downturn takes its toll on bookings.
The pandemic has also caused a shift in how people travel, with more people opting for premium cabins and leisure destinations, especially true for United Airlines, which is seeing a lot of demand for flights to Europe this summer. This has led to increased demand for those types of flights, which in turn has driven up prices.
United’s devaluation is likely a response to these factors and by increasing the number of miles required to book award flights, the airline is hoping to capture more of the revenue from these high-demand itineraries.
The devaluation will have a significant impact on frequent flyers. For example, one-way saver awards to Europe will now cost 40,000 miles in economy and 80,000 miles in business class. This is an estimated 33% increase from the previous redemption cost.
Of course, premium cabin redemptions haven’t escaped unscathed either. For example, one-way saver awards to Asia in business class will now cost 120,000 miles. This is a 25% increase from the previous cost.
In fact, United MileagePlus has increased award costs by over 30% across the board, affecting both travel on United and its partner airlines. The worst affected market is on transatlantic flights, while other regions haven’t seen costs increase by as much… at least, not for now.
Previously, one-way saver transatlantic awards on United started at 30,000 miles in economy and 60,000 miles in business class. These costs have now increased by 33%, with awards starting at 40,000 miles in economy and 80,000 miles in business class.
The devaluation is particularly harsh for partner awards, with some routes seeing increases of up to 47%. For example, one-way saver transatlantic awards for travel on partner airlines used to start at 30,000 miles in economy and 70,000 miles in business class. Those costs have increased by 39-47%, as these awards now start at 43,900 miles in economy and 97,100 miles in business class.
These changes were, unfortunately, made overnight and without notice, making it difficult for MileagePlus members to lock in any last-minute redemptions before the changes came into effect. United no longer publishes award charts, making it increasingly difficult for members to understand the true value of their miles.
It’s worth noting that United’s CEO, Scott Kirby, recently stated that international travel bookings are growing at twice the rate of domestic travel, and the airline expects an adjusted profit of $3.50-$4 per share in the second quarter, with a 14%-16% year-on-year increase in revenue.
This earnings forecast compares to analysts’ estimates of $3.65 per share, according to a Refinitiv survey. Perhaps this context sheds light on the timing of United’s decision and the potential impact it may have on the company’s financial performance.