Airlines are rewriting the rules on frequent-flyer programs—again

Carriers increasingly reward spending on the actual flight, and American Airlines is about to follow the trend more than any major carrier. The pandemic has accelerated the transition as many earlier travelers are earning more miles and points on the ground via credit cards.

“The pandemic gave us an opportunity to really reevaluate how we define loyalty,” says Heather Samp, managing director of AAdvantage member engagement at American.

The airline will make it possible to earn elite status without taking a single flight starting in March. Credit-card miles will count towards status more than ever.

Those who are frequent travellers will get some additional benefits, and business travelers who are not traveling that much will be able to enhance their status with their expenses. Small-business owners and others who use their credit cards a lot may be a top dog in American before they can lift the buckle on the seat belt.

Who stands to lose? Flyers who qualify only by flying long distances on cheap tickets. Spending requirements and credit-card use become even more important.

Loyalty programs have long been designed for business travelers who typically pay higher fares and room rates than leisure travelers. Status tiers with special features such as upgrades and Priority Lines now serve as loyalty points for business travelers.

But business travel remains gloomy. It has been left to airlines to figure out how to maintain status quo for grounded customers so that they remain loyal when they resume.

“I think they’re all trying to figure out what their new world looks like,” says Gary Leff, a mileage expert, travel blogger, and co-founder of the online community InsideFlyer.

Other airlines and hotels have made it easier to hang onto the position for the next year. United lowered the flight and spending requirements required for elite status by 2022 and now allows miles earned on your co-branded credit card to count toward elite status, as long as you take four flights.

Delta says it will automatically rollover the status that SkyMiles customers have this year until 2022. In addition, it will pool qualifying miles earned this year and the next 2023 together toward status requirements. Delta is also offering bonuses for qualifying faster for the elite-status tier and counting the flight that members make on award tickets toward the status tier.

Marriott, Hilton and InterContinental Hotel Groups are all extending existing positions in members’ loyalty programs and deferring points expiration by the end of next year.

Hyatt lowered the qualification requirements for elite status by 50% this year, making it easier to obtain status for 2022, but it seems to be taking a hard line with members when it comes to keeping current points in accounts. Hyatt has been warning members that it will implement the two-year deadline. World of Hyatt members who haven’t earned or used points during the pandemic may be faced with the surprise of having accounts wiped out.

Hyatt did not respond to requests for comment.

The position matters to the passengers. The usefulness of loyalty programs for many road warriors is not free travel with accumulated miles or points. Qualifying for the Elite tier offers the following benefits: better seat selection, early boarding, free checked bags, priority access to upgrades, rebooking and standby seats, exclusive phone numbers and priority queues at airports.

Frequent-flyer programs were created in the 1980s to keep customers loyal. Miles became a hot commodity and credit-card companies now buy them for billions to give to customers as a reward. This turned loyalty programs into a profit center for airlines, rather than just a marketing cost. And it changed how airlines run programs – they focus on expenses rather than travel.

American is creating a currency called loyalty points in an effort to simplify elite-status qualification. Previously American, like other airlines, had three requirements for status: you had to meet requirements for mileage, number of flights taken, and ticket expenses. You couldn’t get position with just a couple of very long, very cheap mileage runs.

Under the new rules, it’s all about the dollar: You’ll get loyalty points for ticket spends and loyalty points for co-branded credit-card spends. American will also prioritize where members are on the upgrade list by spending.

The airline expects this change to expand the range of customers with elite-level status. Often this makes the upgrade even more difficult to score – more people in the ranks competing for some seats.

Status doesn’t come cheap. US, the lowest level gold position requires 30,000 loyalty points. Earn one loyalty point for every dollar spent on a co-branded credit card. Executive Platinum, American’s highest published level (concierge key is by invitation only), requires 200,000 loyalty points.

But Ms Samp says the new members in the status ranks will be occasional fliers rather than hard-core road warriors. And that means they’ll be pursuing upgrades at off-peak times rather than on typical business-travel flights.

“We don’t really see that adding to the ranks will lower someone’s service level,” she says.

The change is likely to be a big boost for US co-branded credit cards as well. Airline credit cards have seen a lot of competition from cash-back cards and high-end cards from Chase, American Express and others, which offer their own lounge access, rewards on any airline or hotel, and other perks.

“If you’re just flying, it’s going to be tough” to qualify for status at American, Ms. Samps says.

Mr. Leff noted that American isn’t the first airline to offer the status-only on credit-card spend. Frontier has a similar option. But it is the first major program to fundamentally change the way American status is earned, he says.

“It’s not a good deal for more travelers,” he says. “There will be people who are unhappy, and there are those who would have earned a higher status under the old program over the new.”