Canada’s Airlines War Over Frequent Fliers

Domestic airlines may eliminate all frequent-flier triple-mileage programs by Dec. 31.

If so, they could be influenced by what is happening in Canada.

Under terms of the triple-mileage frequent-flier programs, passengers get credit for three times as many miles as they fly, accumulating a staggering amount of free travel time.

Atlanta-based Delta Airlines was the first, early in 1988, to promise a three-for-one deal to passengers charging their tickets to American Express.

Other airlines feared that the new gimmick would cut into their market share, so they took the plan a step further. Keep booking with us, the carriers said, and we’ll give you the same triple-mileage credit, no matter how you pay for your ticket.

What a bonanza for passengers! What a disaster for the airlines!

The program produced better-than-usual passenger loads for airlines in the first quarter of the year, traditionally a slow period for carriers. But it didn’t succeed in changing the market share of any airline by a fraction of 1% in the long run. And Delta, first to make the offer, soon found the program working against it.

By offering triple mileage regardless of form of payment, competitors managed to make Delta’s program that much less enticing. Delta, however, stuck to its guns, maintaining its American Express requirement throughout the year.

In the meantime, the free mileage of most frequent fliers piled up quickly. Soon the airlines found themselves owing their customers billions of miles.

Airlines Can’t Cope

It is generally conceded that if more than a tiny percentage of frequent-fliers convert their earned “free” miles into seats at the same time, the carriers won’t be able to accommodate them.

That’s not quite true, however. Carriers can always operate a few hundred flights to places such as Hawaii and Miami and New York City, carrying nothing but non-revenue passengers, just to cut down the backlog of frequent-flier miles.

Meanwhile the airlines, which are continuing their programs until Dec. 31, are getting in deeper and deeper, and bailing out may not be so easy. At least not for those who compete directly in U.S.-Canada service with Wardair, Air Canada and Canadian Airlines International.

Those Canadian airlines apparently haven’t learned a thing from the U.S. experience. They are locked in their own battle to give away seats.

Upping the Ante

Wardair, the airline with the weakest business-traveler base of the three, was the initiator. In October it started offering customers quadruple mileage.

Air Canada and Canadian Airlines responded by offering the same incentive to customers on routes competing with Wardair.

Wardair, an aggressive carrier that’s beginning to make its mark after years as a charter operator, upped the ante. It introduced an optional offer-- sextuple mileage for those who pay with the American Express card.

Sound familiar? As in the Delta case, evidence indicates that American Express instigated the escalation in an effort to gain its own market share.

After the quadruple and sextuple mileage giveaway ends in February, the Canadian lines will give double mileage for the rest of the year to those who participated at the higher level.

Competing Routes

How will developments in Canada affect airlines here?

Wardair and Air Canada compete in the United States, flying from Los Angeles and San Francisco to Toronto. So does American. Wardair also offers New York City/Toronto and Chicago/Toronto service and has aspirations to serve other U.S. cities.

Canadian Airlines International (formed by the acquisition of CPAir by Pacific Western), has daily flights between Los Angeles/Vancouver and San Francisco/Vancouver. So does Delta.

Undoubtedly the Canadian trio will use the new mileage programs to get Americans on their flights. Obviously, business people who travel on a regular basis will be tempted.

The main battle, however, is expected to be fought inside Canada.

It’s possible that some U.S. carriers may maintain a competitive posture against these foreign rivals on service between the countries.

They won’t ever go to a six-for-one deal, or even a four-for-one, but who knows? Some may retain their triple-mileage program on routes that are competitive with the Canadian airlines.