Low-cost airlines make a play for frequent fliers with new incentives typically reserved for elite-status, while the majors focus on keeping their elites loyal
Low-cost carriers JetBlue and Virgin America are making a play for serious frequent fliers by introducing elite-style programs, and American Airlines — widely expected to cut costs as it emerged from bankruptcy — has instead announced significant upgrades aimed at elite customers.
All three airlines are appealing to the profitable top tier of travelers, but making elite status easier to achieve with their co-branded credit cards.
Low-cost carriers introduce elite-style benefits
On June 23, both JetBlue and Virgin America announced new programs awarding their most loyal customers with the kind of perks elite fliers on major airlines have long enjoyed. Benefits of both programs became available Aug. 7.
JetBlue launched the Mosaic program for its TrueBlue frequent flier members, and Virgin America introduced silver and gold tiers to its 5-year-old Elevate program. Both airlines offer rewards based on the price of a flight rather than mileage: five points per dollar spent on Virgin America and three per dollar on JetBlue — or six if you book on their website.
Qualifying for Jet Blue’s Mosaic requires 15,000 points ($5,000 spent) or 12,000 points ($4,000) and 30 flight segments. It gets you priority security and boarding lines, an option to buy premium seats with points and a second bag checked free (the first one is already free).
Silver status on Virgin America’s Elevate program requires 20,000 points ($4,000 spent) in one year and gets you priority check-in, boarding and security. You also get one free checked bag, a 25 percent bonus in points on flights booked and free upgrades to Main Cabin Express. Virgin America passengers who earn 50,000 points per year get gold-status perks: three free checked bags, a 100 percent bonus in points and first choice on premium seats 24 hours before a flight. Silver-level members get second pick 12 hours later. Everyone else can have what’s left six hours before a flight.
That $4,000 minimum is less than Southwest’s requirement for A-list status (about $5,800), but considerably more costly than the 25,000-mile minimum for base-level status on the major airlines. Representatives of JetBlue and Virgin America, however, say the overall flight experience on their planes is already superior to the legacy airlines. All seats on JetBlue are leather and at least 34 inches in pitch, compared to the 31 inches of typical coach seats; Virgin America offers in-flight entertainment and free Wi-Fi with every seat, rendering the need to upgrade somewhat less dire.
You can get halfway to benefit-earning status with the 10,000-point sign-up bonuses on either the Virgin America Visa or the JetBlue American Express and multiply the rest by charging flights on those cards. JetBlue AmEx offers up to eight TrueBlue points for every dollar spent at the airline’s website.
JetBlue’s ‘badge of loyalty’
JetBlue is not calling Mosaic an elite program and purposely avoided a tier system. “We didn’t want to go down the path of traditional carriers and create pods of customers that compete against each other and become elitist,” explains Dave Canty, head of loyalty at JetBlue. “What we’re doing is creating an opportunity to earn a badge of loyalty, to enhance the experience and make it easier for our most loyal customers.”
Some say that amounts to the same thing. “Of course it’s an elite program,” says Gary Leff, who blogs at View from the Wing. “I don’t think the essential feature of an elite program is having multiple levels. JetBlue is saying they have a subset of customers who are valuable to their business, and they want to provide recognition for those customers and make sure they’re being especially well-treated as a way of retaining them.”
Phil Seward, head of loyalty for Virginia America, embraces the elite concept and, in fact, claims that Elevate’s base-level status is more elite than the average airline’s. “We want to make sure we’re bringing back some exclusivity and cachet to what status really stands for,” Seward says. “We look at silver as being equal to mid-tier elite at larger airlines. We did that to make sure we’re offering a set of meaningful benefits.”
One positive outcome of upping the entry point for status benefits is that there will be less of a crowd in line for priority boarding and premium seats. Both JetBlue and Virgin America expect about 2 percent of their passengers to qualify for Mosaic or Elevate elite, a fraction of the mob on larger airlines. Both also promise no blackout dates on their special benefits.
So has base-level elite status lost its cachet? It seems to be going that way. This year, for example, United Airlines took away a coveted benefit from its silver (lowest tier) members: the ability to request a seat upgrade when they book a flight. Now only mid-tier or higher elite members can do this. Airline credit cards further dilute the power of entry-level elite fliers by offering many perks that were once exclusively theirs — things like free checked bags, premium seating and early boarding.
“First-level elite has basically become kind of a giveaway,” says Leff. “There’s less differentiation between whether you’re a cardholder or whether you’re a first-level elite.”
Neither the Virgin America Visa nor the JetBlue American Express offer elite perks as automatic benefits. You have to earn your way to waived bag fees and seat upgrades, though both cards help with points and their annual fees are about half that of legacy airline cards. “What we didn’t want was for credit card holders to be earning all their points that way and diluting the benefit,” says Seward. “We want to make sure people choosing to fly Virgin America are the ones who end up with silver and, eventually, gold benefits.”
American Airlines goes upscale
In an attempt at enhancing its profile, American Airlines is forgoing changes at ist base-level in favor of squarely targeting the upper-level elite. Starting later this year, American passengers will be able to get horizontal on new lie-flat seats in first and business class on aircraft flying between New York City and California — part of a tricked-out new fleet of 460 aircraft. Next year, American will add even more transcontinental flights with luxurious, expanded first- and business-class cabins.
“American is aiming at a much more premium market than they have historically, hoping to attract higher-revenue fliers,” says Leff. “Having a greater percentage of premium seats on the new Airbus flights means you not only have a better chance of getting an upgrade but the upgrade itself is a better experience.”
Mid-level and (at least for a while) base-level elites will get American’s new economy-plus seating for free. If you don’t fly enough to achieve elite status, the Citi AAdvantage Visa or Mastercard will get you base-level perks such as priority boarding, free checked bag, a $100 flight discount and up to 10,000 of your redeemed miles back each year — plus a 30,000-mile sign-up bonus.
A little added incentive
Some airlines are sweetening the pot with extra perks for acting within a specific window of time.
American is offering up to 30,000 bonus miles to AAdvantage members who book round-trip flights via their Bourne Legacy promotion by Sept. 15. Jet Blue TrueBlue members who earn Mosaic status in 2012 are entitled to six free upgrades to the airline’s Even More Space seats.
Both are nice, but those offers pale by comparison to Virgin America’s introductory prize: a suborbital Virgin Galactic space flight, valued at $200,000, awarded to whoever earns the most points in one year on Virgin America, Virgin Atlantic and Virgin Australia.