2016 was a banner year for the airline industry, with 928.9 million domestic and international passengers being served by airlines that flew into, within, or out of the United States. That marked the highest total in history, besting the previous all-time high of 897.9 million passengers set the year prior. Expectations for 2017 are that we could wind up setting a new traffic record yet again.
This added traffic is a bit of a double-edged sword for the airline industry. While the boost in travel demonstrates that demand from consumers is healthy, it's also increased the voracity of competition among the airline industry. This competition, especially fare-price wars, has been weighing on margins for the industry as a whole. Lower fares may not be good news for airline margins, but it tends to make the consumer pretty darn happy.
You know what else makes passengers happy? Perks. A number of airlines have been bringing back "extras" or emphasizing existing perks to win customers over. Examples include a few of the majors bringing back complimentary meals on long domestic flights, or in rarer cases the opportunity to bring one or two bags of luggage onboard for free.
But passengers want more than just a free meal or a free checked bag. If they're going to stick with an airline for the long haul, they want to feel appreciated and get rewarded for their loyalty. That's where an airline's elite status comes into play. We're talking here about what perks a passenger is offered for flying a certain amount of miles, or spending a specific amount of money, with an airline in a given year. The better the perks, the assumption would be the more likely a consumer is likely to choose one airline over another. And loyalty can be a very important profit driver in the airline industry, especially if loyal customers prove to be less reliant on sales when making their purchases.
This new report spills the beans on the best airlines for elite status
So which airlines have the best elite status perks? To answer this question, we'll turn to a brand-new report from ThePointsGuy.com, which examined six national airlines: Alaska Air (NYSE:ALK), American Airlines (NASDAQ:AAL), Delta Air Lines (NYSE:DAL), JetBlue Airways (NASDAQ:JBLU), Southwest Airlines (NYSE:LUV), and United Continental (NYSE:UAL).
What happened to Frontier, Hawaiian, Spirit Airlines, Sun Country, and Virgin America, you ask? Frontier, Hawaiian, Spirit, and Sun Country were excluded because they're regional carriers with limited elite status perks outside their hubs, while Virgin America is currently merging with Alaska Air and is already included in its results.
The report examined these six national airlines across eight broad categories, each with a percentage weighting of importance:
- In-flight perks (25%): Includes upgrades, preferred seats, and free snacks, entertainment, or Wi-Fi.
- Fee waivers (20%): No checked-bag, flight-change, ticketing, or processing fees.
- Bonuses (20%): Includes extra points or miles.
- Airport perks (10%): Priority check-in and boarding, as well as lounge access.
- Flexible perks (10%): Allows for the transfer of benefits to other passengers, or the choice of benefits.
- Reservation perks (5%): Priority phone line and enhanced award inventory.
- Partner perks (5%): Focuses on the extent to which you can use in-flight perks, airport perks, and fee waivers with partners.
- Non-flying perks (5%): Includes rewards and crossovers between airlines and hotels and/or car-rental companies.
Lastly, the analysis looked at four separate categories of elite status:
- Low-tier elite: 25,000 miles flown and $3,000 spent.
- Mid-tier elite: 50,000 miles flown and $6,000 spent.
- High-tier elite: 75,000 miles flown and $9,000 spent.
- Road-warrior elite: 125,000 miles flown and $15,000 spent.
The performance of the six airlines was averaged across all four tiers, so a first-to-worst list with regard to elite status could be assembled. Let's look at the results.
No. 1: Alaska Air (by a mile)
Topping the list with relative ease is Alaska Air, which came in No. 1 in the low-tier, mid-tier, and high-tier elite status rankings, and fourth of six in the road-warrior category. The reason Alaska stands miles apart from its competition is simple: It rewards passengers based on the miles they fly rather than on how much money they spend, which is the basis for how other airlines reward. For someone in the low-tier elite status level, flying 25,000 miles could earn you a reward of 12,500 bonus miles, worth $237.50. That's almost as much as you'd earn at American, Delta, and United combined!
Alaska's outperformance is perhaps the highest in the mid-tier elite category, where MVP Gold members earn a 100% bonus on the miles they fly, which for 50,000 miles translates to about $950. The other major carriers offer three miles per dollar spent, or about 18,000 miles total. MVP Gold members are also privy to fee waivers, which comes in handy for those last-minute flight changes since it won't result in extra fees.
Not surprisingly, J.D. Power in May announced that Alaska had earned the highest ranking in terms of customer satisfaction among traditional airlines for the 10th consecutive year. With perks like these, it's no wonder its passengers are happy and Alaska's business is excelling.
No. 2: United Airlines
United Airlines, the second best performer based on elite status, finished a respective, fourth, second, third, and first in the low-, mid-, high-, and road-warrior-tiers. Whereas Alaska was top dog for casual to regular fliers, United Airlines appears to be the preferred choice for those who are seemingly always flying the friendly skies.
Interestingly enough, the analysis shows that there's nothing specific about the United Premier 1K status (for those with 100,000 miles flown and $12,000 in spending) that sets it apart from the competition other than it finishing consistently in the top three in seven of the eight categories examined. Perks include enhanced award availability in economy and premium cabins, complimentary drinks and snacks, and a total of six regional premier upgrades and six global premier upgrades.
Another perk offered to United customers is its RewardPlus partnership with Marriott, which allows automatic reciprocal status between both companies. This crossover perk platform helps really boost United's non-flying perks.
No. 3: Delta Air Lines
Delta Air Lines came in third overall with consistent respective finishes of third, third, second, and third across the low-, mid-, high-, and road-warrior-tiers.
For Delta, its in-flight perks and flexible perks appear to be the lure it'll be using to attract passengers. For example, in the high-tier category Delta offers a longer upgrade window of 120 hours (compared with United at 72 hours), complimentary access to preferred seats, and extra-legroom economy seats. Similar to United, Delta also offers a crossover rewards partnership with Starwood Preferred Guest (SPG). While ThePointsGuy.com finds that the United partnership with Marriott is tops on the list, Delta's crossover rewards with SPG come in a close second.
- 4: American Airlines
- 5: JetBlue Airways
- 6: Southwest Airlines
The bottom half of the rankings consisted of American Airlines in fourth, JetBlue in fifth, and Southwest Airlines, which J.D. Power found ranked highest in customer satisfaction among low-cost carriers for the first time in 2017, ranked dead last. Certainly an odd position for Southwest to be in considering its financial success.
Why did these airlines rank so poorly on elite status relative to the aforementioned three? To begin with, in the low-tier category neither JetBlue nor Southwest offers perks. You'll have to reach mid-tier status just to receive perks from either airline -- though the report notes that even there JetBlue and Southwest lag the other major airlines. At the mid-tier level, neither company offers a first class or premium upgrade for elite members, and you'll receive no benefits based on your status when flying with partner airlines.
As for American Airlines, it does offer a few welcome perks, such as priority security to low-tier elite status fliers, and waiving same-day stand-by fees. However, high-tier elite members are restricted to two free checked bags weighing less than 50 pounds each, while United and Delta offer high-tier elites three free bags with each allowed to weigh up to 70 pounds. An overweight bag on American can set you back up to $200, the steepest penalty in the industry.
Do perks beat the almighty dollar? It's debatable.
The question is: Are elite status perks the end-all deciding factor for passengers? To that end I'd suggest it's still debatable.
Take the aforementioned J.D. Power Customer Satisfaction survey into account. Southwest and JetBlue's scores of 807 and 803 were respectively higher than Alaska at 765, and well above the remaining legacy airlines. Yet as the analysis from ThePointsGuy.com shows, JetBlue and Southwest brought up the caboose in elite status perks. This suggests it's quite possible that customer satisfaction is still derived primarily by cost savings via lower fares than perks derived from loyalty, although the two sort of go hand in hand. If this is indeed the case, then low-cost carriers like Southwest and JetBlue have little to worry about and probably won't spend too much time trying to compete with legacy carriers on elite status perks anytime soon.
What matters more to you: a low fare, or being rewarded for your loyalty?
Sean Williams has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Marriott International. The Motley Fool recommends JetBlue Airways and Spirit Airlines. The Motley Fool has a disclosure policy.