United follows Delta in bringing dynamic pricing model for loyalty programme reward redemption

US carrier United Airlines will remove its published chart for Mileage Plus rewards later this year and instead introduce a more dynamic flexible pricing model that will see reward levels “fluctuate based on a variety of factors, including demand”. While some award prices will be lower than those available currently, others may be higher, especially when travelling during high demand periods.

The change to its loyalty programme will take place from 15-Nov-2019 when the current award chart detailing the set amount of miles needed for a flight redemption will be ripped up and replaced with variable rates. It follows around four years since Delta Air Lines followed a similar track with its SkyMiles programme.

Will passengers win from the new structure? Well, United says that some award prices “will be lower than what’s currently published in our chart”, but you would probably need to be flexible with travel arrangements to secure any significant savings. The carrier says that awards to US and Canadian destinations that are 10,000 to 12,500 miles today “may be available for less moving forward”, but again such availability will likely be restricted to the less favourable travel periods.

United does similarly highlight that award prices “may be higher than what you see today, especially if you’re travelling at a popular time”. In travel terms that effectively means rates during the most popular travel periods could rise exponentially.

The airline says that “increasing award prices for the most in-demand flights allows us to offer lower prices on other flights. If your award travel is flexible, these updates will help you make the most of your miles.”

The change may not prove popular with many travellers that are used to predictability and transparency of the redemption chart and knowing exactly how many miles they required for a specific reward, but it does allow the airline to use the system to better manage loads, and of course, boost revenues.

By removing the published award chart, mileage pricing – both the minimum and maximum possible price – becomes dynamic and opaque, similar to what we see with traditional air fares. And like air fares they can now trend both up and down based on demand.

Through dynamic pricing United will now more easily be able to set the price of award seats to a much lower redemption level when demand is traditionally low. At the same time it can slide up the cost of redemption during peak travel periods such as around Thanksgiving or the Christmas and New Year periods.

For now, American Airlines remains the only legacy US airline to offer a tiered, fixed-price frequent flyer system. The question is… how long before it follows Delta and United in adopting a dynamic pricing model?