Frequent Flyers: It's Tougher to Get What You Want

By Daniel Eisenberg

If you think finding a cheap air fare today is a chore, try lining up a freebie. Last year the airlines awarded 2 trillion new frequent-flyer miles--triple the number handed out a decade ago--yet they haven't expanded the number of available free seats anywhere near that fast. It's no wonder America's 57 million frequent flyers are having a tougher time than ever taking off for nothing.

This fall the airlines are adding a new layer of complexity. As part of three major alliances--Northwest with Continental (still pending), Delta with United and American with US Airways--members will be able to earn miles on either carrier and, to a certain extent, pool them. But while that might grant flyers more options, it could also limit competition and further increase already sky-high demand for free seats. Frequent-flyer programs are shrouded in secrecy, but according to Randy Petersen, editor of the trade magazine InsideFlyer, most airlines make only about 7% of seats on a major route available for saver awards. Although an estimated 15 million passengers flew free last year, and 65% of all members redeemed miles for a ticket, upgrade or hotel or car-rental rebate, millions still feel cheated and frustrated.

Meanwhile, by selling miles to credit-card and phone companies, the airlines together generate $1.5 billion in extra revenues each year on their frequent-flyer programs, according to Petersen. And since frequent flyers often stick to their preferred carrier, even when cheaper fares are available elsewhere, they allow the airlines to charge higher fares, saving the industry some $4 billion annually. Thanks to tight restrictions on frequent-flyer awards, most seats given away by airlines are those that would otherwise go unfilled, costing the airlines next to nothing.

Federal regulators are studying the airlines' raising of mileage requirements for awards (like American's just-announced upgrade hike) and tightening of expiration dates. But they have generally let the carriers do as they please. For now, travelers can try Southwest Airlines, which awards free seats to members anytime there's space. On most airlines, frequent flyers should book six months in advance. When you're looking for a last-minute jaunt to Hawaii, all the miles in the world won't help.

--By Daniel Eisenberg