CEO Blog

15 December 2017

Written by Ravindra Bhagwanani on . Posted in Archives

LH

When Delta changed its SkyMiles program to a revenue basis, United followed suit within weeks, without really understanding what they were doing. This history is now repeating on the other side of the Atlantic between their respective partners: Just weeks after a corresponding announcement by Delta’s partner Air France KLM, also United’s partner Lufthansa is rushing to a revenue basis for Miles & More as of March 12. It widely mirrors the earning scheme of Flying Blue of 4 miles per Euro spent for base members, which is considerably lower than the 5 miles per USD applied by the US partners. While Flying Blue’s (correct) reasoning for the lower accrual rate is that its award levels are lower than those of Delta, this is the part of the story Lufthansa has overseen while pushing the copy button: Its award levels are not only much higher than those of Flying Blue, but also than those of United’s MileagePlan. This is not irrelevant as it is very easy to opt for a revenue-based credit for Lufthansa flights under the MileagePlan by simply purchasing tickets through United. So, if the revenue-based model is more rewarding than the mileage basis in certain cases (e.g. on discounted tickets within Europe), Lufthansa group customers are well advised to consider rather the United program. Next to the higher base earning and lower award levels, also elite customers get a higher tier bonus of up to 120% compared to 25 or 50% under Miles & More. Since the applicable Miles & More elite bonus is determined on the basis of the operating carrier, it can also happen to Miles & More elite members that they will earn different tier bonuses within the same ticket, whereby a pro rata of the total fare is applied – a calculation nobody will understand for sure. Status miles continue to be determined on the current mileage basis. The change might not be a downgrade for everybody compared to the status quo – but Miles & More has definitely missed the opportunity to improve its competitiveness and to reduce the layers of complexity.