United Airlines Frequent Flyer Program Case Solution

1. Describe the main problem presented in this case?

The main problem presented in the case is centered on widespread dissatisfaction among customers about United Airlines’ decision to revamp its MileagePlus program, a transition from a conventional miles-based reward system to a revenue-based FFP model. Historically, passengers were awarded miles based on the distance flown. However, United Airlines undertook this significant change in March 2015 by following new industry trends. Under the new program, passengers would earn miles based on dollars spent for tickets rather than distance flown. United Airlines faced significant backlash from customers as they observed this change as a significant devaluation of award miles. The development of United’s new mileage policy has led to disappointment and frustration among customers who were accustomed to the historical model as the majority of MileagePlus members would earn fewer miles unless they fly on costly short-haul flights or premium-class tickets (such as on first-class, business-class or full-fare economy-class tickets).

The case study highlights that United Airlines’ loyal members are increasingly concerned about increased costs for earning rewards, and they perceive that the new model disproportionately benefits high-spending travelers. The new FFP has not only led to confusion among members due to perceived lack of transparency in the new MileagePlus program, but an inadequate timing of this transition has also aggravated the situation. Before announcing this decision in June 2014, United Airlines had already increased the redemption miles requirement recently, due to which FFP members now perceive that United Airlines is continuously devaluing their loyalty program.

2. What are some of the critical questions proposed by this case? 

Some of the critical questions proposed by the case study are as follows:

• How does United Airlines’ decision to shift away from a traditional miles-based reward system to employ a revenue-based model align with strategies of competitors like Delta Air Lines and evolving industry trends?

• How United Airlines’ move to revenue-based FFP would affect customer satisfaction and loyalty? Will it create a sense of unfairness among customers, erode customers’ trust, and result in customer attrition?

• What are implications of this new revenue-based FFP for various customer segments of United Airlines- non-elites and elite members (Silver, Gold, Platinum and 1K)?

• What are competitive implications of this new program for United Airlines in a highly competitive airline industry? How might competitors’ response to similar FFP changes impact the decision-making of United Airlines?

• What are the potential financial implications of this new Mileage Plus program for United Airlines? Will it lead to increased revenue from high-spending travelers, or will it generate revenue loss due to possible attrition of general customers?