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Friday, Sep 22, 2000 7:00 PM UTC

Frequent flier liberation

WebMiles lets you redeem miles without blackouts or expiration dates. How?

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Topics: Air Travel, Travel,

When the first frequent flier programs were introduced in the early 1980s, I thought they were the hottest thing since those little toiletry cases airlines give you in first class.

But you know the sad saga: As more and more travelers began to accumulate and redeem miles, the airlines began to realize that they were losing money. They were giving away seats to freeloaders when they could be filling them with full-fare customers.

And so the airlines began to impose restrictions on their mileage programs. You couldn’t use miles to get seats around Christmas, New Year’s Day, Thanksgiving or Easter; you couldn’t use them to fly during peak summer periods. You needed to book flights weeks and sometimes months in advance; and fewer and fewer seats on each flight were allocated to passengers flying on free tickets.

Then the miles began to come with expiration dates, like milk cartons: “Do not use after …”

Soon, keeping track of your miles almost became more of a hassle than they were worth. You’d look at your statement and think, “I’m about to lose my miles. I’d better fly somewhere quick.” Or even more sobering: “If I just fly to Salt Lake City this weekend, I’ll have enough miles to get a free ticket.”

Tim Olson saw this dilemma as an opportunity.

Seven years ago, Olson had been working in the bank card industry and wrestling with a different problem: Banks wanted to add mileage components to their credit cards, but there were more banks than airlines, so some banks were being locked out of the airline programs.

Then he hit upon a solution that solved both frequent fliers’ and banks’ problems at once: Why not create a generic miles program that wouldn’t be tied to a specific airline? There had been some stabs at the problem by credit card companies like Diner’s Club, but they were still often subject to the same old limitations.

As Jennifer Case, vice president of marketing for WebMiles , explains: “Tim knew that people will do crazy things when they are offered miles — it’s a powerful way to change consumer behavior and to build customer loyalty. He just adapted the program so that consumers wouldn’t have to deal with all the restrictions.

“Then, as he watched the Internet take off, he recognized the clear and growing need for e-tailers to retain customers, and he saw frequent flier miles as the perfect way to inspire customer loyalty.

“So he got together with e-commerce strategist Jeff Crapo and they launched WebMiles on Jan. 17 of this year.”

The first few months were quiet as the company built up a network of partners, but in June and July WebMiles leaped into the public swimming pool with a nationwide advertising campaign promoting its new MasterCard and proclaiming its core customer promise: Any airline. Any flight. Anytime.

“Any airline, any flight, anytime” sounds great, but how does it work?

Basically, WebMiles is forming partnerships with companies online and offline in a number of key industries, including grocery stores, telecommunications providers, rental car companies and hotel chains. Consumers join the WebMiles program by filling out a short form on the site. WebMiles’ partners reward members with frequent flier miles based on their purchases, usually a mile per $1, but sometimes two or three miles per dollar. Members accumulate these miles in the WebMiles database — then when they have accumulated enough, redeem them for upgrades, free tickets or cash discounts on tickets.

To redeem miles, WebMiles members contact the company’s travel agency partner, Maritz Inc., by e-mail or phone. Members tell Maritz what ticket they want, and the company checks the database to make sure the customer has sufficient miles. Maritz then purchases the ticket.

Case enumerates four factors that separate WebMiles from most frequent flier programs: a lack of restrictions, a one mile per dollar spent credit card component, a combination of online and offline partners and, says Case, “lower incentive levels — customers can begin to redeem miles for rewards at the 8,000-mile level, where we offer $100 off a ticket fare.”

WebMiles’ business model is based on economies of scale, explains Case. “Because Maritz buys air tickets in high volume — it’s one of the largest travel agencies in the country — it can get special low fares. The revenue we make is the difference between what our partners pay us for miles and what we pay Maritz for those miles.”

Case also touts another consumer benefit. Because WebMiles buys members’ reward tickets, members can actually accumulate new frequent flier miles on their own airline mileage programs with the WebMiles tickets. “For example, if you need more miles on your Delta program,” Case says, “just tell our agent to buy you a Delta ticket when you redeem your rewards. And if you have unused miles on your airline program, you can get a ticket through us and then use your airline program miles to get an upgrade.”

Domestically, WebMiles’ mileage levels (the number of miles necessary to purchase a ticket) seem to match most airline programs’ standard requirements: 25,000 miles for the continental U.S., and 40,000 for Alaska and Hawaii. Internationally, the levels are roughly comparable as well: 25,000 miles for Canada, 55,000 for Western Europe, 60,000 for South America and Eastern Europe, 65,000 for Japan and South Korea and 70,000 for Australia.

There are, however, a few restrictions, despite the premise that this mileage program is different from the rest because of its lack of onerous limitations. According to the Web site, “All redemptions (except discounts) are for coach-fare tickets only and require a 14-day advanced booking.” All redemptions, including discounts, are valid for round-trip travel. If a member chooses to use an award for one-way travel, no credit will be issued for unused flight segments. Around the world flights must begin and end in the same U.S. city and can include from three to six stops, some of which must be outside the U.S.”

“And, of course,” Case says, “the tickets are subject to availability. If a flight’s sold out, we can’t do anything about that.”

Ultimately, the company’s success in expanding its network of partners will probably determine its success or failure. At this early stage, there is still a paucity of big-player partners, although Toys “R” Us, Borders, J.C. Penney and Dell are all in the fold.

As for other downsides, well, if there are any, I’m missing them. Of course, there’s always the question of long-term viability. Almost certainly, a half-dozen competitors are preparing to launch their own versions of the WebMiles program. And the frequent flier spoils will probably go to whomever wraps up the best partners and offers the sweetest deals.

In the long run, this may mean that the rewards levels come down and the frequent flier frustrations and restrictions disappear. So stay tuned. And if you see some problems with this program that I don’t, let me know.

Don George

Don George is the editor of Salon Travel. More Don George.

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