Frequent Flyer Programs Should be Grounded

Loyalty programs of all shapes and sizes have always left a bad taste in my mouth, but one type in particular makes me regurgitate vomit: airline loyalty programs.

Their repugnance lies in the history of why they were formed. Airlines used to be highly regulated by the Civil Aeronautics Board (CAB) which had a mandate to make sure they were profitable and did so by approving new routes at a glacial pace and preventing new entrants. When Congress deregulated the airlines in the late 70’s, the free hand of the market took over, and airlines started competing more directly with each other.

Birth of a Monster

Airlines scrambled to come up with ways to counter this newfound competition, in the process giving birth to a miserable monster: frequent flyer programs.

American Airlines came up with with the first program in 1981, followed that same year by United, Delta and TWA. Soon enough, every major airline had its own.

The Cost of Comparison Shopping

When deciding between two products, people comparison shop right up until doing so isn’t worth it. This drives competition; if Delta has a lower price than American on a given route, most people will fly Delta, and eventually American will have to lower its prices.

Loyalty programs are one example of ways that companies try to encourage consumers not to comparison shop. The prospect of achieving status, a seat upgrade, or some other reward by always using one airline motivates people to do exactly that. Especially for business travel, people are often willing to pay higher prices to fly on their preferred airline.

The purpose of frequent flyer programs is to make comparison shopping for flights less attractive, reducing competition, and ultimately allowing airlines to raise prices.

Why Airlines are Despicable Creätures

I have no problem with airlines trying to encourage loyalty. What I have a problem with is the dishonest approach they use, taking advantage of known biases and shortcomings in human thinking to manipulate us into making poor choices. Look at this horrifying screenshot, which describes a mileage multiplier:

Airline Miles Con

Even putting aside the fact that the operation being done on the miles is addition, not multiplication, the random numbers they choose serve one purpose: to obscure the fact that this is a horrible deal.

The cheapest one-way ticket available on the American website costs a whopping 12,500 miles. At this price, a round trip within the 48 states, not including taxes and carrier fees, and with limited availability, will run you…$808. To add insult to injury, purchasing these miles doesn’t count toward status.

Airlines pull these shenanigans all the time. The only reason to say “5000 + 1000” when you really mean “6000” is if you’re trying to be deliberately confusing.
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Working hard for something makes you find it more valuable than you otherwise would (a fact IKEA is well aware of). If you manage to attain status, you may even start seeing it as part of your identity. Airlines reinforce this by allowing those with status to board early (often while the “regular” passengers look on, sadly, and wonder whether they’ll avoid the fate of having to check their carry ons). They even display a “leaderboard” at the gate that shows the names of all the people who have received upgrades, which also serves to publicly reinforce status as part of one’s identity.

After all the work one puts in to acquire status, it can be gone in the blink of an eye, and the prospect of losing it is very painful. Losing something like status is more painful than gaining it in the first place was pleasurable, a concept known as loss aversion.

People are highly motivated to avoid this loss. As yourself, who benefits more—the airline or the consumer—by a program that motivates people to say disturbing things, such as this quote I heard last year from my very own brother:

“I only need to spend $400 more on American in the next two months to get gold status!”

So what, you may be thinking. Who cares if airlines take advantage of human nature with their frequent flyer programs?

I care. As someone who believes that behavioral science should be used for good and not evil, frequent flyer programs are incredibly offensive to me.

Over the past 40 or so years, scientists have gained a greater understanding of the sometimes irrational and often automatic ways people make decisions. These insights have amazing potential to positively influence our behavior.

Policy makers are taking note, using behavioral insights to “nudge” people to save more for retirement; hospitals are doing it to encourage adherence to treatment regimens; and even private employers are buying FitBits to encourage a more active lifestyle for their staff. Studies even show that people are ok with being manipulated if they’re manipulated to do something in their best interests.

However, when companies deliberately mislead or confuse consumers, they take advantage. They use behavioral science to convince us to do something that is against our best interests so they can make a profit. Airlines are the worst offenders, and they should be ashamed.

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