How to make airline loyalty programs work for you

The goal of the game is to earn more points cheaply and redeem them for high-price items.

Airline loyalty programs are big business for airlines, but they can also be profitable for travellers who know how to play the game.

The airline industry struck gold when it tapped into the heart of its customer base and offered us free travel in return for our loyalty. 

Since the pioneering air mileage program, AAdvantage, was launched in 1981 by American Airlines, the concept has morphed to the point where loyalty schemes have become more profitable than an airline’s flight operations.

With so many programs and partner agreements to consider, how do you ensure that you are getting the best return on your loyalty investment?

Rewards points adviser Steve Hui CPA, the CEO and founder of points concierge service iFLYflat, says frequent flyer schemes are a game and knowing how to play that game can increase their value five-fold.

“The goal of the game is to earn more points cheaply and redeem them for high-price items such as first or business class,” Hui says. Hui shared his top tips with INTHEBLACK.

1. Loyalty schemes are deliberately complex and constantly change

The programs generate more revenue from selling points to credit card companies and retail partners than they do from flying.

The rewards on offer are attractive, but redeeming them for what you want can be an exercise in patience and research.

Look for subtle differences within each loyalty program. One airline might give you a business class flight for 120,000 points, while one of its alliance partners can be offering the same seat for only 80,000 points.

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2. Research your credit card

Using your credit card as much as you can will earn you more points. However, credit cards have widely varying point-earnings per dollar, and different transfer ratio rates to convert them into airline points. It is worth doing your research because you can easily double or triple your points by switching cards. Some cards have points caps, others have high bonus points on sign-up but low points for ongoing spend. Some let you transfer your points wherever you like, and others are more limited in the loyalty programs they are connected to.

3. Don’t let annual fees and surcharges scare you

If your goal is to earn as many points as possible and you intend to swap them for high-value rewards, Hui says credit cards that give you a high point ratio per dollar can be worth their higher fees.

Grocery and online shopping can often be done without an added surcharge and, in the long run, the amount you save on the cost of a business or first class airfare should be much higher than what you have paid out in charges.

“It can be poor value if the points are used for lower value redemptions, such as economy class or gift vouchers,” says Hui. “It is all about the whole end-to-end value chain, comparing the cost of collecting the points versus the value of using the points.

“Airlines... only give frequent flyers the seats they think they can’t sell.”

“For example, it is quite affordable to earn enough points to fly first class to Paris with your partner, but it costs more than A$20,000 in cash to pay for it, and that’s a lot of time behind a desk earning the money.”

Rather than earning points and then finding a way to spend them, Hui says you should plan how long it will take to earn the points to get the trip you want. Most people earn roughly the same points each month.

4. Look for flights frequently

Flights come and go and long-haul business class tickets can be hard to come by, but Hui says the secret is to look frequently.

Airlines have data based on how well they believe they can sell all the seats and only give frequent flyers the seats they think they can’t sell. They continually readjust this data and may release more seats closer to the departure date.

5. Higher status matters for frequent travellers

Status can be worth its weight in gold when you have travel disruptions such as bad weather, flight cancellations and missed connections. However, higher status is not worth it, Hui says, if you are making more trips than you need, just to retain the status.

If you are paying for the flights out of your own pocket, Hui says you should consider airline safety, pricing, schedules and comfort before considering the points.

“You don’t earn that many points from flying anyhow,” Hui explains. “Most of the points earned these days come from credit card spending.”

6. Best value for your points? 

First class or business tickets will give you the best bang for your buck. You can convert 200,000 points into a A$1000 gift voucher, or redeem them for a business class return flight from Australia to Los Angeles worth A$5000-A$7000. The choice is yours.

Similarly, if your credit card earns you 0.5 points for every dollar you put on it, you may have to spend an eye-watering A$400,000 to earn a A$1000 economy flight to Los Angeles. However, if you have chosen a credit card where you can earn double points, you may only have to pay out A$100,000 to get enough points for a A$7000 business class flight.

“So I might have spent four times less but got seven times the value that you did,” says Hui. “It’s how you play the game that can make the difference.” 

Did you know?

  • Most frequent flyer (FF) points are earned through credit card spending, not flights.
  • Airlines constantly update the FF seats available – clever redeemers habitually check what’s on offer.
  • Credit cards that give you a high point ratio per dollar can be worth their higher fees.
  • Best bang for your buck? Long-haul business class flights. Worst? Gift vouchers.

The man behind the plan

Steve Hui CPASteve Hui CPA is a former Macquarie Bank accountant who discovered the joys of business travel on a work trip. He wanted to make flat-bed flying part of his lifestyle, without having to pay for it. 

In 2012, he left Macquarie Bank and started up his reward points consultancy business iFLYflat, where he helps others to use their points to fly further.

He also runs the LinkedIn group the High Miles’ Club, an informal network of people who share frequent flyer and credit card loyalty reward tips and queries.

Follow him on Twitter @iFLYflat; connect on LinkedIn and go to the website

Read next: How to make the most of loyalty award programs when you travel


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