With Jill Gonzalez, Analyst at Wallethub.com
Podcast: Play in new window | Download
Jill Gonzalez joined Steve to discuss the all-important topic of travel. Many of us will be planning our summer vacations, and as an analyst at Wallethub.com, Jill shares valuable information on traveling by air and navigating through the various paths to finding the best deals.
Frequent Flyers
The discussion was particularly focused on frequent flyer programs, offered by virtually all airlines today. Jill is something of an authority in this area, having recently contributed to an article entitled “2019’s Best Frequent Flyer Programs.” The article compared the ten largest domestic airlines’ loyalty reward programs across about 25 different metrics, to provide a true impression of which is the best.
One of the most surprising points noted by Jill is that only 7% of flights are paid for via points or miles, meaning that consumers are flitting from one airline to another in search of cheaper flights. Jill explained that this strategy can make sense, but that it’s always worth looking out for customer loyalty programs, particularly if you’re a frequent flyer. However, with the prices for both domestic and international flights fluctuating so wildly, it doesn’t always make sense to stick to one airline. But it’s always worth bearing in mind.
Breaking Down The Figures
Jill also revealed that light or average flyers typically receive around $5 to $9 for every $100 spent on air travel. However, some companies go well beyond this. For example, Hawaiian Airlines offers over $21 per $100 spent; Alaska Airlines comes in second with around $18 per $100 spent. It is important to note that this sort of remuneration is only offered if the traveler does a huge amount of flying.
The importance of partner airlines in the equation cannot be ignored. With so many different hubs out there, it can be vital when seeking value from your frequent flyer program that the airline involved is willing to work with partner airlines. Depending upon on where you fly from and where you’re going, it’s an important part of the overall process, nonetheless.
Important Metrics
Several other metrics involved with frequent flyer programs were also touched upon, and it’s clear that this is quite a meaty subject. This is certainly not a discussion to miss for anyone that clocks up a lot of air miles.
Disclosure: The opinions expressed are those of the interviewee and not necessarily United Capital. Interviewee is not a representative of United Capital. Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions. Content provided is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered tax, legal, investment advice. Please contact your tax, legal, financial professional with questions about your specific needs and circumstances. The information contained herein was obtained from sources believed to be reliable, however their accuracy and completeness cannot be guaranteed. All data are driven from publicly available information and has not been independently verified by United Capital.
Steve Pomeranz: Well, it’s a little too early for summer, but if you’re thinking about summer, now is the time to start planning for it. And one aspect of this is the cost of travel. So today I’ve invited Jill Gonzalez, an analyst for WalletHub, to discuss all the frequent-flyer programs that are available and how these different airlines score. Welcome to the show, Jill.
Jill Gonzalez: Thanks for having me back.
Steve Pomeranz: So the article was the 2019’s “Best Frequent Flier Program” and includes a custom calculator. Tell us a little bit about how things are measured and what you did to put this together.
Jill Gonzalez: Yes, I hope consumers really earn more free flights, other types of perks. We compare the ten largest domestic airlines’ loyalty reward programs across almost 25 different metrics, so things like the value of a reward point or mile to blackout date policies to if you’re earning miles, how to do that retroactively. Other types of membership perks, like free upgrades. So we took all of these things into consideration to work out which is the best, specifically for what kind of traveler you are. If you’re a light traveler, only spending $500 per year on flights, this is going to look very different than if you’re a frequent flyer spending $10,000 a year.
Steve Pomeranz: Right. How much, how many points are, what kind of usage do these companies get? How many customers, what percentage of customers actually use miles to book their flights?
Jill Gonzalez: Only about 7% of flights now are paid by points or miles. So a very small number and that’s interesting because so many travelers are willing to jump to a different airline if their flight’s prices are a little bit cheaper. A lot of people really do stick to these loyalty programs even if they’re never accumulating enough points to actually book an entire flight.
Steve Pomeranz: Right. Who benefits more, the airline or the consumer, in this game of points?
Jill Gonzalez: Well, like most loyalty programs, it’s typically whoever has that loyalty program, whoever is making that; in this case, that’s the airline’s themselves. Basic here is that of all of this little fine print, no matter which loyalty program you’re sticking to, it always says we have the right to reserve any changes to this. There may not be blackout dates now. There could be blackout dates later. Right now, your points are worth this. They could be worth something different in a year from now or so. Unfortunately, largely the airlines have benefit from this.
Steve Pomeranz: I personally like to use credit card with cash back because I feel like the Federal Reserve is playing a role in controlling inflation of cash, the value of cash based on inflation. Whereas with the point program from a flyer like this, Delta or whatever, an airline they control the rate of inflation. They can say that so many miles now only purchase some number lower than they did last year. As a matter of fact, looking at the difference between 2018 and 19, has there been much change between the value of these miles?
Jill Gonzalez: Not necessarily the value. I would say with some other specifics, like blackout dates or miles expiration, that’s where we see more movement, but the value, not too much.
Steve Pomeranz: What is the value, typically, per hundred dollars, of these points that you’re getting?
Jill Gonzalez: Most of the time if you’re not a frequent flyer, it’s going to be in the single digits. It’s going to be anywhere from $5 to $9 for light or average flyers for every $100 you spend. There are some outliers there. Hawaiian Airlines offers the most rewards value just over $21 per $100 spent. Alaska Airlines comes in second with around $18 per $100 spent. But that’s again if you’re a very frequent flier.
Steve Pomeranz: Yeah, how do you earn those values? Is it in the ability to secure a seat for no out-of-pocket cash.
Jill Gonzalez: Exactly, that’s just on booking a flight, no out-of-pocket cash.
Steve Pomeranz: Mm-hm, so $21 per $100 spent seems like an awful lot of money. Would you consider that a good value?
Jill Gonzalez: For these rewards programs, I would certainly say so. I mean, especially if you compare them to all of the other rewards programs that we may take part in. Whether it’s Starbucks or Target, think about how much you’re getting back on any of those for every $100 you spend, I don’t think many are $20.
Steve Pomeranz: No, not at all. And my 2.5% cash back isn’t really very good compared to $9 or which is the lower end, surely not anywhere close to the $21 in value. What about expiration appoints? Do most carriers allow unlimited expiration or do they cap the expiration date on these points?
Jill Gonzalez: Well, there’s only two that don’t allow miles to expire because of inactivity, so those are Delta and Jet Blue. The others typically, the miles expire after inactivity of 24 to 36 months or as low as 12 months.
Steve Pomeranz: Yeah, so it pays to know which airline is going to allow you to keep those miles for the longest period of time, obviously, because if you’re doing it to accumulate points and then you’re going to lose them through disuse, that’s not helping you out one little bit. What about the ability to use these points with partner airlines?
Jill Gonzalez: We also looked at partner airlines here just because with so many different hubs, it’s important that one, your airline works with partner airlines. And two, many allow you to earn when you fly with partners but not necessarily redeemed. So seven of the ten largest airlines do allow reward program members to both earn and redeem miles with partner carriers. Those that do not have partnerships are Southwest, Spirit, and Sun Country.
Steve Pomeranz: Let’s talk about those particular airlines and compare across the board. So give me the list of airlines that showed up in your study.
Jill Gonzalez: So we use the ten biggest domestic airlines here, Delta, United, Jet Blue, Southwest, Hawaiian, Alaska, American Airlines, Frontier, Sun Country, and Spirit.
Steve Pomeranz: Okay. And you measured the value of these points based upon what type of flyer, whether you are a frequent flyer which is approximate spending how much per year?
Jill Gonzalez: So a frequent flyer is upwards of $ 7,000 per year, an average flyer is about $4,000 per year, and a light flier only spends around $500 per year. And this is all just on airline travel, not just on all travel.
Steve Pomeranz: Let’s talk about the light flier, so what were the best airlines for someone to spend around 500, maybe $1,000 a year?
Jill Gonzalez: For light fliers, in particular, the best airlines Or JetBlue, Delta, and United.
Steve Pomeranz: Oh, okay. Southwest wasn’t in there? Cause that’s a surprise.
Jill Gonzalez: You’re right, sorry. That was for frequent. I can do that over.
Steve Pomeranz: No, just continue. So what were the best for the light flyer? What were the best airlines to choose? If you are spending, let’s say, 500 to $1,000 a year.
Jill Gonzalez: So number one was Delta, number two was South West, and number three was United.
Steve Pomeranz: Okay, and I noticed in the study Delta really scored high across the boards, so before we actually get into that, what about if you’re a moderate flyer, spending about $3,000 a year? What were the top three there?
Jill Gonzalez: For moderate, again Delta number one, United number two, and Southwest number three.
Steve Pomeranz: And frequent?
Jill Gonzalez: Frequent flyers, Delta was number one, Jet Blue was number two, and United was number three.
Steve Pomeranz: I noticed, looking at the report or looking at the article, and by the way, the article is “2019’s Best Frequent Flyer Programs,” and I’m speaking with Jill Gonzales from Wallet Hub. Delta really scored high across the board.
Jill Gonzalez: It did. So a lot of that comes down to just how many daily flights, countries served, destinations served, it goes to. A partner coverage, it has the most partners out of all these airlines, which is 40 in all. You can both earn and redeem with all of them. And for value per $100 spent, it’s not the most, but because it does not allow expiration on inactivity, I think that’s kind of what made up for it.
Steve Pomeranz: Also, these companies, including Delta, serve a lot of markets. It’s one thing to have a high-dollar value. But if it’s Hawaiian airlines, you know, if it’s not serving that many markets so it’s somewhat of an unfair comparison. Would you agree?
Jill Gonzalez: Yeah, I would say for Hawaiian and Alaskan, I mean, they’re still a couple of the ten largest domestic airlines. So, certainly serving a lot of people. That in terms of how many hubs they actually have, how many destinations they service, that’s obviously a lot less.
Steve Pomeranz: Right, the article is “2019’s Best Frequent Flyer Program.” There’s a custom calculator to help you. My guest Jill Gonzalez, an analyst for WalletHub who handles the personal finance and credit card related part of the site. Thank you so much for joining me, Jill.
Jill Gonzalez: Anytime, Steve. Thanks.
Steve Pomeranz: To hear this and any interview again and if you have any questions for the show, we love your questions, come to our website which is stevepomeranz.com. And while you’re there, sign up for your weekly update for all the upcoming live events and important topics we’ve covered this week straight into your mailbox that Stevepomeranz.com.
