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Are US airlines offering status extensions for customers impacted by coronavirus?



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The last few weeks have been fraught with uncertainty as the coronavirus pandemic sweeps across the globe. Travelers have shared myriad concerns with TPG, wondering if they should proceed with their travel plans, if award availability has improved or decreased in recent weeks, and asking if their trips are eligible for travel insurance protection. Brands across the travel industry have issued waivers offering no-fee cancellations and trip credits, from airlines to hotels to cruise lines.

Elite travelers have also begun to feel the impact of canceled business travel as the stock market fluctuates at its wildest instability since the financial downturn over a decade ago. Major trade shows, conferences and corporate events are canceled. Airlines are curtailing or eliminating routes outright, and preventative quarantines are impacting cruise ships, museums, cities, states and even entire countries.

As a result, business travelers have begun asking TPG, “What can we expect from airlines regarding our ability to maintain elite status?”

a close up of a flower: One of many direct messages to Brian Kelly from a concerned TPG reader.

Here’s what the airlines have to say

We know that some customers’ travel plans are changing due to COVID-19, which is causing some SkyMiles members to worry about earning miles, qualifying for status or completing a promotion,” a Delta spokesperson told TPG. “While this is an evolving situation, members can rest assured that we’ve got their back.”

American Airlines and Southwest had similar sentiments to share, with spokespeople from each company telling TPG that they are aware of their customer’s concerns, and will communicate directly with their elite travelers as the situation progresses.

Here’s what the experts say

The International Air Transport Association (IATA) anticipates that the impact of the coronavirus pandemic will be felt across the airline industry for a long time to come.

Airline share prices have dropped by nearly 25% — significantly more than during the SARS outbreak of 2003. Industry analysts believe the commercial aviation industry will take a global revenue loss of between $63 billion and $113 billion, according to an updated IATA report published on March 5. A previous analysis published two weeks prior on Feb. 25 had approximated the loss at just $29.3 billion, based on insights gleaned from when the outbreak was primarily confined to China and its associated markets.

New York-based Cowen, a research firm focused on business insights and analytics, does not believe that airlines will make a decision on extending elite status this early on in the year. 

“Given how many companies have asked their employees not to travel or have banned travel altogether, we expect the airlines do nothing in the short term” about extending elite status qualifications, said Helane Becker, Cowen’s senior research analyst covering airlines and air-related industries.

“You are asking about a decision that does not have to be made until later in the year,” Becker told TPG. “The key question is duration. If this virus and ban on travel lasts until the fourth quarter of 2020, for example, then we expect the airlines will waive requirements and let everyone keep their 2020 status for 2021. If this is short lived — say one month or six weeks — then there might be enough time for people to continue to earn their status. In our view, it comes down to duration.”

But airline industry analyst Robert W. Mann, Jr. takes a slightly more customer-centric viewpoint on the matter. “Given [that] many airlines extend elite status for life events, this [pandemic] may be viewed as comparable,” Mann told The Points Guy. “Airlines need the continuing loyalty of their most important few customers, even if events occur that interrupt travel plans or propensity. Loyalty ought to be a two-way street.”

Mann’s insights regarding customer loyalty are as important as they are hard-earned: Mann previously served as an executive at American Airlines, Pan Am and TWA, where he either designed or directed each airline’s loyalty program. Today, he consults airlines on industry trends and insights. 

Airline consultant Mark Ross-Smith cautions against comparing the airline and hotel industries, pointing out that the two businesses are run very differently despite falling under the mutual category of travel. As such, Ross-Smith, who previously headed up the loyalty program for Malaysia Airlines, believes the approach to the question of status extension should be handled with different considerations as well.

“Choosing the wrong approach based on the program structure type can be costly,” Ross-Smith recently stated on his site, Travel Data Daily. “Or put more bluntly – gifting or to extend elite status to the wrong customer at the wrong time will have disastrous consequences for airlines on forward bookings and future ticket revenue.”

In other words, airlines that already are hurting from lost revenue will only worsen the issue by extending unnecessary benefits in this time of crisis.

Ross-Smith sums up the issue by saying that there is no blanket “right” or “wrong” answer. Rather, each airline will have to evaluate its individual business strategy to determine the right move at the right time.  “There are two certainties, no matter the path,” Ross-Smith said: A percentage of a brand’s customer base will stop spending with that airline, while another percentage of that customer base will continue spending with the airline.

“Knowing which percentage and which segments of the database will swing more business your way, and which segments will spend less is the key to steering a successful elite status extension program in times of crisis,” Ross-Smith concluded in his analysis.

Still, business is never just about the numbers. “Airlines should not underestimate the PR damage they will suffer if they do not show some flexibility,” said Henry Harteveldt, president and industry analyst at Atmosphere Research Group. “Our 2019 US traveler research shows that only 22% of U.S. airline passengers are loyal to at least one airline. If airlines don’t show some willingness to compromise on elite re-qualification, they risk seeing that number sink even more.”

That being said, Harteveldt shares Becker’s opinion that it’s too early in the year to tell what airlines will — or should — do. “If the virus starts to abate in May or June, it leaves passengers about half a year to re-qualify,” Harteveldt told TPG. “But if the virus remains a threat, and if organizations continue to restrict business travel past July, I believe airlines will have to re-examine re-qualification criteria – unless an airline intentionally wants to thin certain elite-tier ranks.”

Bottom line

As of yet, none of the major U.S. carriers are offering elite status concessions as of yet. But we’re not even a quarter of the way through 2020 at this point in time, and there are many months ahead for travelers to beef up their mileage count for the year.

Spring is coming, and respiratory diseases like the coronavirus and common flu tend to die down with the advent of warmer weather. Hopefully that’s true for COVID-19 as well. If that happens, it’s very likely that both business and personal travel will pick back up again, and elite travelers no doubt will find plenty of sale fares and opportunities to use their travel credits toward building up status for 2021.

“With fewer airlines today than when 9/11 or SARS [occurred], two events that had massive impact on air travel, frequent fliers need to remember that airlines don’t have to be as flexible or generous as they may have been in the past,” travel industry analyst Harteveldt told TPG. “But all it will take is for one of the ‘core four’ airlines — American, Delta, Southwest, and United — to relax elite-tier re-qualification criteria, and the others will likely follow in order to remain competitive.”

Featured photo by Zach Griff for The Points Guy.

RELATED VIDEO: Cruise ship remains held off California coast as coronavirus fears deepen nationwide (provided by TODAY)


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