Airlines slash mileage rewards, offer $3,700 chocolates instead

Image by Flickr user DearEdward

(CBS News) Delta Airlines is the latest air carrier to change their frequent flier mileage policies. This week, Delta released an updated version of their SkyMiles policy book, which states they will no longer allow customers to transfer miles to friends and family when they die.

CBS News travel editor Peter Greenberg said Wednesday that the policy shift is just "one more indication of how the programs are changing" within the industry.

"If the airlines are flying at 83 percent load factor, they're officially flying full. They don't need to displace a revenue passenger by giving you a free ticket," Greenberg said.

He explained that recent airline cuts and corporate mergers have led to the decreasing focus on loyalty programs.

"When you're down to four major airlines, the loyalty program concept doesn't really work anymore because they already own you," Greenberg said.

Airlines are offering new alternatives to old rewards, however. "Very quietly, they're trying to transition the frequent flier mileage program to a frequent flier lifestyle program."

"So instead of redeeming your miles for a ticket, how about a toaster? How about a magazine subscription? How about a box of chocolates?" Greenberg asked before delving into the grim specifics of cashing in miles for so-called lifestyle rewards.

If it takes "6,500 hundred miles to redeem for a $40 box of Godiva chocolates, that means you've spent $3,700 for the box of chocolates ... that's $200 a bite," Greenberg said.

Still, according to Greenberg, "They can't get rid of the programs because they make more money for the airlines than the airlines make as airlines," he added, touching on industry-standard practices like selling miles to credit card companies with the knowledge that redemption levels will be under 10 percent. Fifty-four percent of all mileage earned by frequent fliers is earned on the ground with credit card reward programs.

"There are now more unredeemed frequent flier miles out there than there is currency in circulation," he added.