Why does United want to charge me $800 for premier status?

I flew a lot (by my standards) on United last year, including a trip to Israel, and came about 5,000 miles short of qualifying for their lowest tier of premier status.  I got a flyer from them in the mail saying I could make up the difference with cash — but it turns out the cash cost of making up the 5,000 mile gap is $800.  This is not an attractive offer.  I’ve had premier status on United before, and it was pleasant, but not $800 pleasant; I think I was upgraded maybe a couple of times over the course of the year, and I’m not sure what real benefit I got from getting to board first.

Still, those benefits would be enough to make me more likely to choose United, especially for longer trips when the chance of upgrade and access to the Economy Plus seats means more.  So why are they asking for so much money, I wonder? Wouldn’t just giving me premier status be a good value for United?

The threshold has to be somewhere:  somehow they’ve calculated that the people who fly 25,000 miles a year are the ones whose business they want to attract with premier.  But of course I did fly that much last year; just not all with United.  So my question is:  doesn’t United know this?  I am not the kind of guy who’s careful to log out of Facebook and Google before buying a plane ticket, so lots of data vendors know which plane tickets I’ve bought.  I would guess United knows that I spend money with other airlines, which is foregone revenue for them.  Or do they not actually know this?

It’s also possible that premier is a money-loser for United, and they don’t want so many people to have the status.  (Maybe they make enough money selling those Economy Plus seats a la carte that it doesn’t make sense to let a lot of people claim them free?)  Evidence for that:  they’re making premier status harder to get.

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11 thoughts on “Why does United want to charge me $800 for premier status?

  1. TG says:

    Certainly in the past such offers have had variable amounts of cash attached to them, and the suspicion has been that they are just A/B testing as an experiment to work out the ideal price point.

  2. Richard Kent says:

    I think Delta is also losing money on the lower tier of its medallion program, as this year they have made it tougher to get (they’ve added a requirement that you must spend a certain amount on tickets, with waivers given for certain frequent-flyer-credit-card behavior).

  3. JSE says:

    Right, United has added a similar dollar requirement.

  4. DS says:

    Let’s start by establishing what you would be paying for. If you have the United credit card ($95 annual fee), you get some of the more important features of Premier Silver status — checked bag, and priority check-in, security, and boarding. What you don’t get are economy plus and a small chance of an occasional upgrade (as well as reductions in certain fees that a typical traveler wouldn’t be paying anyway, such as award change fees, so let me ignore those). Actually, to be precise, these days you would only get access to economy plus 24hrs ahead of your flight, when on many flights there may only be middle seats left.

    You might think, if you were planning to fly a lot this year, and you had the intention of paying for E+ every time, you could put up $700 in E+ fees, making the offer worthwhile. But in fact you can just buy an annual E+ pass for $500, without the 24hr restriction. Upgrades for silvers are rare — mostly on regional routes/smaller planes, where those upgrades can often be bought for under $100 on day of travel. Add it all up and it’s extremely unlikely that the deal could possibly be worth it — but to know about the credit cards and the E+ passes you have to be paying attention, which not many people do.

    Why don’t they just give it to you? One answer is that they probably don’t have the capacity for that. The main marginal benefit over the credit card is E+, and there are enough elites that E+ is pretty much full. They had to go to the 24hr limit for Silvers because Golds sometimes had a hard time getting a good seat. They’ve made a calculation that giving away even more E+ would be a money-losing move (giving up revenue from people willing to pay for E+). You might not be willing to pay for the E+ seat that’s open because you weren’t given it for free, but someone else is.

    Your point about making targeted offers to people who (according to data vendors) are flying other airlines is an interesting one. I’m not aware of any airline having done anything so sophisticated. You wouldn’t even need to have flown an airline at all, for that to make sense. Delta could be coming after your business (the *bulk* of your business, rather than just the marginal extra business that you would give United if you flew 100% with them): “We see that you live in Madison and flew United a lot last year. We have N flights a day from Madison to our nearby hubs in Minneapolis and Detroit, as well as three flights a day to Atlanta. We’re proud of the service we offer and we’d really like you to try it. As a courtesy we’re extending Silver status to you for the fist six months of 2013…” or whatever.

    TG: do you think they’re still doing A/B testing these days? If I were them, I might worry that there’s enough online comparison of these offers to make people upset at getting the high offer.

    Richard Kent: I think the new revenue requirements exist largely to thin out the top-tier ranks, which have been getting squeezed enough that top-tier elites don’t feel as loved as they used to. Witness that on United, you can get out of the revenue requirement for Premier Silver/Gold/Platinum by holding a credit card, but not out of the revenue requirement for 1K. But once you’ve implemented a revenue requirement for top-tier status, it’s natural to impose one for lower-tier status as well — worst case, you drive a bit of extra credit card business for people who are going to miss the cutoff, and the credit card business is pretty lucrative for them.

  5. DS says:

    (Correction: a global E+ pass is $700. For $500 you get North America only. And in each case it’s only E+ for one person, whereas Premier Silver would let you get it for everyone on your itinerary — you have to pay a bit more to get access for more people. So it’s not quite so cut-and-dried. If you were planning to go to Europe with your family in 2014, and your intention was to pay to sit everyone in E+, it might be reasonable to spring for the status instead — though you’d be taking a big gamble because of the 24-hr restriction.)

  6. Michelle says:

    “Upgrades for silvers are rare — mostly on regional routes/smaller planes…”

    I had silver status on United for one glorious year, and I got upgraded to first on almost every flight I took. Maybe I just got lucky. Maybe it’s gotten a lot more rare in the past couple of years. But my flights were all into & out of Honolulu and various mainland hubs… that’s not a cheap upgrade in general.

  7. DS says:

    Michelle: It’s gotten a lot more rare since the merger with CO. But HNL is quite exceptional in the sense that all its flights are operated by large mainline planes, and most of the traffic is tourism (tourists tend to be non-elites).

  8. sjphilly says:

    Living in Philadelphia it is not hard to fly almost exclusively on US Airways. I have had Gold status (50K miles) for the last couple of years and routinely get upgraded on short flights, occasionally on cross-country flights. That’s nice. But the main perk for me is early boarding–that means I’m sure to have a place to stow my suitcase in an overhead compartment, which means I won’t have to spend an extra 15 minutes after deplaning waiting for my suitcase to come up on the carousel (or wait in vain and then have to spend more time on paperwork). US Airways has no economy plus seating but I can usually score an exit row seat without an extra fee.

  9. Ursula says:

    In my experience, the biggest advantage of the Silver Premier status on United is that you get better customer service when things go wrong. My tiny local airport has two United flights daily to ORD and nothing else, so I’ve had lots of experience being stranded or potentially stranded in O’Hare, and the special short lines + priority phone number for rebooking are incredibly nice (and induce a bit of survivor’s guilt).

    I use the United credit card to buy flights on other airlines, but I don’t know whether they’re allowed to track that information, or whether the sponsoring bank keeps those details to itself.

  10. I got a similar offer from AA, which would let me keep their minimal elite status (which I’ve had for a couple of years) for $650 and I missed by more like 10,000 miles. (Unlike the other airlines, on AA essentially the only way to get qualifying miles is to actually fly them.) No way is it worth it, even if gold status does revert the airtravel experience to the good old late 90s or early 00s: there’s no charge for reserving any seat, checking one bag, or going standby on an earlier flight, plus no worrying about overhead bin space.

    In general, I suspect that my travel pattern (lots of miles but always on the very cheapest tickets) is not one that AA would like to reward (the money is in the folks who buy the full-fare refundable tickets) but it’s probably rare enough that it’s not worth crafting the rules try to exclude me.

  11. JSE says:

    “some of the more important features of Premier Silver status — checked bag, and priority check-in, security, and boarding.” What’s interesting is that these features are, to me, NOT the most impotant features. Should they be? I almost never check a bag when I travel, Madison doesn’t have a separate premier security lane, and I don’t care if I board early. What I DO care about is getting more room in front of me so that my legs aren’t cramped and I can use my laptop effectively! So the status (assuming my experience would rarely involve upgrades) would be effectively an Economy Plus pass for me.

    I will say that I DO occasionally pay for E+, and I have never seen there not be E+ seats available for purchase; so I don’t think the status flyers are filling them all (or, maybe more likely, they reserve a bunch of E+ seats for purchase, then fill all the unsold ones with status at the gate?)

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