Home Points & Miles What Does Dynamic Award Pricing Mean?

What Does Dynamic Award Pricing Mean?

by joeheg

All of the legacy U.S. airlines have done away with award charts and now use a dynamic award pricing system. That phrase means nothing to most customers so here’s an attempt to explain what airlines are saying and what it means to you, the passenger.

For U.S.-based airlines, you used to be able to look at a chart to know how many miles you’d need for a ticket. If you wanted to fly from the U.S. to Japan, you’d know the price. Here’s a current example of an award chart found on ANA’s website.

Screen Shot 2020-04-29 at 12.51.27 PM

Once you know that the codes for the class of service and times of the year mean, it’s simple to figure out the number of miles required.

The only thing that mattered was if there was availability. Over time award charts became more complicated, often listing different prices for flights on partner alliance flights. Some airlines even had (and still do have) different charts for each airline.

When U.S. airlines used award charts, they couldn’t take award reservations for partners online. You needed to call a representative who’d book the flight on the phone. The technology available couldn’t connect all of the airline systems and pricing mechanisms. If you were a savvy travel hacker, you knew the sweet spots of each program, allowing you to fly around the world in style with the least amount of points possible. The less the representative on the other side of the phone knew about the rules of their own program, the more you could get away with.

Little by little, airlines have found ways to link their IT systems to their award programs. Starting with Delta, airlines eliminated award charts, opting for what they called “dynamic pricing.” Most bloggers called Delta’s system, “We’ll charge whatever we please for an award ticket and there’s nothing you can do about it.”

I’m sure other airlines would have liked to follow Delta down this path but their IT systems weren’t up to the task. American was the next one to fully eliminate charts and finally United was the last airline to remove partner award charts from their website.

Now that all of the big-three airlines no longer list award charts, what does dynamic pricing mean?

Merriam-Webster Dictionary defines dynamic as:

marked by usually continuous and productive activity or change

What airlines mean when they talk about dynamic award pricing is that the prices can change all of the time. This isn’t unlike what we’ve come to expect when purchasing airline tickets and it drives me crazy.

Do all points now have a fixed value?

It’s easy to confuse dynamic pricing to what Southwest and JetBlue do with their award programs. For them, the number of points needed for an award is linked to the price of the ticket? Isn’t that all the airlines are doing now?

Well yes, but mostly no.

Southwest and JetBlue’s programs have fixed value points. You’re always going to get the same amount of cash equivalent for a point, no matter the cost of the ticket. So a cheaper ticket costs fewer points and a more expensive ticket will cost more but the value of each point stays the same.

If the airline wants to offer a lower award ticket price, all it needs to do is lower the cash price for everyone. There’s no way to offer any specials for using miles on award tickets.

So what’s dynamic award pricing?

Dynamic award pricing gives an airline the ability to change prices over two currencies, cash and points. They’re able to offer “sales” for members of their program by lowering the number of miles needed for redemptions while keeping cash prices constant.

I was able to redeem a flight on Delta for 7,500 Skymiles that would have cost $118. If Delta had still been using a static award chart with all domestic one-way flights costing 12,500 miles, I never would have booked an award on that route. So not having a chart allows Delta (or any other airline) to adjust prices to where people are willing to redeem points.

The downside is there’s no upper limit to how many points an airline can charge for an award. I remember when Delta published an award ticket that cost 1,000,000 SkyMiles. I don’t know who would pay that but they must have thought someone might. Otherwise, they can still just not offer any award tickets for a flight.

While dynamic pricing for award tickets makes it harder to find sweet spots, it doesn’t remove them. Airlines can now publish short-term sales for award fares to unload excessive inventory. You just have to be on the lookout and jump when you see them, the same as for when you see a low airfare.

For the time being, pricing for partner awards still mostly follows the award chart pricing. It’s still difficult for airlines to coordinate supply and demand and figure out prices over multiple mileage programs in real-time. The closer the partnership between the airlines, the more dynamic their award ticket pricing will be. Otherwise, you’ll still find seats available on a partner airline for a set price (usually the one from the old chart) until they’re sold out.

Final Thoughts

The one big problem with dynamic pricing for award tickets is planning. If you’re saving points for a once-in-a-lifetime trip, it’s possible that the airline could double the price of that ticket overnight. There wouldn’t be a thing you can do about it. The program will just say the new price is what the market will pay.

The only thing we can do as passengers is to be flexible. Maybe we can travel at a different time when the award prices are lower. It might be necessary to book a positioning flight or even book the flight in a lower class of service.

We can complain about how much a certain flight used to cost on the now non-existent chart but no will at the company will listen. We just have to find out new ways to get the most value from our points and miles.

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This post first appeared on Your Mileage May Vary

4 comments

z o May 1, 2020 - 2:16 pm

*ALL* of the Legacy? well, FMB if Alaska suddenly got dropped from legacy to start-up…

Reply
joeheg May 2, 2020 - 6:26 pm

Alaska falls in a middle ground between both categories. I’m sure most people feel AS doesn’t copycat AA, DL, or UA. I’ll try to do a better job of differentiate which airlines I’m referring to in the future.

Reply
Shaun May 1, 2020 - 3:05 pm

United’s roll out of partner dynamic pricing this week used the following formula:

last week’s price * 1.10 = today’s price

Dynamic is airline code for devaluation unfortunately.

Reply
Christian May 1, 2020 - 4:06 pm

I find dynamic award pricing to be indicative of insufficient competition. Loyalty programs’ entire premise as a mutually beneficial relationship between the company and the member is to provide value for the member in return for flying, hotel stays, credit card spend,etc. There are always going to be better and worse proportional redemption values, just as with anything but the entire premise of dynamic pricing is to destroy the best values wherever feasible. This premise flies in the face of the very concept of loyalty, indicating that there simply isn’t enough competition. If there actually was enough competition, companies would be less eager to continually devalue these programs that are giant cash cows even without the continual worsening of terms and redemption costs. In short, for the most part, the companies just don’t get it, then they bemoan when customers choose flexible currencies over their devalued and restrictive miles or points. I suppose it’s a good illustration of the dangers of the ivory tower mentality so prevalent in travel company boardrooms today. I know if I treated my customers in a similar fashion, I’d be out of business in a hurry, but then again I’m not lacking sufficient competition.

Reply

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