Airlines Are Just Banks Now - The Atlantic   

Last week, Delta Air Lines announced changes to its SkyMiles program that will make accruing status and taking advantage of perks much harder. Instead of relying on a combination of dollars spent and miles traveled in the air, Delta will grant status based on a single metric—dollars spent—and raise the amount of spending required to get it. In short, SkyMiles is no longer a frequent-flier program; it’s a big-spender program. These changes are so drastic that one of the reporters at the preeminent travel-rewards website The Points Guy declared that he’s going to “stop chasing airline status.”

When even the points insiders are sick of playing the mileage game, something has clearly gone wrong. In fact, frequent-flier programs are a symptom of a much deeper rot in the American air-travel industry. And although getting mad at airlines is perfectly reasonable, the blame ultimately lies with Congress.

From the late 1930s through the ’70s, the federal government regulated airlines as a public utility. The Civil Aeronautics Board decided which airlines could fly what routes and how much they could charge. It aimed to set prices that were fair for travelers and that would provide airlines with a modest profit. Then, in 1978, Congress passed a sweeping law deregulating the airline industry and ultimately abolishing the CAB. Unleashed from regulation, airlines devised new tactics to capture the market. American Airlines was one of the most aggressive. In the lead-up to the deregulation bills, it created discount “super saver” fares to sell off the final few remaining seats on planes. That meant cheap prices for last-minute travelers and more revenue for American, because the planes were going to take off whether or not the seat was filled. But these fares upset business travelers, who tended to buy tickets further in advance for higher prices. So in 1981, American developed AAdvantage, its frequent-flier program, to give them additional benefits. Other airlines followed suit.

Continued here