Honestly, it's crazy this isn't true for all governments and businesses. Frequent flier programs are just transparent kickbacks. I'm not too worried about the redistribution (since ultimately people will count it as a perk when they are comparing jobs, so it's priced in), but there has got to be significant deadweight losses from inefficient compensation, and from the person booking the travel being insulated from various incentives.
Yeah, I generally look at it as legitimate compensation rather than a kickback. Like: "As the sales manager for across the country you have to spend half the year away from your family, and we're not going to pay you any more than the guy that sits next to you, manages sales on this side of the country, and travels a lot less. But at least when it comes time for you to go on vacation, you'll get to fly for free."
Also, anecdote: I have a friend who works for an organization that employs many frequent flyers, and they have an organization policy of all flying the same airline for all flights because the benefits in terms of better rebooking in the event of flight problems for their frequent fliers are worth the added cost of not shopping around. They actually all switched, collectively, from United to American last year or the year before in response to changes to United's program.
Yes, I think big companies especially tend to view it that way. Governments have passed some of these rules about employee travel having to use the miles/points for official purposes mostly because it's politically popular to hammer "government waste", even using tools that aren't very efficient hammers. Companies tend to take a bigger-picture view when they're worried about travel budgets, instead of the relative penny-pinching of going after airline miles. For example when there's internal pressure to cut corporate travel budgets, two common policies are: 1) direct managers to reduce unnecessary travel, e.g. cut out 10% of trips entirely, and 2) institute a rule that employees have to book through the corporate travel agent and normally must pick one of the routes that's within x% of the cheapest business class fare.
The miles themselves, yeah, I think they just see as a minor compensation to employees for travel, since they don't pay them overtime or anything. Plus in some cases it's not precisely a kickback. Sometimes it is, but other times it's intended to incentivize the traveler to stick with their main airline even when the airline has worse routes to some cities. For example, you usually fly United, but today you want to fly to a city where American has a nonstop and United has only a 1-stop, for similar prices. Absent any kind of loyalty program, you'd pick American's nonstop for convenience. United's perks are supposed to encourage you to take the United 1-stop, even though it's a bit less convenient. This isn't precisely a kickback in the normal sense, because they aren't incentivizing you to buy a higher fare, and it's basically a wash from the employer's perspective. Instead they're incentivizing you to accept being personally inconvenienced with a worse flight, in return for receiving some personal perks.
I know people who do a lot of crazy routings to stay with their preferred carriers. As you suggest, it's not necessarily about spending more money but taking a less direct route. Personally, I won't do it for shorter trips; I spend too much time in planes as it is. But there are a couple more distant destinations where I could fly non-stop but usually will take my regular carrier with a stop instead.
>I know people who do a lot of crazy routings to stay with their preferred carriers. As you suggest, it's not necessarily about spending more money but taking a less direct route.
That generally doesn't work anymore. Almost all airlines now use a revenue model for milage awards, not distance.
With oneworld airlines (BA and AA, amongst many others) mileage doesn't affect status, it works on a different point system (tier points) that doesn't depend in cost, but largely can be gamed by breaking up a direct flight into a few stops in different "zones".
For instance, I flew LHR-CDG-DOH-KUL-PEN last year, business class, for less money that I would have spent in a more direct flight, but I got a lot of tier points for it.
Then I realised I was addicted to my BA gold status, and that I wasn't getting that many perks anyway. This year I'm opening myself up to other airlines.
That's only for award miles, but not for status-qualifying miles, at least on United (and I think also Delta). And like the original article says, people trying for status pretty much never use award miles because you don't earn status miles for those flights, so they don't really care.
>Yeah, I generally look at it as legitimate compensation rather than a kickback.
But, to the extent that it's a way to circumvent taxes, it's not so legitimate -- it's a way of providing a private gain [1] that works as compensation but which isn't taxed. When you have marginal tax rates on high income workers hitting ~50% [2], that's a pretty big incentive for tax-free compensation! (And, IMHO is also an argument for reducing them, since they cause such distortionary collateral damage.)
[1] Don't know the specific jargon the tax code uses for "something that really ought to be taxed if we want to be consistent"
One issue is that it's at least as much about the status perks as the actual miles which some reasonable $$/day can't replace for frequent flyers unless the company is going to suddenly give them upgraded flights everywhere.
In law school I learnt that thanks to the doctrine of trusts, a lot of the time these perks nominally belong to the employee but beneficially belong to the company or government which paid for them.
This is a legal, administrative and tax-payment mess so most employers simply assign the beneficial ownership back to the employee. Doubly so since they're not transferrable in almost every case.
Of course the details have changed, things vary from jurisdiction to jurisdiction, I last studied this more than a decade ago, I'm not a lawyer and by god this is not legal advice.
>Honestly, it's crazy this isn't true for all governments and businesses
I'm pretty sure my entire firm would rise up and put management's heads on pikes if our frequent flier miles were taken away. Points are one of the few joys in life that we consultants are afforded.
This can be said about almost any inefficient transfer program. Even if the agency has to burn 50% of the value in order to move to people, and could instead just give it to people in their paychecks, they have a special attachment to it and feel something is being taken from them.
