It’s finally here: the beginning of the end for the fees airlines charge to use your hard-earned miles.

Let me explain.  In the beginning you could accumulate enough miles for a trip, call the day before you wanted to leave, find a flight with a mileage seat and be on your way the next evening.  This flexibility was very valuable, because airfares generally rise to rip-off levels in the days leading up to a flight.  If you just had to be somewhere last minute, using 25,000 miles was a far better option than paying $1,500 to fly from LA to Chicago.

Eventually airlines realized this was costing them money so they started charging a fee for expedited service.  This was back in the days of paper tickets, roughly around the same time as the Commodore 64 and Super Nintendo.  And at the time, airlines were right to charge a fee: someone had to print out the tickets and FedEx them to you.  So an airline charging a $50 last minute fee was merely recouping its costs.  Fair enough.

But then came the era of the e-ticket (and the Game Cube).  And the costs incurred from issuing last minute tickets vanished: no more paper = no more FedEx.  And when travelers booked mileage awards online no airline staff had to get involved in the process.  Airlines were saving tremendous amounts of money.

So what did the airlines do?  Eliminate the fee in a gesture of goodwill to customers?  No, by this time fee revenue had become their crack cocaine and airlines were full-on junkies.  Fees went up, not away; they become staggered: no charge for booking more than 21 days out, up to $100 for booking with less than three weeks notice.

It took a recession and precipitous drop in demand to get here, but I’m happy to report that members of United’s Mileage Plus program can now live fee-free for last minute travel.  United has eliminated this bullshit fee so we can now use our miles at any time without having to pay for our “free” ticket.

This is great news for consumers and a step in the right direction for United.  However let’s not forget that United’s mileage program has a dark side more sinister than Lord Voldemort: they routinely block you from using your miles to book seats on their Star Alliance partners.

So while this fee elimination is a step in the right direction, United has some way to go before they’ll get my business again.

Should United’s program be called Mileage Plus or Mileage Minus?  Read this and then decide.

Yesterday I made the bold claim that United applies an additional filter to block out already-scarce frequent flier award seats on offer from their alliance partners.  Now for the why and how.

To understand this problem, you need a quick primer in the economics of frequent flier programs.  The concept that began just over 25 years ago as a way to reward flier loyalty has dramatically evolved.  Miles are now awarded for just about everything, from grocery shopping to car rentals to credit cards.  And just as our ability to earn miles has expanded, so has our ability to redeem them.  Airlines have partnerships with other airlines.  The heaviest concentration of these are the three global airline alliances:  Star, SkyTeam and oneworld.  United is a founding member of the Star Alliance.  In theory, miles that a United member earns can be used to book flights on any of the Star Alliance airlines.  This greatly expands the choice of global destinations, as United’s network pales in comparison to the combined global reach of Star Alliance.

Back to the point, frequent flier miles have become a form of currency, and airlines are the central banks of this monetary system.  When Chase gives you miles for credit card purchases, it has to buy those from United.  So do Avis, Safeway and their airline partners.  The converse is also true: when United members redeem miles on partner airlines, United has to pay for those seats.  Since there are so many more Mileage Plus members than there are members in their partners’ programs, there are more United fliers redeeming on, say Air New Zealand than there are ANZ fliers redeeming on United.  This imbalance has to be addressed, which means United sends a check to its partners.  This financial pain is even more acute when United members redeem for expensive business and first-class tickets.  United’s solution to keep these costs down?  Make less partner seats available to its own loyal customers.

This is called Starnet filtering.  Starnet is the networked program used by all Star Alliance airlines to book flights on the other carriers.  The filtering refers to the additional filter United puts on top of the already-limited award seats released by its partner airlines.  Here’s an example:

Your blogger wants to fly on Swiss to Zurich in April.  Swiss has released several award seats in business class on the flight in question.  These seats can be booked with miles from any program in Star Alliance, from Air Canada’s Aeroplan to Singapore Air’s KrisFlyer.  But when I called United to make a booking, they claimed the flight is not available as an award.

This is not a story that I’m breaking.  It’s been documented in a couple of excellent pieces by Nicholas Kralev at the Washington Times.  It’s also been discussed quite a bit in the blogosphere and at FlyerTalk.  I think it’s important to keep the pressure up on United over this.  One of the key benefits of United’s program is supposed to be that members can redeem awards on any of its partners.  Now that United is making it increasingly difficult to do so, this amounts to nothing more than a bait-and-switch.  We’re promised destinations like Bali, Paris and Singapore, but when it comes time to make a booking, United’s penny-pinching policy stands between us and our hard-earned award ticket.

To add insult to injury, United lies to its own reservations agents about this.  Savvy travelers like me have ways to find out if an airline has released award seats on a given flight.  So when I call in, I know exactly what I’m talking about (”I” class in the case of that Swiss flight I want).  Reservations agents are told that - even though I can see “I” class available - they haven’t released that seat to United.  This is patently false.  I have confirmed with sources at Swiss that when they when they release award seats, every program in Star Alliance has equal access to them.

So what do we do about this?  Arguing with United reservations agents is pointless.  They have been lied to by their management and likely won’t believe you.  The most important thing you can do is to make other United fliers aware of this issue.  Reference this blog post and the articles linked therein.  Step two is to write the United executive offices and tell them you know exactly what they’re doing, and that you won’t be flying United again until they put a halt to these shenanigans.

Last, be sure to stop crediting those credit card, car rental and grocery miles to your United account.  Since those companies have to pay United for the miles, it’s money in United’s pocket every time we choose Mileage Plus.  Hit them where it hurts.

If there’s one thing I’m an expert on, dear readers, it’s travel.  Having worked as a corporate travel manager and personally flown more than 1,000,000 miles, I’ve learned a thing or two about how airlines work.  Since they can give incredible value, I’ve spent years mastering the ins-and-outs of frequent flier programs.  I’ll save the details for another day, but I earn miles at $.02 or less and spend them at five-to-ten cents a piece.  There’s tremendous value in a program where you can spend a reward for several times its actual cost, and get the transportation thrown in to boot.

IF you can actually spend the miles, that is.

We all know the game.  Airlines make some seats - by no means all, or even most - available for frequent flier mileage redemption.  We accept that airlines are in business to make money, and our free tickets take a back seat to them selling their product.  So far, so good.  Airlines have sophisticated computer modeling that enables them to predict things like revenue and bookings on any given flight.  These programs also tell the airline how many seats to offer as mileage awards on each flight.  But as long as we know the rules of the game, we can still try our luck at getting that elusive First class seat on Singapore Airlines, since we know that there are seats out there available for mileage redemption.

But what if an airline changed the rules of the game and didn’t tell you?  What if that airline lied to its own agents in order to further deceive customers?

Sound outrageous?  It is.  And it’s exactly what United Airlines does to its Mileage Plus program members who try to redeem their miles for flights on Star Alliance partner airlines.

The short version: United’s alliance partners make their frequent flier seats available to every mileage program in Star Alliance.  Remember, these seats are limited to begin with.  United then applies an additional filter to prevent United’s own Mileage Plus members from using their miles with their partners.

Why does United do this?  And what can you do about it?  Come back tomorrow for part two and find out.