I’d argue frequent flyer programs are one of the best ideas the airlines ever had. I think it would be any capitalist’s dream to be able to make hundreds of millions of dollars selling a “currency” where you control every aspect of the earnings and redemption rates.
If the airlines want to change how many miles they give to members, they can do that. If they want to change how many miles it takes to “buy” something, they can do that as well. Heck, you don’t even own the miles you “earn” from the airlines — instead the airlines do.
Historically frequent flyer programs are the only consistently profitable part of airlines’ operations. American might not even be in business if it weren’t for Citi buying hundreds of millions of dollars worth of miles from them upfront when they were in Chapter 11.
But there’s one huge mistake I think the airlines are making. Let me explain…
I don’t blame airlines for revenue based earning
With the upcoming AAdvantage changes, all of the “big three” US carriers will issue miles based on revenue rather than distance flown. As someone who likes good deals, am I fan of that system? No way. Do I understand where the airlines are coming from? Absolutely, and therefore I don’t blame them — it may very well be the right business decision.
Airlines are trying to monetize their frequent flyer programs even more. In the US, over half of miles are issued through non-flying means (credit cards, dining programs, shopping portals, etc.). That number keeps growing every year.
What it comes down to is simply that the airlines are doing extremely well, and they don’t need to give frequent flyers as much of an incentive to fly with them. They’re as aggressive as ever before about issuing miles, but they want it to be a profit center rather than a cost center.
Why miles have become so popular (and mutually beneficial)
While many of us perhaps take it to an extreme, we’re not the only ones into miles & points. Look at how many Americans have credit cards which earn points that can be redeemed towards flights or hotel stays. It really is incredible how much frequent flyer programs have become a part of everyone’s day-to-day life, even without really realizing it.
Why are miles so awesome? Because they don’t have a fixed value, and that’s what makes them so lucrative. Most people redeem their miles extremely inefficiently, because they’re at an information disadvantage.
But they continue to collect them because miles are this aspirational currency. When I say “aspirational” I’m not just talking about redeeming miles for Cathay Pacific first class or Etihad first class, but rather that people view it as monopoly money, and are excited when they can get something for “free.”
“Aspirational” awards aren’t limited to international first class
When I tell non-frequent flyers what I do in a social setting, I’ve come to realize everyone has a story they want to share about redeeming miles. People are proud when they redeem their miles. “Oh yeah, I love miles, I redeemed them for a free ticket to Orlando last year, which saved me $200. I can’t wait to get my next free ticket.”
And that’s why the programs work so well.
The mistake I think airlines are making
This brings us to the misstep I think the airlines are making. I’m not going to argue that revenue based mileage earning is a bad idea. I don’t like it, but that doesn’t mean it’s not smart from the airlines’ perspectives.
But what I think is a really bad idea is that the “big three” US carriers are slowly headed towards revenue based redemptions. Delta SkyMiles wants your miles to be worth at most one cent each. They want you to view them as a currency that you can redeem for just about anything travel related. You can take $100 off the cost of a ticket by redeeming 10,000 miles. You can buy premium drinks in the SkyClub at the rate of 100 SkyMiles per dollar.
This is just the beginning, as they’re trying to condition consumers into thinking of SkyMiles as a currency they can redeem for just about anything at a fixed value. If there’s one thing we’ve learned over the years, it’s that when Delta does something, United and American follow. It certainly seems like that’s the direction things are headed.
So why is it a huge mistake to try and tie miles to a certain dollar value? Because if you want to make the frequent flyer programs thrive based on non-flying means, there needs to be a value proposition or an element of mystery/aspiration.
Simply put, there are credit cards which offer 2% cash back. I actually think most consumers would be better off with cash back cards rather than mileage earning cards, assuming they’re at an information disadvantage when it comes to redeeming miles.
But many still earn miles because the perceived value is higher, because they never really calculate the value of what they’re getting. If the airlines get to the point where one mile equals one cent, then there’s no mystery anymore. Then there’s no rational reason most consumers should use a credit card which basically earns 1% cash back towards travel on an airline rather than 2% cash back with no annual fee.
Bottom line
If this is the direction the airlines are headed, they’re making a huge mistake. And for that matter if they’re basing their entire business model around consumers being uninformed, then that’s not a very good place from which to start.
I get why Delta is wanting to make SkyMiles revenue based on the redemption side. A lot of people working at SkyMiles have backgrounds in revenue management. When they make a last minute saver award seat available on an international flight they’re saying “well, that seat would have cost $7,000 if someone bought it,” rather than saying “that seat would have gone out empty and not generated any revenue.” Surely there’s some middle ground between those two approaches.
What do you think — if mileage redemptions become revenue based with miles worth a penny each, would there be any reason to ever use a mileage credit card again? If this is the direction the airlines are headed, are they just counting on us being uninformed, or?
This was amazing piece you wrote about. I know so many people who act that they got a great value using there points when it was mostly below 1% lol. The mystery behind the redemption is what makes points exciting to earn take that away it just becomes like a 1% card
Typo above folks. The last sentence should be 2.5 to 2.7 percent. This is a net yield on a combination of AMEX 5% Blue Cash, Citibank Double Cash, and Capital One Quicksilver cards. Have a nice New Year all.
I disagree that they're hurting the aspirational angle, many people aspire to getting a free economy class ticket. I showed my father how switching his spend from one card to another would be enough to change his annual award ticket to Europe from economy to business and he responded by saying "but I like my card."
As mentioned before, this is purely secular. I wish we never have another recession but we will, and then...
I disagree that they're hurting the aspirational angle, many people aspire to getting a free economy class ticket. I showed my father how switching his spend from one card to another would be enough to change his annual award ticket to Europe from economy to business and he responded by saying "but I like my card."
As mentioned before, this is purely secular. I wish we never have another recession but we will, and then there'll be all sorts of incentives. It might not be miles & points exactly but it'll be something. Maybe flyer vouchers will make a comeback or lifetime passes (please please please!!) There'll be something.
Killing the aspirational aspect of the programs will kill the programs. Providing a 1% rebate in a currency of extremely limited utility will never be enough to sway the purchasing decisions of airfare customers who have a choice. 1% fixed rebate means that every airline will need to compete based on price, service and convenience, or they will need lots and lots of corporate contracts. Delta can compete on price and service, I have no...
Killing the aspirational aspect of the programs will kill the programs. Providing a 1% rebate in a currency of extremely limited utility will never be enough to sway the purchasing decisions of airfare customers who have a choice. 1% fixed rebate means that every airline will need to compete based on price, service and convenience, or they will need lots and lots of corporate contracts. Delta can compete on price and service, I have no idea how AA thinks they'll compete, because the FFP was the only thing they were best at.
And providing a 1% rebate in a currency of extremely limited utility is not going to capture any credit card customers when there are other cards that offer a 2% rebate in a currency with almost unlimited utility (cash).
Killing the FFP programs is the best thing for the shareholders over the next 6 to 12 months, but when the economy turns they will regret it. It's funny how quickly these geniuses forget that selling miles to banks is what kept them from being liquidated about 5 years ago. They've not only forgotten that but they've deluded themselves into the fantastical belief that the record profits they are earning is due to their exceptional strategic acumen, rather than massive fuel price drops they had nothing to do with. Interesting that despite pulling most award seats AA has declining passenger revenue per available seat mile. Wonder if they have any clue where that PRASM is headed when the economy cools off.
Cheaper fares are where they need seats filled. In a way they are doing themselves a disservice to steer people away from those emptier planes. It's not like the difference in earned miles is huge given the increase in miles needed to get free flights. They may be creating unintended consequences. I suspect they hope those who have companies paying will opt higher to earn more, it not being their money being spent. But since...
Cheaper fares are where they need seats filled. In a way they are doing themselves a disservice to steer people away from those emptier planes. It's not like the difference in earned miles is huge given the increase in miles needed to get free flights. They may be creating unintended consequences. I suspect they hope those who have companies paying will opt higher to earn more, it not being their money being spent. But since there are already other incentives for paying more, it seems the wrong path to me.
@mbh agree with you about david another boo hoo guy who likes being an ah. ultimately the market will determine what happens in FF world. Ask the beef growers about the price of beef in the 70's,it never recovered. As for Ben he didn't get to where he is by being stupid. He was on CNBC and FOX over the weekend and that was nice to see. I am not a FF but I have learned a lot about buying a seat from reading his blog and the comments. Drive on Ben
Interesting discussion - personally, I'd like anything that gets away from all the CC-sign-up nonsense, which has obviously saturated the market for miles (as AmtexFly put it earlier).
I'm perturbed this is starting to move somewhat to the hotel market, causing stiffer cancellation penalties, etc.
It means I retire my AA card and go back to my BA rewards card @ 2%.
Which part of that don't the airlines understand?
@Endosluft - i think airlines are racing to the bottom based on price because that's what the customers want. I'll admit to paying a little more to fly Delta since I have status with them and find they're a better operation, but the reason Spirit and Ryanair are so successful is that the majority of passengers just book based on price. Sure, they'll complain about cramped seats, bag fees, etc..... but they next time they...
@Endosluft - i think airlines are racing to the bottom based on price because that's what the customers want. I'll admit to paying a little more to fly Delta since I have status with them and find they're a better operation, but the reason Spirit and Ryanair are so successful is that the majority of passengers just book based on price. Sure, they'll complain about cramped seats, bag fees, etc..... but they next time they want to go to Florida and Spirit is $170 and United is $300 they'll still gladly book spirit. Even with the big 3, if flight times were similar and prices are $10 different theyre going to go with the cheaper option, not with the 'better' airline.
I wouldn't be investing in my economy product if i was an airline. Put your money into economy plus, biz and first and cater to those who will shop on more than just price.
As Warren Buffet says: "You only know who is swimming naked when the tide goes out."
The changes the airlines have made are good for them when seats are full but they will be disastrous when the economy goes south and competition intensifies.
The biggest two changes are:
1. revenue based programs
2. every elite benefit is for sale
The folks who have budgets to spend are now truly free to pick...
As Warren Buffet says: "You only know who is swimming naked when the tide goes out."
The changes the airlines have made are good for them when seats are full but they will be disastrous when the economy goes south and competition intensifies.
The biggest two changes are:
1. revenue based programs
2. every elite benefit is for sale
The folks who have budgets to spend are now truly free to pick any airline at any point both. Loyalty is an afterthought as miles, as Lucky says are just a currency, with no added aspirational benefits. I normally don't fly Delta because I'll be last in line to board and get a lousy seat but if they have the best connection and I can pay a few extras maybe I'll do that for a single flight (otherwise I prefer to book other airlines).
As I get older I'm less excited about flying period and now I feel liberated from chasing any particular program because everything is for sale and who needs points when they are just worth a couple of dollars might as well get a Capital One Venture card and fly whatever airline.
It feels like the airlines don't realize that this is a race to the bottom for them solely based on price. Emirates has the lowest cost to Asia with somewhat equal benefits why not pick them for less money? There is no more loyalty incentive or points incentive to stick it out and book Delta, United, American, as their points are just a minuscule rebate and the value of those points are being gutted.
The right approach would be to offer a mileage based program, have some benefits that are not about dollars but recognition, and then further incentivize (i.e. provide goodies like upgrade certs, etc) for high value spenders. In my opinion removing the mileage based part was a very dumb move.
Based on number of points and miles blog, no golden goose is being killed by the airlines.
The comments about the 'average American' above are spot on. You read too many blogs and everything that isn't Etihad, Emarites, Cathay, etc F starts to look rubbish and you can lose perspective. Most people are just happy to be going on holiday. I often find myself looking at weird and wonderful ways to get somewhere in the fanciest cabin possible and forget that 2 years ago I would have thought any flat seat was...
The comments about the 'average American' above are spot on. You read too many blogs and everything that isn't Etihad, Emarites, Cathay, etc F starts to look rubbish and you can lose perspective. Most people are just happy to be going on holiday. I often find myself looking at weird and wonderful ways to get somewhere in the fanciest cabin possible and forget that 2 years ago I would have thought any flat seat was completely unattainable.
From the outside looking in, it would appear the US had saturated the market with points. The credit card sign up bonuses are so high that non US airlines have no choice but to try and protect their own customers by making sure reward flights don't get sucked up by users of foreign schemes.
FF programs aren't the golden goose. As a shareholder, the airlines should do what they are doing. The blogger is just lamenting his need for a career switch.
I really think the airlines have just about killed the programs that have been successful for so long. I absolutely understand the idea of revenue based earning, but the revenue based redemptions kill the goose.
I have personally held top tier status in several programs pretty much for 15 years straight and it has gotten to the point where it is getting increasingly impossible to use miles. The RDM earning has cut earnings so much...
I really think the airlines have just about killed the programs that have been successful for so long. I absolutely understand the idea of revenue based earning, but the revenue based redemptions kill the goose.
I have personally held top tier status in several programs pretty much for 15 years straight and it has gotten to the point where it is getting increasingly impossible to use miles. The RDM earning has cut earnings so much (even on most of my business/first class tix) that I no longer earn enough to be able to use them the way I used to. On top of that, redemptions have become hard to come by. Not just in J and F, but even Y tix are increasingly impossible to redeem during my kids' school holidays.
And that is the point where I am giving up. If I am given the choice to have to stop several times on a Y or even J award that has substantial taxes and maybe even YQ or to pay for a much shorter itinerary in cash, then the latter it now is. And I will pick foreign airlines any day of the week before I will fly the US airlines.
While the getting is good right now, the airlines are making changes that will hurt them badly in the next big recession because most members simply won't read their emails of redemption discounts. And consumers always act in waves. The game is already on the downward part of the arc, but consumers still believe it is a good deal. Conversely, when momentum shifts and the public wakes up, it will take a long time for the airlines to get cnsumers to reconsider their cards....precisely when they may need the revenue from mileage sales to bamking institutions the most.
Good luck to the US3. It may serve them well to remember that hubris comes before the fall.
Actually Southwest does have an aspirational opportunity - it's called "companion pass". And their "fully refundable, with no fees" award tickets are a great convenience feature. In addition, points are worth considerably more than 1 cent each for WN's revenue-based redemptions, and Southwest is extremely transparent with their customers. That "package" makes Southwest and Rapid Rewards attractive to a lot of travelers. Delta - are you listening? A pure 1 cent/mile with no "sweeteners" and...
Actually Southwest does have an aspirational opportunity - it's called "companion pass". And their "fully refundable, with no fees" award tickets are a great convenience feature. In addition, points are worth considerably more than 1 cent each for WN's revenue-based redemptions, and Southwest is extremely transparent with their customers. That "package" makes Southwest and Rapid Rewards attractive to a lot of travelers. Delta - are you listening? A pure 1 cent/mile with no "sweeteners" and no transparency is a non-starter.
I think it's pretty fair for US-based consumers. You earn your miles not from flying, mostly, you got tons of bonuses, cashbacks, credit cards etc. But there exists a world outside of US. Where people earn 100% of their miles by actually flying on revenue tickets.
Why shall we suffer, too? :) I believe there should be different conditions for different countries. The conditions for US-based "flyers" are really too good to be true.
Lucky, if they fully revenue based redemption.. ie 1c per mile, there will be no more need to hv award seats availability. U just "buy" into the cheapest class available. N if the airline has empty seats.. it cannot be redeemed (via opening last min award seats as there is nothing to open).. as it is still based on what they r selling in their cheapest class which has already proven in the run up...
Lucky, if they fully revenue based redemption.. ie 1c per mile, there will be no more need to hv award seats availability. U just "buy" into the cheapest class available. N if the airline has empty seats.. it cannot be redeemed (via opening last min award seats as there is nothing to open).. as it is still based on what they r selling in their cheapest class which has already proven in the run up that people r not biting at those prices.
N if ur alliance partner consistently sells at a cheaper price..u will "buy" from the alliance partners. (If they allow less than 1c on partners.. it is the end of the alliance)
Delta can do whatever they want. Customers are not stupid ultimately. See how things changes when AA goes 1c redemption. Maybe another chapter 11. Try that AA.
In comparisons of miles credit cards vs. the 2% cards, the one (and only IMHO) advantage the miles cards have is the occasional "Super" redemption, like finding FC saver space to Australia, or something similar.
If the US "Big 3" redemptions go the way of Southwest RR 2.0, then the "redemption dream" goes away. Already, I advise everyone who asks me do NOT get the Delta AmEx card, at least not for the miles. They...
In comparisons of miles credit cards vs. the 2% cards, the one (and only IMHO) advantage the miles cards have is the occasional "Super" redemption, like finding FC saver space to Australia, or something similar.
If the US "Big 3" redemptions go the way of Southwest RR 2.0, then the "redemption dream" goes away. Already, I advise everyone who asks me do NOT get the Delta AmEx card, at least not for the miles. They may want it for the benefits. I expect I'll add the AAdvantage cards to "do not recommend."
I don't think it's misinformation at all. I think we're all a bit out-of-touch with the average American, whose aspirations are quite different from ours! I'd say for the average American, the aspiration is to travel to Disney World or to Alaska/Hawaii. I know Delta is going towards revenue based redemptions, but I still think they'll always have roundtrip award tickets within 48 contiguous states priced at 25K or 30K (whatever the credit card offering...
I don't think it's misinformation at all. I think we're all a bit out-of-touch with the average American, whose aspirations are quite different from ours! I'd say for the average American, the aspiration is to travel to Disney World or to Alaska/Hawaii. I know Delta is going towards revenue based redemptions, but I still think they'll always have roundtrip award tickets within 48 contiguous states priced at 25K or 30K (whatever the credit card offering is) since they always market the credit card bonus points as enough for 1 roundtrip economy class ticket.
I'd say the honeymooners or travel/aviation geeks are really the ones who care about the Etihad A380 or Cathay Pacific flights; not the average American. I've told my friends time and time again about flying CX F to Asia or Etihad A380 to Middle East but they tend to be more interested in flying home to see their families over Thanksgiving/Christmas or fly to Disney/Alaska/Hawaii/Las Vegas.
Ultimately, the airlines will do whatever is profitable. I'm still surprised fuel surcharges haven't become the norm in the USA when it's the norm in the UK, but it is what it is! ;)
Airlines thrive on business travelers who fly on full fare tickets paid for by their employers and then use the miles to fly the family to Disney World or to visit grandma. The changes to revenue based earnings and spending reward exactly those customers, who are the airlines' bread & butter. Delta, by no longer publishing awards charts, is the most honest of the pack. AA is the most dishonest by providing award charts that...
Airlines thrive on business travelers who fly on full fare tickets paid for by their employers and then use the miles to fly the family to Disney World or to visit grandma. The changes to revenue based earnings and spending reward exactly those customers, who are the airlines' bread & butter. Delta, by no longer publishing awards charts, is the most honest of the pack. AA is the most dishonest by providing award charts that include awards that do not exist. This will temporarily benefit AA as customers acquire AAdvantage miles via purchase and flight & credit card activity. Hopefully, this deceptive practice will backfire on AA as the general public becomes aware of these dishonest award charts.
I think your right on...it is an emotional and loyalty related issue and when I got my letter from AA about the changes I was pleased it did not sound like Delta mentality but saddened as I realized that "loyalty programs" are losing the loyalty element. Almost all of the 4 million miles I have flown in my life we on AA and they were chosen as my carrier because the loyalty program rewarded me...
I think your right on...it is an emotional and loyalty related issue and when I got my letter from AA about the changes I was pleased it did not sound like Delta mentality but saddened as I realized that "loyalty programs" are losing the loyalty element. Almost all of the 4 million miles I have flown in my life we on AA and they were chosen as my carrier because the loyalty program rewarded me and I responded accordingly. I have had a 2% cash back card for two years now and it rewards almost equal to the AA credit card in terms of dollars...maybe more. But when I made a new purchase I still ignored the better return on the bank card and no fee! Why? I have noticed since getting my AA change letter I think about which card to use! Reaction to no loyalty to begin with is less traumatic than when one goes south on their loyalty.
Lots of well-informed comments (except David, who makes me puke) but I wonder if we're overthinking this. I think back to the year of the chAApter 11 filing. Recession half-over, planes half-empty, carrier going glub glub glub... so the FF program was very generous. I got EXP on 63,570 BIS miles, buying only deep-discount economy tix. A great year. Now, they're making money like crazy, the USA is well out of the recession, AND frequent...
Lots of well-informed comments (except David, who makes me puke) but I wonder if we're overthinking this. I think back to the year of the chAApter 11 filing. Recession half-over, planes half-empty, carrier going glub glub glub... so the FF program was very generous. I got EXP on 63,570 BIS miles, buying only deep-discount economy tix. A great year. Now, they're making money like crazy, the USA is well out of the recession, AND frequent flyer miles have become a "thing". Everyone has them. They're hoist on their own petard. The miles are a liability, the whole game is out of balance. Too many miles out there, looking for too few seats on planes which are too full.
I'm pessimistic in the short term, because the thing we know is on its way out and the next thing isn't clearly in view yet. Worst case: there is no next thing, there's just tickets for sale. Yuck.
Like Keith said above, the vast majority of the public is too dumb and/or lazy to care. Most people don't care so much for a premium cabin and look at a redemption as a free bonus, as opposed to trying to squeeze the most value out of their miles. This is essentially the main selling point of the Barclay Arrival card and Capital One Venture: a guaranteed fixed value which can be used for anything....
Like Keith said above, the vast majority of the public is too dumb and/or lazy to care. Most people don't care so much for a premium cabin and look at a redemption as a free bonus, as opposed to trying to squeeze the most value out of their miles. This is essentially the main selling point of the Barclay Arrival card and Capital One Venture: a guaranteed fixed value which can be used for anything. I actually think the uninformed public would view such a change positively as it removes the complexity of mile values and award charts. I've flown Cathay and Etihad business class in the past year and have offered to help friends if they're interested in this hobby. Two people have asked questions, everyone else just doesn't seem interested.
@Gene - great point! Hotels are talking about huge cancelation penalties for no-shows, and airlines are talking revenue based redemptions. When the next recession hits, that's all out the window. Everything will return to normal, and businesses will do whatever they can to fill space.
I do a long haul pacific run once (sometimes twice) a year for the holidays and short jaunts throughout Asia a few times a year. Nothing that would qualify me as a frequent flyer. This site has been helpful in educating me on accumulation and valuation.
But the long and short of it is, where can I get the most value? For example, I use the Amazon card (Chase) which gets me 3% return (when...
I do a long haul pacific run once (sometimes twice) a year for the holidays and short jaunts throughout Asia a few times a year. Nothing that would qualify me as a frequent flyer. This site has been helpful in educating me on accumulation and valuation.
But the long and short of it is, where can I get the most value? For example, I use the Amazon card (Chase) which gets me 3% return (when used at Amazon) that can be applied to Amazon the following month. And I know that that 3% return will always have value since I can always apply it to my Amazon purchases (i.e. no problems with redemption).
Similarly, an airline credit card may seem lucrative (with say the standard 3x points when used to purchase tickets, etc.) in conjunction with a miles plan, but If redemption is next to impossible, it actually makes that 3% return nearly worthless, at least for the semi-frequent flyer. Am I interested in using those flyer points for overpriced M&Ms or other inflight goods? Not really. Again we are talking about a crowd of folks who are looking for good value.
So by the end, a less lucrative airline loyalty program (in terms of both earning and redemption) for flyers similar to myself, simply means I am back to going for 'cheapest' fare rather than building a relationship with a brand.
I still get benefits from my Delta platnium card that i wouldnt get with a 2% cash back card. Free checked bag and zone 1 boarding (which i get anyways with gold medallion status) but the mileage bonus and MQM's are also worthwhile. Say I spent $50k/year on the card, i'd be giving up those benefits for $500 in cash back.
My real platnium amex will always have value with the $200 airline rebate, skyclub, priority pass access, etc....
@David,
Don't worry about Lucky. He is pulling in millions from this blog every year. He'll do just fine.
FF miles will never be taxed by the IRS because Congress is one of the largest recipients of FF miles.
@David - I cannot imagine how sad and lonely it must be to live in a world as cold and hateful as yours. I hope no one treats you as horribly as you treat them, no matter how very much you deserve it. Karma's a bitch, buddy.
just wait til the recession next year...
I always buy the cheapest ticket. And only travel because I want to, not because I have to get the maximum value from what I have.
The ff miles are just a bonus, none of the airlines have my loyalty based on it.
LOLLLL
Ben's entire career is built on a house of cards. Anyone think he's gonna get an actual job after this? A writing gig would be the obvious choice I think. Too bad his posts are mostly 5th grade reading level that tries to read like a 7th grade reading level. Wonder if Ford would stick around? Maybe not... he's so high class that even BA biz class isn't good enough for him.
Better save up for that rainy day, kiddo.
@David, meh. If the hobby were to disappear overnight and render our favorite bloggers unemployed, I don't think they would suffer. They would still be some of the world's best travel agents.
I for one will give up on this game in 2016 - and actually, reading between your lines, Lucky, I think you should quit while still on top!
Just today, I was informed that I will not be able to upgrade my Singapore Business to First (though having about 400.000 miles with Lufthansa), because apparently it was booked in the wrong Business class (U). No indication on the website what class I was booking,...
I for one will give up on this game in 2016 - and actually, reading between your lines, Lucky, I think you should quit while still on top!
Just today, I was informed that I will not be able to upgrade my Singapore Business to First (though having about 400.000 miles with Lufthansa), because apparently it was booked in the wrong Business class (U). No indication on the website what class I was booking, and I really didn't care that much anyway... However, StarAlliance still promotes updates around their airlines as the unique selling point.....
I am also on a waiting list for AA to upgrade from Economy to Business for a flight to DFW in February, and though I am AA Platinum, I do not feel "special" in any way. The upgrade from LHR will include (next to a lot of miles) around $550, should it go though. Why then should I do it - I am still on the fence... Next time, it will be Lufthansa again...
This "hobby" is so time-consuming when you are not checking all details all the time.. And though I enjoyed it while it lasted, I will not continue buying miles.
For anyone focusing on their job and "real life", it is just not worth it anymore.
@lucky - You proffer:
if you want to make the frequent flyer programs thrive based on non-flying means, there needs to be a value proposition or an element of mystery/aspiration.
I'm not sure that your underlying assumption is necessarily correct, i.e., is it necessarily the case that the airlines *want* the FF programs to thrive at all?
Could it be that the CC mile sales aren't as profitable to the airlines as they once...
@lucky - You proffer:
if you want to make the frequent flyer programs thrive based on non-flying means, there needs to be a value proposition or an element of mystery/aspiration.
I'm not sure that your underlying assumption is necessarily correct, i.e., is it necessarily the case that the airlines *want* the FF programs to thrive at all?
Could it be that the CC mile sales aren't as profitable to the airlines as they once were, and that DL (in particular, with the rest inevitably to follow) has come to the conclusion that the overall direct and indirect costs of maintaining a FF program exceed the value of (a) the miles they sell plus (b) the incremental loyalty benefits of having a meaningful FF program. Everything that I'm seeing, in particular, from DL, could easily be interpreted to point in that direction.
I think we are seeing the gradual fade to black of these programs entirely.
Greg
If the plan is to train people to think they should just buy international business or fist vs holding out for saver awards, it will fail miserably. U.S. airlines have garbage cabins and service. If miles are take off the table I'll just pick a much better foreign airlines, which probably will also have a worthwhile mileage program.
I think the IRS is now going to start looking at FF points miles as something that is taxed, if you don't pay for the ticket - and I think they should. This is going to hit the business traveler. The travel managers are going to say, give me an additional 10% off the price of the ticket and set it up for no FF points. Or, if earned, the IRS is going to say,...
I think the IRS is now going to start looking at FF points miles as something that is taxed, if you don't pay for the ticket - and I think they should. This is going to hit the business traveler. The travel managers are going to say, give me an additional 10% off the price of the ticket and set it up for no FF points. Or, if earned, the IRS is going to say, that the value of the points is taxable and companies will be required to report it as income to the employee. Or the employee opts not the take points, so they aren't taxed.
If you pay for the ticket, then it is just a rebate. And maybe down the road it is part of a cash back.
I think in the long term, loyalty is gone, and FF program programs nothing but CC programs. Why not just turn the programs over to AmEx, Chase, Citibank (DL, UA, AA).
One consideration are business travelers that are forced to buy travel thru corporate directed sites like Egencia, etc. When we were directed to use the site my credit card purchases dropped significantly. I switche from Hilto to Hyatt as they had a negotiated rate allowing loyalty points. I can still get butt in seat miles on my airline. I take what I can get now and any and all reductions in programs hurt more. Pretty...
One consideration are business travelers that are forced to buy travel thru corporate directed sites like Egencia, etc. When we were directed to use the site my credit card purchases dropped significantly. I switche from Hilto to Hyatt as they had a negotiated rate allowing loyalty points. I can still get butt in seat miles on my airline. I take what I can get now and any and all reductions in programs hurt more. Pretty soon I will give up and go for the best service, best times, non-stops, closest hotel to destination (all convenient to me not what rewards me the most) and not be concerned with the loyalty or programs. Might be time to see the US or neighboring country on my buck now. I am sure there is plenty to see and do. Loyalty is gone. Airlines and hotels have turned it into a one way word.
I'll take a contrary view here. Sure it would suck to have miles valued at 1 cent per mile and eliminate the great redemption's out there. That being said from the airline perspective, they are filling planes and air travel is growing rapidly with less competition. If you can earn most of your miles through credit cards or purchasing them what loyalty has the airline lost if you can no longer redeem first class for...
I'll take a contrary view here. Sure it would suck to have miles valued at 1 cent per mile and eliminate the great redemption's out there. That being said from the airline perspective, they are filling planes and air travel is growing rapidly with less competition. If you can earn most of your miles through credit cards or purchasing them what loyalty has the airline lost if you can no longer redeem first class for 100,000 miles? That first class ticket could have easily netted $10-15K if purchased, and the kicker is people are purchasing those tickets.
We also have to remember that there is the mileage earning/redemption side of frequent flyer programs and the status side of these programs. Many frequent traveler's will still favor their primary airline for the additional comfort of first class upgrades, main cabin extra, priority boarding so you carry on doesn't have to be gate checked. This is just like cell phone data plans; the majority of the abuse was done by a small subset of the population. Those who used 20gb of data for the same price as 2gb for the general public were in a uproar. This is a very similar situation where a small group was able to outsmart the system and now the system is adjusting to bring things back in balance.
All that said still sad to see things go the way they are...
You guys are wrong about Lucky and his confederates. There will be a market for economy class trip reports.
@Steve, it's called TripAdvisor, lol
@John and Chancer
John is quite correct - if ALL programs are going revenue based earn and revenue based burn, Lucky and his confederates need a new job.
BUT, to the whatever extent different airlines develop divergent, inconsistent, policies, individualized, targeted, guidance on how to play the game becomes more valuable.
Airlines aren't making a mistake--you and frequent mile/point award redeemers simply don't like what the airlines are doing.
When there were many choices for airlines, airline miles and the ability to accumulate miles by flying (and by credit card spend for that airline) made a lot of money from customers who otherwise and most likely would have made alternative choices in the airline they used. With many airline choices, airline miles played a bigger role--keeping...
Airlines aren't making a mistake--you and frequent mile/point award redeemers simply don't like what the airlines are doing.
When there were many choices for airlines, airline miles and the ability to accumulate miles by flying (and by credit card spend for that airline) made a lot of money from customers who otherwise and most likely would have made alternative choices in the airline they used. With many airline choices, airline miles played a bigger role--keeping many customers from taking another airline simply to keep building their mileage balance with their preferred airline or two. In that model, airlines needed airline miles to keep some loyalty and to keep customers spending with that same airline.
In the new world, there are only 3 major international airlines. For those customers who aspire to international travel to the overwhelming destination list that is not served by the other smaller carriers like Southwest, Alaska, JetBlue, and Virgin America, only the miles for the Big 3 matter--and all 3 of those now have revenue based earning...and Delta now has revenue based awards.
For those customers who aspire only to domestic travel, there really are only 7 total options--and far fewer when you consider the start point and end point for routes served by only some of those 7 airlines. So even with domestic routes, you have only 7 carriers to consider at best...and already Southwest places a fixed value on their miles. So Southwest and Delta already eliminate the aspirational value of miles as the author contends they should have.
With less competition for customers on any particular routes they fly, the Big 3 airlines no longer need to cater as much for aspirational awards for their customers. As such, they can go revenue based on redeeming miles (like Delta and Southwest) or they can simply require far more miles for the best redemptions (making it more expensive for the best awards in premium class, essentially doing the same thing) like UA, AA, and the other carriers.
Only foreign carriers do not need to do this as much...because their home nation/continent loyalty members do not earn nearly as many miles on credit card bonuses or credit card spend as do Americans. That is why you see more and more foreign carriers precluding the availability of First Class and even Business Class for their international flights for members of US based loyalty programs. They instead limit the awards that Americans can get, and/or make them more expensive for the American carriers to provide. That's why DL doesn't even offer F awards on partners, and that's why both UA and now AA have made it far more expensive to get premium awards on their partners.
The change has already happened...but people were too busy to notice or to believe that US airlines would give fewer perks when they have less competition. We now have less competition in the USA, and that allows US carriers to be less generous. Period.
In "revamping" their frequent flyer programs, the airlines are doing exactly what they least want: They are lessening the program's value as an alternative to fliers only looking at fare prices to buy tickets.
I'd argue that in many ways the economic value of the programs in keeping the loyalty of the occasional traveler who would otherwise price shop can be far stronger than in keeping the corporate traveler, whose company often requires using...
In "revamping" their frequent flyer programs, the airlines are doing exactly what they least want: They are lessening the program's value as an alternative to fliers only looking at fare prices to buy tickets.
I'd argue that in many ways the economic value of the programs in keeping the loyalty of the occasional traveler who would otherwise price shop can be far stronger than in keeping the corporate traveler, whose company often requires using a specific airline.
But whichever is bigger, eliminating benefits of the programs to occasional travelers only hurts the airline's bottom line long term. Fewer people will use the credit card and more people will look for cheap tickets
@Keith, I generally agree that "[t]he public is too dumb or don’t care to figure out award charts."
But most folks have heard of someone who has goosed the system and done something awesome with their points, creating some perception that they have value. The programs truly need these stories, whether true or not, to continue perpetuate themselves. The way things are going, there will be fewer and fewer such stories told, and the programs will lose their allure.
This comparison of Qantas Frequent Flyer points is quite good.
http://www.ausbt.com.au/what-is-a-qantas-frequent-flyer-point-worth
@thomas_reeh
Yes, Lucky! Unequivocally, yes! Revenue-based earning and redemption are destructive, short-term thinking, and more high-profile travelers like yourself need to draw attention to this fact!
When the people begin to realize how few points they earn per flight and how little those points are worth, they will stop basing their loyalties and purchase decisions on the "loyalty" programs and start basing them on price and value. And for the big three, this is a bad,...
Yes, Lucky! Unequivocally, yes! Revenue-based earning and redemption are destructive, short-term thinking, and more high-profile travelers like yourself need to draw attention to this fact!
When the people begin to realize how few points they earn per flight and how little those points are worth, they will stop basing their loyalties and purchase decisions on the "loyalty" programs and start basing them on price and value. And for the big three, this is a bad, bad thing.
When Billy Q. Public finds out that the European business class anniversary trip he's been saving up for is now 2,000,000 miles instead of 200,000, he'll start saving his pennies instead of his miles. And that means he'll take LCCs for domestic flights. He'll fly SW instead of the US3 for less than half the cost. And when he's saved up enough money to make that amazing trip with his partner, he'll be flying a foreign airline with newer planes, better food, and friendlier staff.
Revenue-based earning and redemption will kill the US3 if they don't shape up their absurd fare pricing and the rest of their operations. They would do well to reinvest some of their record profits in their operations and loyalty programs instead.
Well, at a minimum, I think they are killing the goose that lays the golden egg. Dunno if they are killing any golden geese, however.
And no doubt, if these systems become a mile per cent on the redemption side, the programs are in trouble. Folks will still take whatever miles they get for flying, as they really have no alternative. But over time, people will opt for cash back credit cards, cash back shopping...
Well, at a minimum, I think they are killing the goose that lays the golden egg. Dunno if they are killing any golden geese, however.
And no doubt, if these systems become a mile per cent on the redemption side, the programs are in trouble. Folks will still take whatever miles they get for flying, as they really have no alternative. But over time, people will opt for cash back credit cards, cash back shopping portals, etc., etc.
I am left to wonder, however, whether the big three will actually make premium cabin tickets one cent per mile. These are the "aspirational" awards, but it, at one cent per mile, they price out at 500,000 or 1,000,000 miles folks will simply give up well prior to aspiring. I cannot see the revenue management folks permitting that to happen.
@John - If frequent flyer programs are all in upheaval, isn't that precisely when people need the most help booking awards?
I think you hit the nail on the head. 1 cent per point is a fair valuation, but if there's no opportunity to redeem for more then what's the point. Then it's just a banking competition. Then you have to compete on price, product, times, etc; there's no loyalty.
And they don't really have to compete on the times and price since the mergers have reduced competition so much. The product is basically the same...
I think you hit the nail on the head. 1 cent per point is a fair valuation, but if there's no opportunity to redeem for more then what's the point. Then it's just a banking competition. Then you have to compete on price, product, times, etc; there's no loyalty.
And they don't really have to compete on the times and price since the mergers have reduced competition so much. The product is basically the same on all of them, it doesn't seem like there is much more they can do in the economy cabin.
I'd *like* to believe that having a major international operation and multiple cabins of service would affect revenue-based redemption -- that demon lurking behind the door -- but then jetBlue has Mint and a decent international footprint, right? So it could happen. Much as we all hope it doesn't. Your point is a valid one, Lucky, and I hope airline people agree with it. But they might not.
And then, I suppose, we start...
I'd *like* to believe that having a major international operation and multiple cabins of service would affect revenue-based redemption -- that demon lurking behind the door -- but then jetBlue has Mint and a decent international footprint, right? So it could happen. Much as we all hope it doesn't. Your point is a valid one, Lucky, and I hope airline people agree with it. But they might not.
And then, I suppose, we start crediting to foreign programs and dealing with fuel surcharges. The game would get harder, but we'd still play.
Yes: but then you have to look at programs like Southwest and Jetblue and how their credit cards are selling. The public is too dumb or don't care to figure out award charts (see: what Delta said when they removed their charts), or retail value of their redemptions.
As far as they're concerned, miles are always free and a free ticket is a free ticket. Southwest and Jetblue have no "blackout dates" to boot: that's...
Yes: but then you have to look at programs like Southwest and Jetblue and how their credit cards are selling. The public is too dumb or don't care to figure out award charts (see: what Delta said when they removed their charts), or retail value of their redemptions.
As far as they're concerned, miles are always free and a free ticket is a free ticket. Southwest and Jetblue have no "blackout dates" to boot: that's why there's little uproar over AAnytime and other fixed but extraordinarily expensive awards.
The lack of award space being released on many routes is just as big an issue. What good are miles if you cant redeem them? Why is American sending planes to Sydney 2/3 empty instead of letting people spend miles?
If all the airlines are moving towards revenue based, you need a new job/business.