Revenue Based Airline Award Redemptions

"that’s the beauty of a free market"

what free market? oligopoly does NOT equal free market.

I agree with you on the revenue-based redemptions for two reasons: A) None of the airlines that currently have such a program fly business class internationally, so they don't ever have to ask something like a million miles for a business class ticket, which would be an extraordinarily bad optic. B) It would kill the aspirational value proposition of their lucrative credit card business, and ultimately push more people towards cashback cards. All that being said, I still think Delta has a serious plan to try it at some point.

@Lantean - that really depends on how you define oligopoly. If you disregard the existence of JetBlue, Southwest/Airtran, Spirit, Alaska, Frontier, and Virgin, then I guess yes, you have an oligopoly on your hands.

@Lucky - a very well written article. I got my fingers crossed that AA/UA won't follow suit.

The credit card mile programs are pure gravy to the airlines. The banks are purchasing miles when we make charges, and our FF accounts are credited. So the airlines are getting cash up front.

What's hard is using those miles.

Ben has a great system - he finds availability, books the flights, and plans his travel around that. That works!

But miles are increasingly useless for a lot of people. Say I need/want to fly a particular flight on a particular date. Chances are high that I WON'T be able to upgrade that flight using miles - or get an award ticket on that flight in Business or First.

Kudos to Ben, Mac, and the rest of his team because they perform miracles, as far as I'm concerned … scoring me at least three sets of international business class award tickets this year. I could never figure that out on my own.

Earning miles is not the hard part of the equation for many; it's spending those miles. And the harder it gets to spend them on upgrades and premium award travel, the more we need services like Ben's!

Lucky -- You are a great analyst of this industry and I really enjoy reading your blog; however, your statement relating to "treat their employees really well" is disputable. Being a Medallion member with Delta for the last 10-odd years and flying plenty with them on a monthly basis, you tend to hear a lot of unhappiness coming from the flight attendants. Just this week I was on a flight from LHR to DTW and I was talking to a couple of them and they were quite unhappy with the lack of a 'union option' and rather scared that they their jobs might be outsourced. (Case-in-point Virgin Atlantic that hires a number of foreigners, pay them a third of what they pay their "own" employees and thus they are forced to work more hours per month).

The in-and-out weekly management consultant or salesperson type often flies really short routes on modestly expensive fares, so I think they will really like this. Someone without status flying $400 LGA-DCA roundtrip every week is much better off -- currently earning a pathetic 430 miles roundtrip (no more 500 mile minimums) but will in future earn 2,000 miles. I think those are the valuable customers who are sensitive to frequent flyer miles who Delta is targeting, and Delta (along with US) has a lot of those customers thanks to their historical concentration on the East Coast where short flights are prevalent.

This change might be harder for United since they are (and especially pre-CO were) more dominant in trans-con and international flying, as well as interior west and west coast flying where even short legs tend to be longer than 214 miles.

I keep saying it: American has long had a revenue-based option for earning status: buy expensive fares and you'll qualify on points faster than on miles.

@ Lantean -- While I don't like the decreasing competition, I'd hardly call the US airline industry an oligopoly. Domestically they have dozens of low cost carriers competing with them, and internationally there are tons of airlines competing with them as well.

@ And000 -- At every company there will be some people that aren't happy, but compared to the other legacies I do think Delta treats their employees exceptionally well. I mean, they just had an employee profit sharing of over half a billion dollars.

And regardless of where you stand on unions, it says a lot that the flight attendants voted against being unionized -- clearly they trust their management enough to feel that they don't need a third party negotiating on their behalf.

@ Susan -- That's a good point, though keep in mind that the primary reason for a revenue based program isn't so that people have more options, but rather so that the airlines can exclude the market segment that they generally consider to be unprofitable.

I can't wait until Delta release their new award cost chart and people realize how bad it is.

It's going to be fun to watch Delta try and spin 2x more availability of a 200k award as better than a 1x low availability of a 150k award.

@ joh m -- I'm waging my bet now that I don't think low level redemptions will go up in price by much. Ultimately even if we see the chart now, the real "test" is what availability is like, which we won't know for a while.

Mileage programs are slowly dying, it's been in the works for a long time.

Lucky - I get your point in terms of profit sharing; however, with respect to the union being voted down by the employees, the reason behind that was the younger staff members were against it as they felt a number of them might lose their jobs and one also taking into account the economy at that point wasn't doing particularly well so people generally were happy and felt blessed with what they possessed.

Let me re-phrase that: "and one also has to take into account". Sorry!

I agree with Lucky. Redemptions are never going to be based on the cost of the actual ticket. Right now saver redemptions allow airlines to fill seats that would otherwise go empty. This costs the airlines almost nothing.

The problem right now is that empty seats like are somewhat rare, so there is less saver availability.

It is unfortunate, but the people who play the points and miles game have a perverse incentive to wish for recessions so that award programs become more generous.

People who think that there are more people playing this game now than there were in 2010 and it is causing devaluations are wrong. It’s just the economy improving!

@Lucky
I guess we can agree to disagree...

@Tom
Definitely more people playing the game... when you look at pushy blogs like MMS that make it all sound like today you apply for a credit card (thru his link) and tomorrow you're in first class on Qantas A380 on your way to Sydney... who on earth would not sign up for that???

@DavidO

I do agree with you that if you that if you expect to pick a couple of flights and redeem your miles for business class travel (or first if you're picky) on those flights, then you are likely to be out of luck.

But with a little flexibility -- and more importantly, advance planning -- I haven't had trouble using my miles either.

I do get your point, but I've also been able to make this system work for me.