This week's AboutUS employee newsletter has an interesting article about the Chairman's Preferred desk. In it, they state that US Airways Preferred members provide 30 percent of total enplanements, but 43 percent of total revenue.

I'd hope they'd consider those numbers when they look at reducing the F-cabins... piss your elites off at your own risk!

This week's AboutUS employee newsletter has an interesting article about the Chairman's Preferred desk. In it, they state that US Airways Preferred members provide 30 percent of total enplanements, but 43 percent of total revenue.

I'd hope they'd consider those numbers when they look at reducing the F-cabins... piss your elites off at your own risk!

Percentage of revenue does not equal percentage of profit.

The 70% of total enplanements and who supply the majority of revenue (57%) and who do not require special telephone lines and happily use an aircraft as a means of getting from A to B without whining b1tching and demanding special treatment because they are travelling on their employers dollar rather than their own may appear to be an attractive option to some.

Playing with figures is like playing with fire the bright light is enchanting but sometimes distracts you so much that you do not realise that you are on fire.
Just sayin ;)

An airline with 70 percent of its original passengers making only 57 percent of its original revenue is an airline in serious trouble.

An airline with 70 percent of its original passengers making only 57 percent of its original revenue is an airline in serious trouble.

Which is why I made the tongue in cheek reference to the danger of using misleading figures. Think freight. No DM issues or special meal preferences needed ;)

Seriously the self importance of DM members is out of all proportion to their worth in the real commercial world. The majority travel on company money rather than their own. Should they change jobs they will likely change carrier and they will be replaced with a new US FF.

US has a business model that they are committed to no matter what you I or anyone else thinks until they are proven wrong. To be honest the statement that an American airline is in serious trouble is such old news that the paper is faded yellow.

Do I dislike the way that US has changed over the years? Heck yes I do. But I am realistic enough to know that waving a piece of plastic in faux indignation and suggesting that I am really much more important than I am and the airline should therefore listen to me is pure fantasy land.

If people really dislike US that much then fly with someone else. Oh wait a minute the corporate travel policy that pays for your ticket doesn't allow you to does it guys? ;)

And that is the acid test for the airline - how many bums does it put on seats - the rest? well its all just an amusing distraction that allows for a social welfare programme in customer service. :D

The key is that a relatively small pool of total individuals make up a substantial portion of enplanements (30%) -- these are supercustomers who come back over and over. While a large # of seats are filled by people who travel once a year or even less, each preferred member represents a ton of tickets. And the interesting and perhaps even surprising thing about these tickets is that they appear to be for greater than average revenue. These are the high yield, profitable tickets -- if they were just avg fares, the 30% of enplanements would represent 30% of passenger revenue. Instead it's oversized revenue. So it's a few customers buying tickets over and over at a yield premium.

Of course you ignore the corporate discounts which would tend to make those flyers less profitable per capita than a non DM member flying the same route and headline fare.

Of course you ignore the corporate discounts which would tend to make those flyers less profitable per capita than a non DM member flying the same route and headline fare.

So a "non DM member" (without a doubt a leisure traveler) is a more profitable flyer?!?!?? I'm sorry but the leisure traveler is not the high profit flyer. The more profitable flyer is a flyer who's traveling at the last minute, paying a higher fare than most others on the plane and who does that a lot of the time - that flyer is someone who would more apt to want to accumulate those miles, i.e. a DM member. Am I wrong?

The key is that a relatively small pool of total individuals make up a substantial portion of enplanements (30%) -- these are supercustomers who come back over and over. While a large # of seats are filled by people who travel once a year or even less, each preferred member represents a ton of tickets. And the interesting and perhaps even surprising thing about these tickets is that they appear to be for greater than average revenue. These are the high yield, profitable tickets -- if they were just avg fares, the 30% of enplanements would represent 30% of passenger revenue. Instead it's oversized revenue. So it's a few customers buying tickets over and over at a yield premium.
Spot on! Those relative few elites are hugely important to the bottom line. Assuming the average US elite enplanes 10 times more often than the average non-elite in a year (maybe conservative), it would only take 3 elite flyers to make up 30% of enplanements against 70 non-elite flyers. Those same 3 flyers provide 43% of revenue against the 70 non-elites. In this case each elite provides about 14 times the annual revenue of the average non-elite flyer. These numbers are just estimates, but it does show that pissing off and driving away one elite (like they did with me) is equivalent to driving away a ton of non-elites.

Of course you ignore the corporate discounts which would tend to make those flyers less profitable per capita than a non DM member flying the same route and headline fare.

Airlines curtailed many corporate discounts, especially on lower advance purchase fares, years ago.

A couple of things:

1) If you're in PHL, you're pretty much f'ed unless you can find consistent connections and like departing at oh-dark-thirty every Monday. I did this and got screwed when AA further cut PHL (thus raising fares). I miss the 6am to ORD. Really. (Side note: I could take the train ZFV-EWR-xxx, but that's a pain in the arse... and center city isn't close enough to drive to EWR.)

2) What do these numbers look like without Envoy and folks who pay for domestic F (yes, there are some). The ultra-high yield folks probably don't give a damn about status, etc - they get all the perks anyway because they pay for them. I'd wager the numbers work out to about the same yield if you exclude the UHY folks.

Airlines curtailed many corporate discounts, especially on lower advance purchase fares, years ago.

Yep.

The fares listed on the website are sometimes less than the "negotiated" rate the corporate agent comes up with for my itinerary. This "negotiated" rate has never (not even once) been less than that available to the public.

without whining b1tching and demanding special treatment because they are travelling on their employers dollar rather than their own may appear to be an attractive option to some.

Of course you ignore the corporate discounts which would tend to make those flyers less profitable per capita than a non DM member flying the same route and headline fare.

If people really dislike US that much then fly with someone else. Oh wait a minute the corporate travel policy that pays for your ticket doesn't allow you to does it guys?

Playing with figures is like playing with fire the bright light is enchanting but sometimes distracts you so much that you do not realise that you are on fire. Just sayin


yes, and making sweeping generalizations is like buying something without shopping around; convenient, but makes you look like an under-informed, over-confident (?over-opinionated) fool.

been chairman's for 4+ years -- a total of exactly two initeraries during that time have been paid for/reimbursed by anyone other than yours truly.

does that mean i meet YOUR qualifications to offer my thoughts here? am i thus entitled to whine or b1tch if the airline that I'M PAYING to render services to me fails to meet my expectations? am i an important customer to them? they seem to think so, as evidenced by their (pre-merger) invitation to me to sit on their consumer advisory board. but what do YOU think?

your "tongue-in-cheek" comments imply that substandard service should be acceptable to very-frequent-fliers because we're trapped by circumstances we can't control. ain't true...at least not here it's not. maybe you should rethink some of those sophomoric jabs of yours.

just sayin.

Thanks Gleff for getting us back on track.

An example from another industry, the bicycle industry: I did some work for a local bike shop a while ago.

Bottom Line: The shop had these "super customers" that provided about 1/3rd of the MONTHLY Revenue (and that was AFTER all the freebies, coupons, discounts etc that we gave them). So there was a clear ROI for this local bike shop to spend money (i.e. special promos, coupons, events) to make more money.

So all the chit chat about "spoiled bratty elites" I personally think is a little mis-placed.
I think these "elites" fall into two buckets:
1. Dividend Members who just want to recieve the benefits of the program as advertised.
2. Dividend Members who throw tantrums when they don't get the benefit of the program.

I am a good 50/50 split with my spend, partially my employer and partially my own.

I also like the "super customer" monkier . . .much better than "elite".

Which is why I made the tongue in cheek reference to the danger of using misleading figures. Think freight. No DM issues or special meal preferences needed ;)

Seriously the self importance of DM members is out of all proportion to their worth in the real commercial world. The majority travel on company money rather than their own. Should they change jobs they will likely change carrier and they will be replaced with a new US FF.

US has a business model that they are committed to no matter what you I or anyone else thinks until they are proven wrong. To be honest the statement that an American airline is in serious trouble is such old news that the paper is faded yellow.

Do I dislike the way that US has changed over the years? Heck yes I do. But I am realistic enough to know that waving a piece of plastic in faux indignation and suggesting that I am really much more important than I am and the airline should therefore listen to me is pure fantasy land.

If people really dislike US that much then fly with someone else. Oh wait a minute the corporate travel policy that pays for your ticket doesn't allow you to does it guys? ;)

And that is the acid test for the airline - how many bums does it put on seats - the rest? well its all just an amusing distraction that allows for a social welfare programme in customer service. :D


I think this just about sums up what I perceived was the attitude of US towards its customers. And why after a number if years, maybe 7 or 8, as a CP I switched to AA. And talk about no regrets. For all I know, AA feels the same towards frequent flyers as is expressed in the above post. But they dont show it to me. And I suspect they have a different attitude than US does as well. They very clearly show more attention in a positive way to frequent flyers. And BA seems to share that attitude. As an example last Saturday BA upgraded me from premium economy to business since I was an AA elite and they were bumping some people up. So I got picked. Social welfare? Well except for the 10K I have spent on BA tickets this year.

To say that putting a "bum" on a seat at a Go-Fare is the same as selling someone a few business class tickets at 5K-7K each seems to indicate a certain level of challenge with arithmatic, but maybe thats just my imagination. Bottom line is that Im not even a real big spender on travel compared to a lot of people. But airlines all take you from A to B. The difference is the service, and there are airlines like AA, BA and UA that are willing to compete for that spend with service because it is a lot more than some other people spend. I dont know of many businesses (that are service oriented in particular) where customers who spend 100 or 1000 times as much as the average customer gets treated exactly the same as the average customer. In may be discounts or rebates, or special shipment or whatever. But $20,000 customer is usually not treated the same as the $200 customer. Well, except on US.

I think this just about sums up what I perceived was the attitude of US towards its customers.
Amen, brother.
As for nomenclature- (Supercustomer, Elite, ect.)
I'd be dreaming if I thought I'd actually be treated like a "GUEST" of the airline (never mind actually being referred to as such), but realistically I always liked the "passenger" moniker. Gave me a little solidarity with all of the other "paying suckers" that US prefers to call "Customers". Call it a "Pet Peeve".
Kendall

Of course you ignore the corporate discounts which would tend to make those flyers less profitable per capita than a non DM member flying the same route and headline fare.


I'll challenge ANY casual (or Priceline) flyer for profitability against my $1376.83 PIT-LGA last minute fare.

You make good points but the sweeping generalization is not correct.

Yep.

The fares listed on the website are sometimes less than the "negotiated" rate the corporate agent comes up with for my itinerary. This "negotiated" rate has never (not even once) been less than that available to the public.

Absolutely right. Which is why my company WILL allow me to ticket on usairways.com if I can document it was the lower fare. Happens about 2x a month.

Now, why would I want to use usairways.com, you ask? :confused: :D Well, that's a whole new thread in itself :D :D

Of course you ignore the corporate discounts which would tend to make those flyers less profitable per capita than a non DM member flying the same route and headline fare.

a 7% discount good on what used to be "Q" fare and above isn't breaking anyone. Especially when the "Q" fare is 30 to 40 percent higher than the lowest fare anyway.

Bottom line is this: Guys and Gals like us pay the freight and without the loyalty of US Airways elite flyers through two bankruptcies there would not be a US Airways to merge with America West and HP would most likely be gone too.

So for me the open question is when are the boys from Way Out West (WOW) going to step up to the plate and reward that loyalty????? Perhaps when Kirby turns 40?? Who knows?

As someone who does not spend the bulk of my "own" money, but rather spends my companies money on flights, I have to say that I look to fly an airline that makes life EASY for me. And yes, I do get a 5% discount. BUT, my latest flight of over $900 PHL-YYZ-PHL was probably still twice what ma/pa traveler paid.

That said, I did have a direct impact on US. Since June I have taken about 65% of my flying to CO/NW. Even taking a few connections while US had a direct flight. Now to the reasons: (Making life EASY)
1-No meals. I have had it with smelling every ethnic food out there (including F/A's who use the ovens for their PERSONAL use) while given a snack basket.
2-Fare increases. I booked a PHL-PHX refundable last year, december, for around $500. I just looked, the NEW price is now $1436+. CO, here comes my $$$.
3-Most importantly. I booked what was to be a "fun trip" for my wife and I. She has put up with my 155+ nights away from home this year, so we booked a Thanksgiving flight to london--in March! She, being the avid 5x's a year flier was totally into the row 1 we scored on upgrade fares. Then came the booting out of Row1. Then the return. I do NOT need US to give my wife something to complain about.

Back to the OP. I have 150+ flights on US this year. I wouldve been at about 245+/-, had they NOT given me a reason to look elsewhere. So, they have definately lost revenue in me. (and i normally make trips 6-11 days before, getting hit with the HIGHEST fares).

Just my $.02.

If people really dislike US that much then fly with someone else. Oh wait a minute the corporate travel policy that pays for your ticket doesn't allow you to does it guys? ;):D

Yes, most of my travel is paid for by my employer. And my corporate travel department encourages booking away from US. But they don't mandate carriers, and I have made it very clear to the travel people that I will not accept any carrier other than US.

Why am I loyal to US? I'm CP and so I get -- or think I get -- service from US that I wouldn't get on any other carrier. Also, of course, I can't minimize the fact that my home airport is PHL, so US represents over 60% of the departures. Nonetheless, there are non-US options even in PHL.

What about my personal travel? Again, all on US and for the same reason. Incidentally, I use my miles to upgrade my many TA flights, not for domestic personal travel. When my wife and I fly on vacation, whether in the US or TA, we pay. And we make one TA trip per year, 1 or 2 Chicago trips, and 1 or 2 trips to Arizona and / or New Mexico.

So my point -- I represent a fair amount of revenue to US and *none* of it is revenue that is forced to go to US by my employer. And I can't be the only high mileage DM member who actually chooses to fly on US.

Percentage of revenue does not equal percentage of profit.

The 70% of total enplanements and who supply the majority of revenue (57%) and who do not require special telephone lines and happily use an aircraft as a means of getting from A to B without whining b1tching and demanding special treatment because they are travelling on their employers dollar rather than their own may appear to be an attractive option to some.


As long as Preferred-related additional revenues are higher than the amount of expenses US spends on Preferreds, US is coming out ahead. I'd guess that the amount US could spend on Preferreds and still come out ahead would be very high- and far higher than US currently spends.

Re: the post about FC and Envoy revenues needing to be considered differently than Preferred revenues: The people I know who fly paid FC and paid Envoy are often Preferreds, as it doesn't take more than a few trips in paid Envoy to make one Preferred. In addition, those people are generally not people who fly just once in a blue moon; I have a co-worker who flies paid Envoy about once a month and is CP, for example.

And I can't be the only high mileage DM member who actually chooses to fly on US.

You are not. United is actually my corporations 'preferred' carrier. I am free, however, to choose the airline I want to fly based on my discretion. For years, that choice has been US Airways.

The position set forth here that business travelers deserve no reward for loyalty because they have no power of choice is clearly naive. Any argument that business travellers fly on fares with profit margins below leisure travelers is so far outside reality that it's not even worth the bandwidth to argue.

My 'bum', as so quaintly put in another post, will be in one airplane seat or another for over 110,000 miles this year. It will likely be more next year. I don't whine about benefits, but it is a fact that I'm unhappy about several policy changes and decisions made by US over the past year or so.

It is also a fact that the decision I make about which airline my 'bum' will go next year will be felt more in a financial sense to the airline than the decision a twice-yearly flyer makes regarding where to plant his.

Karen_123987- do we have the same employer? On my corporate travel site, the "discounted" negotiated rates are also far higher than what I can usually find on Expedia or usairways.com.

My corporation's travel rules might be similar to those of many others: we are prompted to take the cheapest flight with a "preferred" carrier (three legacy carriers), but we can take a more expensive flight or on another carrier for scheduling reasons. Thus we most certainly can pftem select pretty much any airline we want to, and at least one of several.

I am retired and as such have no employer to pay for my US trips. Nonetheless I still choose US over others because I am loyal to an airline I have flown over 20 years. ( My date for FF is 1986). It has not always been easy, but I am still there and hope that that the people in Tempe realize that there are people like us that fly US frequently, (my third year as CP), and still are loyal. My wish is that they give us something to be loyal for for otherwise all those years of loyalty will go away. At this point, I am not sure anyone cares if anymore.

And I can't be the only high mileage DM member who actually chooses to fly on US.
You're not - I'll bank about 85k EQM this year, flying US by choice out of SFO and OAK. My employer has no "preferred airline" (we're not big enough to get any negotiated discounts) so I'm free to choose who I fly, with the caveat that I've got to be within a window around the lowest fare.

As long as Preferred-related additional revenues are higher than the amount of expenses US spends on Preferreds, US is coming out ahead. I'd guess that the amount US could spend on Preferreds and still come out ahead would be very high- and far higher than US currently spends.
... but in the interest of return to shareholders, they should only spend what they need to to maximize the margin. UA spends more, but their margins suck.

Re: the post about FC and Envoy revenues needing to be considered differently than Preferred revenues: The people I know who fly paid FC and paid Envoy are often Preferreds, as it doesn't take more than a few trips in paid Envoy to make one Preferred. In addition, those people are generally not people who fly just once in a blue moon; I have a co-worker who flies paid Envoy about once a month and is CP, for example.

Yep - it does happen, but it's not the bulk of preferreds. It doesn't make others bad, just a curious thing. I know lots of folks from, say, AstraZeneca, who didn't give a rats arse but made preferred flying direct to ARN this year in Envoy.

... but in the interest of return to shareholders, they should only spend what they need to to maximize the margin. UA spends more, but their margins suck.


Good points.

True that (1) UA seems to spend more on its elites than US does, judging by the FC quality on UA and other things, and (2) UA's profit margins are lower than US's, but it doesn't necessarily follow that the two are related or that (2) is caused by (1) on UA.

Does the OP have the link for the article mentioned. Can't find mention of it in Just Plane News and other areas are access restricted. It would be useful to evaluate the full context of the article.

Barry

This is an extremely interesing thread as it cuts to the heart of what folks legitimately believe US should provide eiltes in our customer partnership ( I won't get into categories like 'superflyer elite' etc. -- let it suffice to say that we are "fellow travelers" or "loyal pax" ).

I hope that newryman's comments are indeed tongue in cheek as this thread does not reflect the "US is bad/incompetent" argument found in other threads by disaffected FFers. It is significant ( though not a surprise ) that elites comprise some 43% of US revenues, and from this it follows that higher tier elites might expect some sort of recognition/consideration by US for their loyalty. This is distinct from "demanding" special treatment.

Though a majority of high tier elites are business flyers, leisure folks also choose to fly US. And the key word is that we all "choose" to fly US, though as some note, options exist, but perhaps not always easy ones. Whether one flys on a corporate discount, full fare, or simply out of pocket, we're all customers playing and paying by the rules. Our need is to get from point A to B, but our expectations sometimes vary.

At the moment, it's become difficult to discern precisely what the US LCC business model is all about and what we as elite customers should expect. As Gadgetfreak notes, GoFares seem a reckless way to reach for a few bucks to stick a bum in a seat when cabin reconfigurations shrink UG inventory for elites. And as a leisure traveller who initially starts out purchasing the cheapest seats to get the miles and status, let me note that we now most usually purchase upscale fares simply to improve our UG chances. Of course most business travellers are doing the same.

I agree with those who say that at the moment, there are still reasons to fly US. But proceeding from the OP's revenue data, one has to ask what in the hell is going through Tempe's mind as they've cast DMs adrift and their higher tier elites don't quite know what to expect. Boeing Boy mentions in a different thread that US is pursing a LCC strategy, but is in truth an airline caught between being a pure LCC and one that continues to behave like a legacy carrier. That's certainly not going to be a stable business model, and for elites, it's not a great position to be in.

I only hope that Tempe comprehends who their top tier elites are, the desire by most of them to play ball with US, and the necessity to clean this mess up and make a committment one way or the other to letting elites know precisely what we can expect and what US wants of us.

I simply want to get on with my flying without worrying about getting snarled or entangled in the merger web of an airline redefining itself. I think that most folks here feel the same.

Barry

Does the OP have the link for the article mentioned. Can't find mention of it in Just Plane News and other areas are access restricted. It would be useful to evaluate the full context of the article.

Barry

Try here (http://www.justplanenews.com/PDF/aboutUS_101906a.pdf) .

Good points.

True that (1) UA seems to spend more on its elites than US does, judging by the FC quality on UA and other things, and (2) UA's profit margins are lower than US's, but it doesn't necessarily follow that the two are related or that (2) is caused by (1) on UA.

You're right - there may or may not be causation there. My point is that by the estimations of some here, all of the high revenue flyers are rushing over to UA. Even if that's the case, high revenue isn't equalling high margins. Could they be dumping on the cheap for the rest of their seats? Maybe. But I think they're not getting a revenue premium for their efforts for the most part, making the extra costs a no-benefit expenditure.

2-Fare increases. I booked a PHL-PHX refundable last year, december, for around $500. I just looked, the NEW price is now $1436+. CO, here comes my $$$.
US has refundable nonstops between phl and phx for $651r/t all in. CO has them for $663r/t all in, and they're obviously not nonstop. Out of EWR, US and CO both sell refundable nonstop for $1085 r/t all in. This is all for depart 10/23 and return 10/24.

Ummm....I just read the link provided. It says that Preferreds account for 30% of enplanements and a 43% Revenue Premium . There is a big difference between 43% of revenue and a 43% Revenue Premium. This is simply saying that the average non-preferred member on a flight pays $100 each way and the average preferred member on a plane pays $143 each way. While yes, that is significant, it does not necessarily mean that 43% of revenue comes from elites. US has a lot of BIG revenue that comes from other things besides paying customers. I can guarantee you that there is no chance in hell that 43% of US's revenue is from Preferreds. They would die without us, no question, but we do not provide as much revenue as would appear according to this thread.

Let's say you have 100 people on a flight. 70 non-preferreds pay $100. 30 preferreds pay $143. That means that non-preferreds account for $7000 (70 passengers x $100) in revenue on that flight. Then the preferreds account for $4290 (30 passengers x $143). $4290 of the $11290 total revenue is equal to roughly 38% of the revenue. So, preferreds would be 30% of enplanements and 38% of the revenue.

So 38% of paying passenger revenue is from elites. But if paying passengers only account for 70% of revenue, for instance, then the revenue from preferreds would be somewhere around 26.5% of total revenue (38% of 70% of revenue).

I'd say that if Preferreds provide a 43% revenue premium, with a Preferred paying $143 for a flight for which a non-Preferred would pay $100, then the Preferred revenue premium would provide a disproportionately large share of US's profits- much higher than 38%.

Say US makes $1 profit on a non-Preferred's ticket that costs $100; thus the cost of transporting the non-Preferred passenger is $99. Perhaps for a Preferred the cost of transporting the passenger is $109, with $5 in drinks and $5 in extra gate agent, phone agent, etc. costs. The Preferred would provide thus $34 in profits while the non-Preferred would provide $1 in profits. I'd guess that the real gap is smaller than that but the point is the same.

Also, if we look at revenues and profits per individual customer (not per passenger/flight), one Preferred customer (say, Mary Smith), who flies a lot on relatively profitable tickets, would provide a much greater share of profits than an individual non-Preferred customer (say, Tom Jones). Losing Mary, with her frequent high-fare flights, would put a much, much, much larger dent in US's profits than losing Tom.

Yes, if the non-preferred contributes $1 to profit, then the preferred passenger contributes 43% more to profit than the non-preferred passenger. But the split between preferred and non-preferred is not 50-50 (its 30-70), so the impact on the bottom line is not 43%. The numbers don't lie, as I showed. Your numbers are what-if's and then an assumption. While yes, the preferred definitely contributes more to profit than the non-preferred, and to lose a preferred over a non-preferred is much more costly, that still does not mean that preferreds contribute more than 38% to the paying passenger revenue. The numbers show that it is 38% (well really 37.9%).

I'm just stating that the title of the thread is misleading, and no offense, but you can't really disprove my numbers. They are what they are. (I'm a finance major, too, if that helps)

This post is super sort odd.

Basically people have said:

1) Non-DM members make US more money than DM elite members. :confused:

2) People who pay F are automatically NOT DM elite members because they don't need the benifits (when I buy F I LOVE getting it from people who CAN'T understand me nor I them). :rolleyes:

Fairly certain both are incredibly wrong and based off of fallacious generalizations. :confused: :rolleyes: :( :p

Yes, if the non-preferred contributes $1 to profit, then the preferred passenger contributes 43% more to profit than the non-preferred passenger. But the split between preferred and non-preferred is not 50-50 (its 30-70), so the impact on the bottom line is not 43%. The numbers don't lie, as I showed. Your numbers are what-if's and then an assumption. While yes, the preferred definitely contributes more to profit than the non-preferred, and to lose a preferred over a non-preferred is much more costly, that still does not mean that preferreds contribute more than 38% to the paying passenger revenue. The numbers show that it is 38% (well really 37.9%).

The article stated that the 43% is a revenue premium- not the same as profit. In an industry with high fixed costs but low marginal costs, such as airlines, any additional revenue much beyond the company's fixed costs will be nearly pure profit, so my point is that a group that constitutes 30% of emplanements (with 37.9% of paying passenger revenue, as you point out), can have a much larger share of profits attributable to it than 37.9%.

I'm also in finance.

The article stated that the 43% is a revenue premium- not the same as profit. In an industry with high fixed costs but low marginal costs, such as airlines, any additional revenue much beyond the company's fixed costs will be nearly pure profit, so my point is that a group that constitutes 30% of emplanements (with 37.9% of paying passenger revenue, as you point out), can have a much larger share of profits attributable to it than 37.9%.

I'm also in finance.

Cheers! ^

All I have to say is...I travel on a company dime, but I make the reservations with the carrier I want to travel with. As a US1, I will say this...If they continue to cut our benefits (bottled water, upgrades (they don't do it as generously as they used to), cp phone line, etc.) I will change my booking preference. If you want to brag about accomadating the common passenger and not dealing with us "prima-donnas" then you better be prepared to cater to that crowd and not have the benefit of us returning to continue to book...this just makes you truely an "lcc". Don't ask for something you don't really want.
Your shrinking customer satisfaction is nothing to brag about. Ask any US employee, their not impressed with they AWA way.

(yes, I've been on the red eye and had a few cocktails, excuse the spelling)

Thanks for the link jmcfsus. I had to read through the article a few times to find the reference, but that's just a consequence of wearing bifocals.

I won't get into a numbers argument here as it's the words revenue and revenue premium which are most salient to the discussion. The lesson learned is that elites are not necessarily the biggest fish in the pond, though we do indeed make a pretty good catch for the airline -- others can carp about this point ( sorry not trying to inflame here, I just couldn't resist the play on words ;) ).

It remains a legitimate argument to suggest that a different relationship exists between US & elites versus that of infrequent flyers and non-elites. But it's also true that most airlines derive their bottom line from a revenue mixture which includes those folks who want nothing other than a cheap seat from A to B once or twice a year to those road warriors who gut it out some 100 to 150 nights a year

In a perfect airline universe, fares would be high and revenue and profit sustained across the board. With increased numbers of folks flying today, legacy carriers pursued this dream to their detriment while LCCs simply figured out a way to make money sans frills. The business traveler and other categories of elites are the sought after prize of the legacies, but this categoroy of traveler is finite and fickle ( but that's also a function of choice ).

A good question to ask is exactly what is the US revenue breakdown by category of pax and how does Tempe interpret these numbers and plug them into their new business model? It does not follow that an airline must cater to elites simply because elites pay a premium. But it is important to decide how many and what sort of elites US feels it needs in the revenue mix to meet its goals. And this will help to determine the sort of benefits/perks that US does or does not offer in the future.

Of course we here can venture nothing more than a guess or an opinion. But I do believe that this is the dynamic that we elites are caught up in and we should all watch very closely how things develop as we all have individual goals and needs and some may need to look to other carriers while others may find a niche with US.

Barry

Which is why I made the tongue in cheek reference to the danger of using misleading figures. Think freight. No DM issues or special meal preferences needed ;)

Seriously the self importance of DM members is out of all proportion to their worth in the real commercial world. The majority travel on company money rather than their own. Should they change jobs they will likely change carrier and they will be replaced with a new US FF.


And that is the acid test for the airline - how many bums does it put on seats - the rest? well its all just an amusing distraction that allows for a social welfare programme in customer service. :D
I’m going to be nice and just suggest that you read the financial reports before posting…….

Cargo in the first quarter represented just $74,000,000 of $5,840,000,000 Million in revenue. That is 1.2% of the US’s total revenue. Selling DM miles made more for the airline than cargo. I will assume that you are not interested in the facts so I will not take the time to post the link.

Consider these facts as well…..

Total revenue for the half of the year was $5,840,000,000. Total expenses for the first half was $5,373,000,000. That is an operating profit or net margin of $467,000,000 or 8%.

Now let’s do the math. 30% of each enplanement is an elite member. So all things being equal, and we know they are not because per US elites represent a 43% revenue premium, elites represent minimum revenue of $1,754,000,000. If we use US’s numbers the elites represent an additional premium of $754,220,000 for the same mile flown. Humm lets see now total profit in the first half was $467,000,000 and their ADDITIONAL revenue equaled $754,222,000. I think it is safe to say that the elites PREMIUM revenue represents ALL of the profit and then some.

Now lets make an assumption, and a conservative one at that. Let’s say across the board it takes 30 flights to make elite status. Most CP’s are going to be over 100. By my math that means it takes at least 30 ma and pa’s to equal one elite. Now which do you think is cheaper to attract to your airline, ma and pa or 30 ma and pa’s.

Lose the elites and this airline goes out of business tomorrow.

Oh and one more fact from the quarterly report, US had a 1% decrease in total load factors in the first half. Capacity was cut as well. An interesting number is the 15% decline in emplanements on the old US network in the first six months. That my friends is a huge number. My guess these are folks just like me who no longer fly them because of all the cuts.

I’m going to be nice and just suggest that you read the financial reports before posting…….

Cargo in the first quarter represented just 37 Million of 2,648 Million in revenue. That is 1.4% of the US’s total revenue. I will assume that you are not interested in the facts so I will not take the time to post the link.

Consider these facts as well…..

Total revenue for the first quarter was $2,648,000,000. Total expenses for the first quarter was $2,523,000,000. That is a operating profit or net margin of $125,000,000 or 4.7%.

Now let’s do the math. 30% of each enplanement is an elite member. So all things being equal, and we know they are not because per US elites represent a 43% revenue premium, elites represent minimum revenue of $794,000,000. If we use US’s numbers the elites represent an additional premium of $341,000,000 for the same mile flown. Humm lets see now total profit in the first quarter was $125,000,000 and their ADDITIONAL revenue equaled $341,000,000. I think it is safe to say that the elites of the airline contributed ALL of the profit and then some.

Now lets make an assumption, and a conservative one at that. Let’s say across the board it takes 30 flights to make elite status. Most CP’s are going to be over 100. By my math that means it takes at least 30 ma and pa’s to equal one elite. Now which do you think is cheaper to attract to your airline, ma and pa or 30 ma and pa’s.

Lose the elites and this airline goes out of business tomorrow.

Oh and one more fact from the quarterly report, US had a 2% decrease in total load factors in the first quarter. My guess these are folks just like me who no longer fly them because of all the cuts.



Baaaaaaaaaaaa......... ;)

Im just thinking of last year, late fall. I was trying to decide whether to try requalifying on US after years as a CP, or on AA after one or two years as a mid tier. Between my wife and I, mostly me, I bought about $20,000 dollars of tickets on AA for the month of December. Unusual buy for me, but still, it is a lot of Blo Fares to Orlando.

Oh and one more fact from the quarterly report, US had a 1% decrease in total load factors in the first half. My guess these are folks just like me who no longer fly them because of all the cuts.
No they didn't. US was up 4.6 in 2Q year over year, and up 3.4 in 1H year over year. HP was flat for the quarter and up .4 for the half.

Not that that means a whole lot, because capacity was down. It would be bad if LF fell while capacity was cut.

I certainly agree with your statements regarding the importance of elites though. I think the biggest factor is one you didn't mention - we tend to be loyal to the program. Ma and Pa (literally, in the case of my parents) tend to fly whoever is cheapest on expedia/travelocity/whatever. It's good to see someone at US realizes this, even if it's just the CP desk and whoever writes the newsletter.

No they didn't. US was up 4.6 in 2Q year over year, and up 3.4 in 1H year over year. HP was flat for the quarter and up .4 for the half.


Your not looking at the correct numbers for the first six months, which are the numbers I was referring to above


TOTAL - Mainline & Express
Revenue passenger miles
(in millions) 19,066 7,261 35,453 13,631
Available seat miles
(in millions) 23,405 8,980 45,293 17,263
Passenger load factor
(percent) 81.5 80.9 78.3 79.0 Passenger revenue per
ASM (cents) 12.67 8.75 11.90 8.50
Total revenue per
ASM (cents) 13.63 9.41 12.89 9.15
Operating cost per
ASM (cents) 12.17 9.27 11.86 8.82

Had it not been for the large increase in express these numbers would have been worse.

The above will not format so here is the link.....

http://usairways.com/awa/content/aboutus/pressroom/pressreleases.aspx

Does the OP have the link for the article mentioned. Can't find mention of it in Just Plane News and other areas are access restricted. It would be useful to evaluate the full context of the article.

Barry

Well, I was going to say that 1 - l4pi beat me to posting this tidbit from the article, and 2 - I posted the entire article in another thread before I got to this one, but then jimcfsus posted this:

Try here (http://www.justplanenews.com/PDF/aboutUS_101906a.pdf) .

So all I'll end up saying is "it's already been covered".....

Jim

You are not. United is actually my corporations 'preferred' carrier. I am free, however, to choose the airline I want to fly based on my discretion. For years, that choice has been US Airways.

I am in the same boat. While not a "preferred" airline of my company, we do have a flat discount negoatiated with UA.
But, 99% of the time, my bum is planted on US metal.
While the relationship has been kind of rocky, they still fit my schedule and where I need to go.
When it's my personal money for the tickets, I still fly US almost exclusively, unless there is a dramatic price difference or I would have some ridiculously remote connection to fly them.