US Airways Dividend Miles (Pre-FlightFund Merger) - Could this be related to the upcoming alliance?

This may be mental midget thinking, but I keep seeking motivation for this action. I have read some of the bright, insightful comments regarding what this could NOT be motivated by, and I keep thinking why I would take such a move. I can really only think of a couple - balance sheet impact, cash flow impact, or partner/contractual requirements. Of all the folks in an organization who typically qualify as the sales prevention department, it characteristically is NOT marketing.

If, as stated by those of you with much more insight than I, there really is no lift to be had on balance sheet or cash flow, then I'm down to partner/contractual requirements.

Could all this be a result of UA having a duck fit over the richness of our FF program? I know next to nothing about UA's program, but I have to wonder if there's a connection...

If they aren't going to see positive balance sheet or cash flow results from this, it must be groundwork for something we don't yet know about... if not the UA/US alliance and more closely matching FF benefits, then what??

The two carriers are in discussion about linking their loyalty programs. This wuld have to have been mentioned. My theory continues to be that the other carriers (UA, in particular) pulled back after US stepped on a land mine.

Well, US and UA could be seeking to align their FF programs with those of the other Star Alliance partners, which are generally less generous to lower-yield customers...

..but even the Star airlines with relatively bad FF program benefits arent dumb enough to publicly insult their members.

Maybe this is part of some crazy initiation rite for new *A partners? Imagine the CEOs all sitting around a table saying 'what should we make US do to join the club?'... and the guy from (upcoming member) Spanair says 'you made us do horrible things with the pets in the cargo hold - why not make Siegel and Baldass humiliate all of their loyal fliers?'

AGREED!

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by hscottm:
..but even the Star airlines with relatively bad FF program benefits arent dumb enough to publicly insult their members.</font>

Well - there's execution and there's execution. http://www.flyertalk.com/forum/smile.gif Maybe the collective idea wasn't to insult us - notwithstanding the obvious fact that US managed to do just that. Maybe the idea was just to shift the FF program to one more consistent w/ the new alliance partners?

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by svpii:
This may be mental midget thinking</font>

Nope. That's reserved for the boys and girls in Crystal City.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">... but I keep seeking motivation for this action. I have read some of the bright, insightful comments regarding what this could NOT be motivated by, and I keep thinking why I would take such a move. I can really only think of a couple - balance sheet impact, cash flow impact, or partner/contractual requirements...</font>

They do get something in the way of cash flow from "use it or lose it" They get to immediately take the value of confiscated tickets as income instead of waiting 13 months and hoping the customer forgets.

Baldanza claimed 10s of millions of dollars -- if it's all coming from that and over one year (both questionable assumptions) then they would only need to confiscate about 100 tickets a day to meet the goal.

In the scheme of things that kind of money doesn't matter. So one is still left scratching one's head wondering what the &$%@ are they thinking?!?

Why the h*ll didn't they do something smart like adopt AWA's rational pricing model? It seems to be working in spite of the doom and gloom predictions and the best efforts of the majors to kill them...

[This message has been edited by TomBascom (edited 09-02-2002).]

So let's be really generous and assume they recover the purchase value of 200 tickets a day at an average price of $300.. I think that's right at $20MM/yr.. With annualized operating revenues coming in right at $7B, go figure.

But hard money is hard money. So even if they have a case for the "Pricing" changes as they relate to the "use it or lose it" discount ticket policy, that still doesn't explain where their head is as it relates to the "no status miles for discount tickets" policy.

Tell me what I'm missing.?? What are the vast numbers of elites costing them today? Let's count..

1. Lost Revenue Opportunity - If we weren't upgrading they could sell that seat.

Upgrades are only offered when the seat is empty. The number of seats to set aside for upgrades is set by the airline, based on load factors one would presume. Therefore, the lost revenue opportunity of this seat is negligible. Therefore, what do they gain by shortening the list of folks vying for the upgraded seat?


2. Increased Service Fees - If we weren't in that FC seat, they would have less class of service cost.

If they fill every FC seat every time due to the vast numbers of us FF'ers upgrading, they DO have to eat the service fees associated w/ the class of service. Anybody wanna take a swag at the total exposure for them on that one?

3. Increased Liability - elites earn a bonus on earned dividend miles, therefore increasing the number of free award tickets they have to provide.

Because all of us elites receive a bonus on earned miles, the total mileage liability for free tickets is increased. Reduce the number of elites, reduce the total outstanding mileage liability. Again, award seat availability on a given flight is set by the airline, again presumably based on load factors, and again presumably at no to low marginal cost..

At best, the cumulative total of ALL those hard and soft dollar revenue gains and expense saves is chump change. Does anyone see any real $$ anywhere along these lines?

Where's the money? Or where's the pressure?

I keep getting back to there can only be two reasons - money or pressure. NO ONE intentionally runs off their most loyal customer base during times of BK to show their love for a small and arguably not mistreated subset (the hi-revs).

So if we don't see obvious money issues and we don't see obvious pressure issues, then can we assume that in early sale discussions with airline X or X(s), someone doesn't want to assume some of this liability and U is doing their best to mitigate it via an in-your-face policy change? Could they be intentionally running us off??

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by svpii:
So let's be really generous and assume they recover the purchase value of 200 tickets a day at an average price of $300.. I think that's right at $20MM/yr.. With annualized operating revenues coming in right at $7B, go figure.</font>

And if just one of those results in some consumer advocacy group getting on their case because of the mistreatment of some poor kid with cancer visiting Mickey...

It makes no sense.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">But hard money is hard money. So even if they have a case for the "Pricing" changes as they relate to the "use it or lose it" discount ticket policy, that still doesn't explain where their head is as it relates to the "no status miles for discount tickets" policy.

Tell me what I'm missing.?? What are the vast numbers of elites costing them today? Let's count..

1. Lost Revenue Opportunity - If we weren't upgrading they could sell that seat.

Upgrades are only offered when the seat is empty. The number of seats to set aside for upgrades is set by the airline, based on load factors one would presume. Therefore, the lost revenue opportunity of this seat is negligible. Therefore, what do they gain by shortening the list of folks vying for the upgraded seat?
</font>

Nothing.

They seem to have an idea though that there is a vast body of deserving high fare passengers that aren't getting those seats.

To me this means that inventory control is broken. Or that the pax in question aren't really paying full fare. They might be buying "B" fares which are so expensive that you might assume that they're "full" but most of which are actually "discount" and then not getting upgraded. I could see that as being possible. The first few times it happened to me I was mystified, pay $650 for a ticket and be waitlisted? Huh? But I quickly figured it out.

The assumption may be that they can push these people from B to Y?

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">2. Increased Service Fees - If we weren't in that FC seat, they would have less class of service cost.

If they fill every FC seat every time due to the vast numbers of us FF'ers upgrading, they DO have to eat the service fees associated w/ the class of service. Anybody wanna take a swag at the total exposure for them on that one? </font>

a) The incremental cost of the food? Some small % of F seats are on flights with full meal service. It probably costs them an extra $20 for those meals. Impact? Unmeasurably small.

b) The flight attendant in F? Nope, the number of FAs is mandated by the FAA -- they'd have the same number if the took the F cabin out. Maybe more if the number of seats crosses a threshold (as I believe it would with an A320...)

c) The number of seats? Maybe... There are somewhat fewer seats on the plan because of the F cabin. But so long as the plane has any empty coach seats that hasn't cost them a penny. With load factors in the 75% range F seats are't hurting loads. So this one loses too.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">3. Increased Liability - elites earn a bonus on earned dividend miles, therefore increasing the number of free award tickets they have to provide.

Because all of us elites receive a bonus on earned miles, the total mileage liability for free tickets is increased. Reduce the number of elites, reduce the total outstanding mileage liability. Again, award seat availability on a given flight is set by the airline, again presumably based on load factors, and again presumably at no to low marginal cost..
</font>

Maybe. But they've got to get people into "burn" mode to reduce the outstanding balances -- or they need to change the rules to make them go away. They're making it really hard to burn right now so I don't see this as being it. Besides I don't think the so called liability really bothers them.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">At best, the cumulative total of ALL those hard and soft dollar revenue gains and expense saves is chump change. Does anyone see any real $$ anywhere along these lines?

Where's the money? Or where's the pressure?
</font>

I think that they really think that they can force "business" travelers back to paying full fares. They're insane of course but that's what they think they're doing.

Well, this will be interesting tomorrow. Because if by then no other airline jumps on board w/ this brilliant idea, I predict that corporate travel managers will defect from US in droves - creating exactly the adverse effect of what you describe as their underlying objective in all this.

I'm going to get comped status asap on SOMEONE else - and start making mileage runs. And I'm gonna give free flights to everyone in my family to start burning the miles I have. I have zero confidence in US.. I was pulling for them before this. But since I'm one of the unclean low-revs they have no interest in, I just abandoned my loyalty. Clearly that makes no difference to them in any event.

The best explanation I've been able to come up with for US's moves is that they are trying to force business travelers into "upgrading" to refundable tickets. That's the only possibly sensible result from eliminating the standby option and not offering elite credit.

I THINK that's that they're trying to do. And it will probably work for some folks. But they could've gotten most of that possible effect with the standby change itself without alienating its most loyal flyers. Since other airlines on matching on the stanby change, they would've gotten away with it.

But other things suggest to me that US's days are numbered.

From the number of companies which are allegedly parting ways with US Air with regard to their travel, I do believe that my earlier characterization of the combined US Air moves is truly tantamount to a murder-suicide.

In about 5 hours, I will be getting up to do a one-day SAN turn around mileage run. I will continue to continue to fly US (and probably do a couple more mileage runs) through the end of October.

Starting November 1st (actually my first flight will be 11/2), I will be implementing a new personal travel policy. In the spirit of US Airways "Use'em or Lose'em fares", I am implementing my "All or None" policy. If you don't appreciate all of my business, you will have none of it.

I don't think this is caused by the tie up with United or Star. CO and NW are in an alliance and they have different redemptions for some business class tickets. To Europe CO is 100k and NW is 80k.
As far as earning miles the Star carriers all have their own systems. Some even vary within the system depending on what country you live in. Lufthansa isn't stingy on status miles. They give status miles for all flights on all Star carriers. They even give a 1000 mile minimum on most flights. However Lufthansa requires more miles to reach silver and a lot more to reach Gold. They also have a way to reward high yield flyers, they give you double status miles for paid business and triple for paid first! Then there are other Star carriers that don't give any miles on cheap fares and only give 50% or 70% miles on restricted eco fares.
All correct information about Lufthansa's system is from what I learned from Rudi, all mistakes are my own. http://www.flyertalk.com/forum/biggrin.gif