MilesBuzz! - Impact of frequent flyer programs on airlines

Hi
I know that this is actually the wrong place to post for this question but i couldn't figure out any better place...

I'm writting a paper about the impact of frequent flyer programs on airlines regarding the economical, commercial and marketing aspects. I'm looking for any good articles/papers on the net or any practical books.

Can anybody gimme some tips?
Thank you
Flavio

You've come to the right place - approaching FT members. I'm relatively new to this site and haven't contributed much. But I have learned SOOO MUCH just reading everyone's contributions - and everyone's so helpful and nice.

Good luck on your paper. :)

Welcome to FT, Flavio!

As one who has been in a FF program since they started, I can say for certain that after 24 years if they were not a net economic benefit to the airlines they would have closed them down without even thinking about it.

They have fine tuned the program, as far as maximizing ways to make money by "selling" miles and at the same time diminishing their value by upping the miles for certain awards and minimizing availability.

Now if they could only run the actual airline as adroitly and profitably as their FF programs.....

Hi
I know that this is actually the wrong place to post for this question but i couldn't figure out any better place...

I'm writting a paper about the impact of frequent flyer programs on airlines regarding the economical, commercial and marketing aspects. I'm looking for any good articles/papers on the net or any practical books.

Can anybody gimme some tips?
Thank you
Flavio

There should be substantial literature in the marketing world re: frequent flyer programs. I believe there is at least one case on AAdvantage written by HBS, I know for a fact there is one on Hilton HHonors, and I seem to recall reading articles from journals about the impact of customer loyalty, especially focusing on ff programs.

If you don't have more info by tomorrow I will try to dig some stuff up for you.

As one who has been in a FF program since they started, I can say for certain that after 24 years if they were not a net economic benefit to the airlines they would have closed them down without even thinking about it.

They have fine tuned the program, as far as maximizing ways to make money by "selling" miles and at the same time diminishing their value by upping the miles for certain awards and minimizing availability.I don't agree that this is necessarily the case. The structure of some FF schemes has conditioned those airlines' markets into behaviour that is financially ruinous for the airlines.

For example, if you can depend on unlimited free upgrades into premium classes, why would you spend the money buying a premium class ticket? Is it any surprise that some airlines fill their premium cabins all the time, but sell very few premium class fares?

Of course, the airlines concerned may now find that they can't easily backtrack on that part of their FF scheme for fear of losing even more business to competitors who are still giving away their premium class product for free. But I wouldn't say that this could properly be described as a FF scheme operating as a net economic benefit to the airline, nor of there being fine-tuning to the airline's advantage.

I don't agree that this is necessarily the case. The structure of some FF schemes has conditioned those airlines' markets into behaviour that is financially ruinous for the airlines.

For example, if you can depend on unlimited free upgrades into premium classes, why would you spend the money buying a premium class ticket? Is it any surprise that some airlines fill their premium cabins all the time, but sell very few premium class fares?

Of course, the airlines concerned may now find that they can't easily backtrack on that part of their FF scheme for fear of losing even more business to competitors who are still giving away their premium class product for free. But I wouldn't say that this could properly be described as a FF scheme operating as a net economic benefit to the airline, nor of there being fine-tuning to the airline's advantage.

Well, there you have it. Five posts into this thread and the inevitable "FF programs are the cause of the airline industry's financial troubles" theory appears. With all due respect to Globaliser, the notion that FF programs have anything to do with the industry's financial issues is ridiculous. The airlines have never been shy about dropping/cutting benefits and doing almost anything, including removing olives from drinks, in order to reduce their costs. As noted by inlanikai, if FF programs were net losers, you can bet that at least one airline in the past 24 years would have eliminated their program entirely.

FF programs are profitable for airlines. They sell numerous miles to partners, many of which are never redeemed. The airlines control capacity on award travel so they are not giving seats away for free. In most cases, the award seats are seats which would never be filled by paying passengers anyway. And the cost of flying one incremental passenger is about $25, far less than what the airline receives from mileage sales. Further, the programs maintain customer loyalty in an era where price, and almost nothing else, is king. Air Canada sold its FF program (AeroPlan) to a firm outside the airline business, so there is at least one business who felt a FF program is a profitable endeavor. Searching Flyertalk should provide other threads that discuss this topic.

Flavio:
Welcome. You might start by clicking around here:
http://www.insideflyer.com/aboutus/press_room/facts_and_stats/index.php

This is an index of the many facts and stats of the industry that everyone uses.

As well i would highly recommend that you consider subscribing to insideflyer.com and click through many of the back issues of various topics. It's sure to give you plenty to think and write about and you also might click on over to:
http://www.colloquy.com which i also contribute to. It's really designed for the loyalty business itself. There are several white papers you can read about the industry, but keep in mind that some of these have client bias in them and just do some additional homework to measure and compare what you deduce.

Hope this helps.

P.S. Updating MileKing's comment. Actually Aeroplan has not been sold to an outside firm.... yet. A prior attempt at investing in the program fell apart and though it's future is likely to be that as a public spinoff, the day has not actually come yet.

(Deleted - On second thoughts, it's better that I don't enter into arguments on this issue in a forum where many members have a vested interest in believing that all FF schemes are a positive boon to all the airlines running them, as opposed to something that some of them don't dare to be without.)

FF programs are the best profit centers going for the airlines. Imagine if the government allowed you to build a mint and print your own currency, sell your currency for actual profits (dollars), and then decide on your own whether or not to honor your own currency. I'll take that gig!!

The key is marketing: convince the pool of buyers that your currency will be honored slightly more often or for slightly more value than the "mint" down the street. That's what keeps your currency attractive to individuals and its value propped up among institutional traders (for example, the major banks that buy and sell billions of miles per year).

The upside to all of this (for us) is that most of the airline profit in the mileage game is thanks to people who buy miles all the time (whether by flying or through partners) but don't really pay attention to how the game works. They let their currency expire or simply never really use it well. That means there's room for people (like us) who have an interest in these things to maximize our return on investment in this artificial "currency market".

To sum it up: both the airlines and the savvy traveler are subsidized by the tens of millions of people who traffic in FF miles but never use them wisely or at all.

P.S. Updating MileKing's comment. Actually Aeroplan has not been sold to an outside firm.... yet. A prior attempt at investing in the program fell apart and though it's future is likely to be that as a public spinoff, the day has not actually come yet.

Randy, thanks for the correction. I did not realize that the Aeroplan deal never went through.

Way back, some restaurant decided to give free bread to customers who ordered a meal. (Maybe it didn't really happen that way, but it could have.) Since its prices were about the same as everyone else's, people went there for that reason. The profits on the added traffic more than offset the small cost of the bread.

Other restaurant owners watched this happen. Pretty soon they all gave free bread. It became a competitive non-issue, though some restaurants got good reviews in InsideEater for their fine bread. It was an added expense for all restaurants. Prices were raised to cover the cost of the "free" bread, so restaurants didn't lose. The only losers were those who didn't eat bread, but had to pay for it anyhow since the few restaurants that didn't offer it tended to have inconvenient hours, a limited menu, or some other drawback.

Same thing here.

Indeed, I think the real thing to look at is all the selling of miles and promotional tie-ins as a profit center. Maybe that wasn't the original intent - and there are real concerns about the widening imbalance between unredeemed miles and available seats - but that's the kind of thing we have today, at least in the U.S.

For a good argument on how powerful the idea is/was, look at the Asian and some European carriers that don't do FF programs particularly well, but find they still have to offer something. Korean, Japan Airlines and Malaysia Airlines have always seemed like laggards there to me, especially loath to award miles across alliances on their domestic routes. You also don't often get double miles for elites except in the U.S. All the promotional tie-ins, non-flight miles and elite perks are definitely cases where America has led the world and is still far in front.

...For a good argument on how powerful the idea is/was, look at the Asian and some European carriers that don't do FF programs particularly well, but find they still have to offer something...
Forgot to mention that some ethnic restaurants continued to do well despite not offering bread, but they had to have something else going for them to make up for it.

For example, if you can depend on unlimited free upgrades into premium classes, why would you spend the money buying a premium class ticket? Is it any surprise that some airlines fill their premium cabins all the time, but sell very few premium class fares?


I am curious - have you ever been elite on a FF program that provided unlimited free upgrades? If you have been elite on one of these you will also have known that fare class is an important ranking factor and only the truly stupid would "depend" on free upgrades.

I can only think of USA-based, primarily domestic flights that offer unlimited free upgrades - and the pricing dynamics of Economy fares plays a much larger role in this than "conditioning the markets to ruinous behavior for the airlines".

If you actually believed your thesis, explain why all N.A airlines don't have unlimited free domestic upgrades - after all the market would reject any airline that does not offer this - Econ 101?

If you actually believed your thesis, explain why all N.A airlines don't have unlimited free domestic upgrades - after all the market would reject any airline that does not offer this - Econ 101?No, I'm sorry but I'm really not going to get into this. There has not been a single post in this thread addressing the issue of the effect which FF schemes and benefits have on purchasing decisions and behaviour. I may be right or I may be wrong, but this is not a forum in which any sensible debate is going to take place.

No, I'm sorry but I'm really not going to get into this. There has not been a single post in this thread addressing the issue of the effect which FF schemes and benefits have on purchasing decisions and behaviour. I may be right or I may be wrong, but this is not a forum in which any sensible debate is going to take place.

Globaliser, I am sorry that you believe a debate here is not possible. Maybe you 're right - after all this website is focused on gaining maximum benefit from miles & points.

But, I would like to point out that the large scale use of FF benefits and programs is primarily in the US. The ONLY place where unlimited free upgrades is available = US domestic premium class travel (and even then - not all airlines).

We have to separate domestic and intl operations - eg CO offers free unlimited upgrades in domestic, but try upgrading on a CO intl flight - I submit that its harder/costlier than upgrading on BA. The US domestic situation is peculiar due to pricing and stage lengths that are very different than say - Europe short-haul.

Intl - I don't believe FF programs have led to the lack of competitiveness of US premium classes. Its got a lot to do with corporate contracts.

US airlines have certainly relied on FF programs to gain loyalty/revenue but we must remember - US airlines primarily compete with each other domestically AND internationally. I really don't think AA/UA try to compete with BA/LH/AF/CX etc for premium class pax "in the general market" but rather fight each other to get corporate contracts.

Hi
I know that this is actually the wrong place to post for this question but i couldn't figure out any better place...

I'm writting a paper about the impact of frequent flyer programs on airlines regarding the economical, commercial and marketing aspects. I'm looking for any good articles/papers on the net or any practical books.

Can anybody gimme some tips?
Thank you
Flavio

sounds like you are writing the same book I am.

But right now, I am a recruiter now who works exclusively for the creative and marketing businesses.

I find that lately, companies who slashed their marketing budgets a year or two ago, are finally starting to realize they need to hire back marketers. They figured out that these people will generate new biz and this will bring in money desperately needed to keep investors and banks happy. this in turn, gives the percetion off that the airline is doing fine and customers will therefore get on their planes.

Though the money is tight, marketing is actually the area is where it is going stronger than not. Hence, good marketing, promotions, partnership deals, reaching out to new biz development, sales, and graphic and web design are the order of the day.

Take a look, for example, at United's rather agressive ad and marketing campaigns, and how nice their emailand web stuff looks from an art standpoint. (Beware, of course, that most of their partnerships take way too long to actually POST some of your miles! I hate the UAL Mall and other partnership campaigns that airline puts forth, because they do NOT post credits in the standard promoissed 6-8 weeks out, but instead they often make you wait several months. But at least it looks nice and so do all the ads and e-blasts that come my way.

Their (UAL's) web booking engine sucks, but the way it is designed and how well it was promoted are actually pretty nicely done from a creative look and feel standpoint--at least, in terms of comparing them to the rest of the industry. AA's is nice too. In fact, all the airlines and hotels have put forth great graphics and great web and print campaigns in the past couple of years. This area, due to all the new partnerships and hype they put out about getting miles, has brought them tons of money in return. You can bank on it!

Therefore, if I am someone in the creative side of marketing, I would almost want to work for the airlines I this capacity. That part of the biz is flying high!

I mean, take a look yourself:
These days you can get so many cool deals on miles and how to earn them and how to try to use them and where you can earn and burn them... This is because all the airlines, realizing they can survive by letting its marketing departments try to get more biz and more customers, have remained alive... It has remained alive because of this marketing. Thus, FF programs and the directions they continue to head, are keeping them going.

that's just part of my 2 cents...

:)MM

Another thing to consider is that when FFP's were invented, they were probably considered to be a niche marketing promotion directly at business travelers. That is, they were targeted at a luxury demographic and intended for business development, not to drive their own profits within the program itself. Air travel in 1980 was still primarily a luxury. I remember saving money for two years to afford 1 trip to Europe. We were (and still are) middle class, and the idea of getting on a large jet to fly to Rome was considered a once-in-a-lifetime thing in the 70's or early 80's. We didn't enroll in the FFP - didn't even know what it was!

Then the airline industry changed, and now anybody of middle-class means can take a long weekend in Europe if they choose - spending about 1/5th in terms of real dollars to get there. Air travel 25 years ago was luxury: now it's mass-transit, much like riding a train. At some point the airlines figured out that the FFP's had to go mass-market as well, and they began to evolve into the currency that they are today. Now, instead of being a little arm of the marketing department, the FFP's are profit centers in and of themselves. Not that it would ever happen, but if they spun it off, I'd be a lot more apt to buy stock in AAdvantage than I would in AMR!

Another thing to consider is that when FFP's were invented, they were probably considered to be a niche marketing promotion directly at business travelers. That is, they were targeted at a luxury demographic and intended for business development, not to drive their own profits within the program itself. Air travel in 1980 was still primarily a luxury. I remember saving money for two years to afford 1 trip to Europe. We were (and still are) middle class, and the idea of getting on a large jet to fly to Rome was considered a once-in-a-lifetime thing in the 70's or early 80's. We didn't enroll in the FFP - didn't even know what it was!

Then the airline industry changed, and now anybody of middle-class means can take a long weekend in Europe if they choose - spending about 1/5th in terms of real dollars to get there. Air travel 25 years ago was luxury: now it's mass-transit, much like riding a train. At some point the airlines figured out that the FFP's had to go mass-market as well, and they began to evolve into the currency that they are today. Now, instead of being a little arm of the marketing department, the FFP's are profit centers in and of themselves. Not that it would ever happen, but if they spun it off, I'd be a lot more apt to buy stock in AAdvantage than I would in AMR!


I would have to agree with everything you say here. And if stock were avail, maybe--just maybe--these FFPs would be better managed, regulated and more fair!

Hey the other news is, though I wont be doing any half marathons, I DID get tix to the June 11 cubs red sox game and am using FF miles to go there for a long weekend!

Now, if AA's marketing and flight availability had nothing to do with that, then I do not know what did. Got SPG points for hotel too, and so now guys like me with middle class lifestyles can do a long weekend in Chicago to see a baseball game! The results of FFPs being so heavily entrenched into our lifestyles has been to have this kind ofthing actually be doable. As much as we may complain about awards, etc, this biz makes money for everyone. Cities who wanted people from other places to come visit can benefit, so the airlines make that happen. Hence, more advertizing to go to places like Chicago, or Europe or here or there...

:)MM

Annual and quarterly reports are a good source of data. So are bankruptcy filings ;)

From the VFF anecdotal side of things my behavior has been influenced in the following ways:

1) I concentrate my travel on airlines that I have, or want to have, elite status on.

2) I buy tickets when I could be cashing in miles. I do this in order to earn status miles. (Miles are to burned on behalf of other people -- family & friends.)

3) I take connections and out of the way routings in order to maximize status miles (or segments).

4) I might even make a mileage run from time to time ;)

5) I go out of my way to book flights off peak in order to maximize the chances of an upgrade.

6) I use an affiliated CC for just about everything.

7) I fly when I could, perhaps, drive.

In my view all of this behavior is a win/win. My goals are met and the airline gets more money and lower costs. A lot of what I'm doing puts me in seats that would otherwise be empty and frees up seats that can then be sold for more money. For instance -- in spite of airlines reporting load factors at or near 90% I hardly ever find myself on a flight that needs volunteers.

In my view all of this behavior is a win/win. My goals are met and the airline gets more money and lower costs.I can't resist chiming in just to say that actually there is one item of behaviour in that list which very probably results in the airline getting less money and incurring higher costs, but which you've adopted because the FF scheme gives you an incentive to do it while probably simultaneously benefiting your own pocket.

That's not a criticism, and it's completely understandable, but it does illustrate the sort of thing one would have to look at.

I'd be curious to know which one you think that is...

I assume he's talking about the act of taking a Mileage Run, which FT'ers define as a trip for the purposes of earning miles that yields more value to the traveler than its cost in terms of money and time - and therefore less revenue for the airline on the subsequent award trips.

Hard to say whether that's true or not. In a world without miles, the Mileage Runner probably takes neither trip (neither the MR or the award trip that it spawns). So the question becomes whether the traveler found an MR that was so good that the airline actually lost money by transporting the traveler and his luggage all over God's creation. And that I don't know...

(Obviously I'm oversimplifying things a bit by saying that someone takes an MR and then uses those miles to redeem 1 award trip.)

Think marginal cost......

Affinity programs are probably the single best idea the airlines have come up with in many years. What will be interesting to see is how consumer behaviour will change should one of the big programs close (ie airline closes down- not that unrealistic in the current enviornment).

More value to the traveler than cost to the traveler pretty much defines every transaction we make. If it didn't then we wouldn't do it... Actually that defines business in general.

The question should be whether or not the cost to the airline exceeds the revenues. Mileage runs are only sensible when there is plentiful inventory of inexpensive fares. I'm pretty sure nobody pays full Y for a MR ;)

So it then boils down the what you believe WRT to "profitable" tickets -- are you in the camp that thinks every ticket must be sold for more than CASM in order to be considered profitable or are you in the "marginal cost plus" camp? (Hint: I'm a marginal cost kind of guy...)

The plane is going to fly whether I'm on it or not. If the MR doesn't take place that seat is going to go out empty and $0 will be generated. If I'm on it then the airline gets $X that it would not have got without me. If $X exceeds the cost of fuel, a bag of pretzels, a drink and the ticketing costs then they profited from my traffic just as the corner store profits ever so slightly when I stop in and buy a candy bar.

I'd be curious to know which one you think that is...I assume he's talking about the act of taking a Mileage Run, which FT'ers define as a trip for the purposes of earning miles that yields more value to the traveler than its cost in terms of money and time - and therefore less revenue for the airline on the subsequent award trips.No, it wasn't mileage runs that I was thinking of, although both of you have identified cost/benefit arguments there. Many of the items on the list have arguable cost/benefit balances, both ways.

But there's one item of behaviour on TomBascom's list which tends to depress the revenue earned by the airline from the passenger, while clearly adding to the airline's operational costs in relation to that passenger as well as the contingent frequent flyer liability costs.

The fact that it doesn't stand out like a sore thumb here demonstrates, if I may say so, my point that this forum is not really a good place to debate this issue. Collectively, our focus is on what we can get out of frequent flyer schemes and we're very good at it. But collectively, we have relatively little real understanding of how airlines work as businesses and of how the schemes relate to the operational business - particularly in numerical and financial terms.

But collectively, we have relatively little real understanding of how airlines work as businesses and of how the schemes relate to the operational business - particularly in numerical and financial terms.

Except when Randy chimes in.

But there's one item of behaviour on TomBascom's list which tends to depress the revenue earned by the airline from the passenger, while clearly adding to the airline's operational costs in relation to that passenger as well as the contingent frequent flyer liability costs.

You're obviously referring to extra segments etc.
But airlines have a way around this: where do you reckon the PER SEGMENT fuel surcharges end up?

But there's one item of behaviour on TomBascom's list which tends to depress the revenue earned by the airline from the passenger, while clearly adding to the airline's operational costs in relation to that passenger as well as the contingent frequent flyer liability costs.

The fact that it doesn't stand out like a sore thumb here demonstrates, if I may say so, my point that this forum is not really a good place to debate this issue. Collectively, our focus is on what we can get out of frequent flyer schemes and we're very good at it. But collectively, we have relatively little real understanding of how airlines work as businesses and of how the schemes relate to the operational business - particularly in numerical and financial terms.

Why don't you simply make your point instead of acting like you understand the airline business and no one else does?

I can see where behavior (3) - taking suboptimal connections - fits some of the criteria. That is, it raises the cost to carry the passenger and his luggage without increasing revenue to the airline. But...the airlines built their convoluted pricing system that way, so I don't have much sympathy. Sometimes they purposefully direct me onto a long routing with their fares when I'd really rather have the nonstop. Airlines that use more fair, logical pricing systems (e.g., WN) leave a much smaller loophole for travelers to exploit by intentionally flying out-of-the-way.

Why don't you simply make your point instead of acting like you understand the airline business and no one else does?Because I said that I don't want to debate the substantive issues here.

The only point I want to make is that the question of whether FF schemes are an unalloyed benefit to airlines is infinitely more subtle and controversial than can be debated on a message board whose membership is unrivalled at extracting value from the schemes, and who have a vested interest in believing that FF schemes are good and should continue.

And the only point of pointing out that one item in TomBascom's list is that some of the business arguments about FF schemes are far from obvious to those of us who are passengers first and foremost. I certainly don't claim to understand the airline business, let alone be the only one who does. But the real arguments that the OP wants to read are unlikely to be found on FT. He'd probably do better to take out subscriptions to Airline Business and Air Transport World.

Since the OP is a noob, it stands to reason that he/she is using other sources for research - coming to get an opinion from frequent travelers is probably just one facet of his/her project.

Give the people on this board more credit: we come from all walks of life, most of us here on in business of one form or another, and some people here are actually in the airline industry. I don't really care whether you share your point or not, but the "You people are too biased to think straight" line is crap.

A lot of us here are playing the FF game because we have to. If I want to fly somewhere, I have to buy a plane ticket and I have to buy the frequent flier miles that are bundled with it. On 95% of the routes I fly, there is no viable unbundled product - I am forced to buy miles. So since the airlines have forced me to buy their currency on every transaction I make with them, yeah, I want to maximize my value from the currency. That's where this board comes in...

Maybe we're getting off-topic a bit, but notice that hotels have recently unbundled their product and their points-currencies. I can choose to a room+points, or just a room. There are a variety of non-opaque products to pick from. Airlines have yet to go down that path except in very controlled situations on certain routes, which again leads me to believe that they are very, very happy forcing us to buy their currency on the vast majority of our travels - because it is quite profitable to them.

Since the OP is a noob, it stands to reason that he/she is using other sources for researchI do hope so ...

Another thing worth noting is that there are two main types of threads on the forums; one is about how to earn and spend miles, and the other is about how to get premium treatment from an airline. In the old world business travellers flew business class and they got business class service -- which was significantly above the service level for tourists in tourist class. After the arrival of low cost carriers the airlines were forced to sell decently priced economy ticket to business travellers. In a sudden a significant part of the most frequent travellers were no longer found in the front cabin(s).

Now, if you are a traveller that is stuck in economy class due to corporate policy then the airline has lost you as a business/first class passenger, not because of your dislike of proper service but because of regulation. In any other business good customers are treated better than less good customers. The frequent flyer programmes doubles as a neat way to rank economy class passengers, and to give back some of the business/first class privileges to those who are good enough customers.

And then the win/win situation is obvious. I choose to fly with one airline (or one alliance) instead of five different ones simply because I seach recognition as a good customer of an airline, which in return will spare me the long queues on check-in and give me a nice chair and a drink while waiting for their delayed flight.

My best guess is that the most important reason to keep the frequent flyer programmes is centered around customer-relations management, and not around having a profit center around a fake currency.

Another thing worth noting is that there are two main types of threads on the forums; one is about how to earn and spend miles, and the other is about how to get premium treatment from an airline. In the old world business travellers flew business class and they got business class service -- which was significantly above the service level for tourists in tourist class. After the arrival of low cost carriers the airlines were forced to sell decently priced economy ticket to business travellers. In a sudden a significant part of the most frequent travellers were no longer found in the front cabin(s).

Now, if you are a traveller that is stuck in economy class due to corporate policy then the airline has lost you as a business/first class passenger, not because of your dislike of proper service but because of regulation. In any other business good customers are treated better than less good customers. The frequent flyer programmes doubles as a neat way to rank economy class passengers, and to give back some of the business/first class privileges to those who are good enough customers.

And then the win/win situation is obvious. I choose to fly with one airline (or one alliance) instead of five different ones simply because I seach recognition as a good customer of an airline, which in return will spare me the long queues on check-in and give me a nice chair and a drink while waiting for their delayed flight.

My best guess is that the most important reason to keep the frequent flyer programmes is centered around customer-relations management, and not around having a profit center around a fake currency.

I agree with you and I think it SHOULD be because of customer service management, BUT I believe the reality is that it is just NOT about that whatsoever. Sure there's some degree of it--they (any given airline) want to keep people on for some CS reasons. BUT the real reason is because numbers = money and money right now is what keeps them alive. We are numbers to them so their marketing strives to basically spam the world and spam us to keep us interested more and more so we fly more with them than another airline.

There's no loyalty anymore... it's just my airline trying to keep you on a string more than the other guy.
I get more money if I am successful--constantly.
AND, this sorce of partnership revenue keeps us afloat so the bankruptcy courts are happy. Besides, if things done in promos we put forth take 6-8 weeks to post to customers, then similarly, those who wanna see result sof our agressive marketing have go to wait for our monetary reports as well! That gives us more time to get new marketing going and thus make them wait longer.

No, I'm sorry but I'm really not going to get into this. There has not been a single post in this thread addressing the issue of the effect which FF schemes and benefits have on purchasing decisions and behaviour. I may be right or I may be wrong, but this is not a forum in which any sensible debate is going to take place.

Ok, here is a post that adresses the issue of the effect which FF schemes and benefits have on purchasing decisions and behavior.

I am an elite flyer for UA. I always book UA because of 2 primary reasons. 1) UA is the major carrier in Denver and 2) I am a 1K/MM/UGS flyer with them. To continue discussion on item 2, because of my travel pattern (a lot of last minute changes of return time/dates) my status literally guarantees me a seat on a flight to either a new destination or home. The benefits of the frequent flyer program keeps me loyal to UA. If there were no FF programs, I would fly anyone and everyone that benefits my travel. I would not be loyal.

Ok, here is a post that adresses the issue of the effect which FF schemes and benefits have on purchasing decisions and behavior.

I am an elite flyer for UA. I always book UA because of 2 primary reasons. 1) UA is the major carrier in Denver and 2) I am a 1K/MM/UGS flyer with them. To continue discussion on item 2, because of my travel pattern (a lot of last minute changes of return time/dates) my status literally guarantees me a seat on a flight to either a new destination or home. The benefits of the frequent flyer program keeps me loyal to UA. If there were no FF programs, I would fly anyone and everyone that benefits my travel. I would not be loyal.

ahh, but item 1 is llisted first which some may think means you value it more without even realizing it. What if there still ARE FF programs but UA decides to leave Denver, and then AA comes in for example?...

Would you be "loyal" to UA?

Is it because of your item #2 or #1?

Couldnt American Airlines eventually enable you to be in the same situation you are now with UA? And what, with the ability to get status matching, it should be relatively easy to convert one's loyalty almost over night should UA ever leave that airport on you.

Are we loyal because of what we have earned, who we got to know on the plane, the routes and conveniences and things we are used to, and how they treat us every time we fly, or are we loyal because another business was successful in both marketing to and proving to us that they can do all of that even better for our needs? If AA came along with the same thing or even better, ou may jump over! What is loyalty anyway? I work in recruiting. In the work force, there often is none! Sure, a candidate is expected to illustrate some of it in order to show that they are serious about their carrer, but companies will often hire from anywhere. Similarly, airlines do not care so much WHO you are, but if you show up and give them what they need to succeed. That is money. If their aggressive marketing gets you to jump over to them, they win. If the other airline happens to leave, you have to chose the new one anyway. What if AA is able to somehow get UA to fail and thus, have to leave Denver anyway. Then AA won.

I use AA as an example here only.

Ok, here is a post that adresses the issue of the effect which FF schemes and benefits have on purchasing decisions and behavior.

I am an elite flyer for UA. I always book UA because of 2 primary reasons. 1) UA is the major carrier in Denver and 2) I am a 1K/MM/UGS flyer with them. To continue discussion on item 2, because of my travel pattern (a lot of last minute changes of return time/dates) my status literally guarantees me a seat on a flight to either a new destination or home. The benefits of the frequent flyer program keeps me loyal to UA. If there were no FF programs, I would fly anyone and everyone that benefits my travel. I would not be loyal.

I hear ya...but....to play devil's advocate a little, even without the 1K perks, wouldn't you still be pretty much locked in to United? Assuming you fly to a reasonably diverse set of destinations out of Denver, Frontier probably can't support you...or could they?

There are some big cities where airlines have to compete intensely for O&D business - Chicago, LA area, etc. But there are other cities - like DEN, PIT, CLT, DFW, etc. - where one carrier has the city locked down. If you're a frequent traveler, they've gotcha with or without the FF programs.

Maybe I'm getting off-track a bit, but I've noticed recently that airlines have stopped competing really hard for MCI business. It's been gradual over the past year or so...perhaps because WN has been so successful here, they aren't doing as many battles over O&D customers as they used to. And if WN develops such a stronghold that others don't compete, that isn't much better than being in a place where 1 legacy carrier runs the show.

Because I said that I don't want to debate the substantive issues here.



Then with all due respect, stop posting in this thread. Either state your position or stop wasting our time. I, for one, would love to hear your opinion because I may learn something I do not know. However, this "beating around the bush" discussion is not providing any answers, especially for the OP.

Thanks.

IMHO the FFP are going to change dramatically over the next few years.

The way FFP are designed is in my opinion a big error, as these programs were rewarding frequent flights instead of rewarding high spending. This was not that big a problem when they were introduced in the early 80s, as fares were substantially higher and less diverse than they are today. For example there were no 199$ transcons during that time.

The problem is that many FFPs, specially in the US, reward people the same, whether they have spend $2000 for 6 el-cheapo tickets to Europe or two walk-up fares for $2000. Most likely the guy buying the 6 el-cheapo tickets is even rewarded more in respect of miles and status. As an reward he most likely earns top-tier and can probably get a Award ticket in Business Class for his miles, which sells for at least $3000. The business guy buying the two expensive tickets hardly gets anything. This is in my opinion not smart business.

Although DL stepped back from their Skymiles "enhancement" with lower miles for lower fares, I think this is a general, worldwide trend. Many airlines all over the world, as LH, BA, SQ, TG and others either allow only limited mileage earning on lower fares or are currently in the process of implementing this.

An interesting scheme is Air New Zealands new Mileage program, in which you earn Airdollars. These Airdollars are awarded to you according to the fare you bought. You spend them on regular flights on regular fares, no more mileage redemption chart necessary. The airline even has the benefit of charging Airdollars according to the demand of the flight.

Take this one step further and award the miles according to the amount spend, you are at the scheme I am expecting over the next few years.

"Because I said that I don't want to debate the substantive issues here."

I second that...

The way FFP are designed is in my opinion a big error, as these programs were rewarding frequent flights instead of rewarding high spending. This was not that big a problem when they were introduced in the early 80s, as fares were substantially higher and less diverse than they are today. For example there were no 199$ transcons during that time.


You bring up an interesting point. I have not been a FF member in the early days of FF programs (AA in early 80s) nor did I fly before deregulation in the 70s, but I would imagine that at one time, airlines charged fares based on something more seemingly logical - how far you are actually flying. Many carriers in other countries do this - shorter flights cost less than longer ones because the internal costs are higher for longer journeys. If that was the case when FF programs started, then the miles being based on travel distance made sense, because it DID correspond to fares. Once deregulation set in and airlines started charging fares that have absolutely nothing to do with distance flown (and hence their costs of flying you there), the disjoint between spending and awarded miles started. The hotel programs, on the other hand, do it all based on revenue.

Thanks to these many replies on my post. It has been a great help to me so far. I would like to ask you guys a question (cause i'm not a FF):

Are you loyale to an airline/alliance because of the miles you get or because you really think that your prefered airline is superior (thus, the rewards are just a additional benefit). Or in a other way: Do FFP really create loyality or do they just create customer retention.

Cheers,
Flavio

Thanks to these many replies on my post. It has been a great help to me so far. I would like to ask you guys a question (cause i'm not a FF):

Are you loyale to an airline/alliance because of the miles you get or because you really think that your prefered airline is superior (thus, the rewards are just a additional benefit). Or in a other way: Do FFP really create loyality or do they just create customer retention.

Cheers,
Flavio

where I live and where I fly helps determine and maintain my use of airlines I need to get those things done with more ease than some other carrier. If I build status in an airline, I would wish to continue to stay with it, but mostly, for me, if their rules and service are more to my liking, I stick around. But if they stop being nice and put too many restrictions on me or I get hung up too many times because of too many problems, I would drop em like a wet towel. If I have miles on them by that time, I unload them by taking some trips or something, and then zero the account not to use them again --til such time that they may come around and be better than say, the one I am using in place of them. Because the one I am using in place of them could also now become the bad guy. All the airlines have problems, and things seem to be only getting more tight and restrictive with this and that new rule and hurdle in using awards and upgrades. But you go with the one that best suits your current needs. I would like it to be about loyalty instead of hijacked loyalty, and I would like it to be about service instead of luck, but sometimes it just aint.

Like sands in the hour glass, so are the days of our lives!

-(who said that?)

:)MM