MilesBuzz! - Where's the tipping point, i.e. How few legacy carriers before a big FF-benefit hit?

The U.S. Airways - Delta thing has started more talk of possible mergers among legacy carriers. As is often the case, some people in the business press are saying things like, "In 10 years there will only be x major carriers and a number of LCCs."

Seems that somewhere there would be a tipping point where competition would be diminished to where the big airlines would feel free to really devalue miles and FF benefits, under whatever excuse. Maybe WN or FL don't go along, but those airlines' programs don't seem to have the same clout against other programs that those airlines do against other airlines in holding down paid fares.

My own sense is that if the biggest six U.S. carriers go down to four we'll start seeing a real pickup in benefit cuts, including a possible raising of domestic standard awards to 30 or 35K, and at three the damage will really be bad. Seems like baby-boomer retirements starting around 2011 will also unlock a lot of miles seeking trips to put things out of whack.

Any other thoughts about where the balance will be upset of whether it's a tipping-point scenario?

when was the last major devaluation?

when was the last major devaluation?

some would argue that it has already occured, but it has not been announced

by strictly limiting capacity controlled awards, fliers are forced to use twice as many miles to get seats

First of all, I think we can go to 3 "legacies" - DL, UA, AA - and still have viable competition. On the vast majority of the routes I fly, it's already a primary battle between WN, one legacy, and perhaps YX or another niche player. I don't believe that, say, a DL-US merger is going to change my fares to Seattle. Southwest's $329 cap is why my MCI-SEA fares on UA are what they are.

Besides, it's not like mergers will dramatically pull available seats out of the market. Sure, airlines are more cautious with their ASM's these days - but we live in that world now and the sky hasn't fallen. Awards are easy at some times, tough at others. I don't think that'll change.

I don't think there will be a single, massive devaluation. The PR hit would be enormous. The public backlash against airlines the next time any of them needed a little Congressional bailout would be bad. Instead, I think we'll get more of the same: gradual devaluation, tightening of award availability on the most profitable routes, etc. And we'll continue to see airlines advertising the heck out of "expanded availability!" on off-peak flights. (United is doing this now.)

My guess is that the 25k domestic award will be the last one affected. It's currently the least lucrative for an FF'er as it is, but it's also the one award that the mass media tends to write a lot about. You can jack int'l J award levels up by 20% and travel columnists and magazines might do a piece about it. If you jack the 25k domestic award to 30k, it's on the front page of USA Today and every other major U.S. newspaper's business section.

So they don't really need to do any of that at all: not when they can quietly tighten the availability where they need to, and leave it wide-open where it doesn't hurt them to do so.

fliers are forced to use twice as many miles to get seats

Forced? No. Not persistant enough and give in to using? Yes.

Pretty good MSNBC story here (http://www.msnbc.msn.com/id/16183725/)

All the incremental takebacks in the programs have been ongoing for quite some time, and the "stealth devaluation" with the rulebuster awards is pretty well-known. But I think there are still some thresholds airlines haven't crossed because of fear of competitors not matching.

A good example was UA's readjustments of mileage awards last summer. They basically searched for and upped just about any award they had that was lower than the going rate, but shied away from being first to raise levels in key areas.

I think the situation on the paid-fare side is more encouraging, as LCCs could ramp up and really eat into market share, at least domestically. AirTran, especially, could do a lot, as they offer jets on all routes AND a first-class option. But on the FF-program side they don't have the same clout.

yeah, other than DL, what airlines have no avail?

change is slow but its existence is consistent...

;)

Ok, here's a tangent that could relate to this somehow, in a classic MM sense:

Value vs. position...
I remember the days as a kid when my parents used to say all a guy needed was a good high school education and they could get a solid job. gee if you had a college degree then WOW, you were something and you could have a carreer! In those days, why, getting the Sears card was a big deal! Then one day my dad got the American Express green card! wow!

Later, one needed to have a college degree and now the expectation was that you have a GOLD card... In those days, 20,000-25,000 miles actually meant you could walk into the terminal and say, here is a voucher for a totally free ticket. Where can I fly right now, and you could walk onto a plane and fly right now!

then it was graduate degree and you had to have a PLATINUM card!

PHD = Optima? I dunno... the point is that as the expectations and requirements got bigger so did the need for status. Or, was it the other way around? Who knows. Now you still have 25k awards but they are really scarce and have mega restrictions on them because there are too many people and ANYONE can get that platinum card or a PHD.

I think one of the biggest devaluations was like around 1999-2000 when carriers first started to create and enforce the rules about account activity. If you had no activity for x number of years you lose your miles. That's when I really got into this game. I was into it back in the early 1990s when I first GOT my first AMEX card and had all these NWA and DL miles, but I was just a collector of miles back then and that's when the number of miles you had made you look cool among friends.

now, it's like, wow if I have a bunch I should use them or they will change the rules and they will dissapear! It's not good to gloat about having 300k United miles anymore... now it's cool to gloat about being 1k or something, because if you have status, at least your awards can be more easily used/recognized!

ok, back to the airline tipping point thing...

I know there was a hige devaluation around 2002-03 when within like one week, United and couple other carriers announced they would stop transfers to Hilton, and many of us in here frantically sent over batches of miles to convert to HH points.

There was also the multi-airline bankruptcy thing, and of course, mergers or partnership creations like the ones we currently have today.

I used to be a member with miles in every program... Today I use only 3, really. United covers my UA and US travel, NWA covers my DL and CO travel and AA pretty much covers the rest. (other than a flight here and there on Jet Blue) I only have to concentrate on 3 accounts for myself and if they come up with new rules I am on it (mostly). I only really horde miles in AA because I actually have the most faith in their program staying the course over all others, and they still have awards that worked the same way as years ago for me.

I bet regardless of any mergers, we are about to face another 'devaluation' because the whole world is into the method of marketing that frequent flier mile programs has made commonplace. You can get points everywhere for everything and so in a way, it's like a giant rebate scheme where the company suddenly wakes up to the horror that everyone ACTUALLY DID redeem the rebate card correctly!

"OMG, they ALL sent in the box top with the UPC code and circled $ amount on their receipt by our crucial deadline! Oh dear me, now we MUST change the program or we are sunk!"

Yup, the fact that soooo many people are into miles, promos, deals, gift cards, credit cards and stuff noto even involving flying is forcing them to change. And as big business tries to make these mergers take place, why, it's a great chance for them to wipe the slate clean and reset that process in the name of survival and profits. Oh sure, you will probably be able to merge your CO miles with UA ones and wow, that means we no longer need to seek out schemes that used to work like that old UA-AMTRAK-CO gig that went on for several years in here, but try USING your newly accumulated miles... I bet the requirements will go up, or the ability to redeem at current levels will just go down even more. pinniped says flyers are forced to use more miles... I agree with that because people get tired and overwhelmed so they get lazy and say, oh well, I'll just pay extra because it's easier. mtparadis says people are merely just not as persistent when the airlines present new challenges. I agree with that too, but that's the plan: Use marketing to study the psychoogy of the white mice (we flyers) and then create obsticles that make them respond the way we want them too. Genius!

But, FT is full of some smart mice. Be the second mouse...

Oh well, that's business.

:)MM

i was going to go for AA lifetime status (credit card etc), but then i found out the only redemption option that appealed to me was CX J... so im just going to go with Asiamiles instead of AA miles.

no hassle rewards, thank you network, and "custom" awards from DC and AX are becoming more prevalent as well. (instead of more mile earning)

I've been trying to using Delta miles for an award for several trips and can't do so. I think some of the programs are already devalued. One less major carrier and all the fun will be out of the game.

If AA is allowed to be run by foreigners, game over! Just look at British Airways for comparison on that.

One other piece to this that is on one hand silver lining for us, but OTOH part of the driver of inflation: it is far easier now to pile up massive amounts of miles than at most points in past history. I know the list of Greatest Mileage Promos Ever includes some good stuff from the late '80's/early 90's, but by and large people earned miles by flying and didn't talk to other FF'ers about all of the available promos out there.

Now, somebody new to the game could easily go from 0 to 150,000 miles by sitting in his living room for an hour filling out online credit card applications. Granted, it might be 20-25k spread across 6-8 carriers, but follow that up with a little iDine or nominal partner activity, and he has a stack of theoretical free domestic tickets without setting foot on an airplane. That didn't use to be the case 5-10 years ago. Sure, I think the Citibank AA Mastercard existed by then, but it was like 5,000 bonus miles to sign up. Now, I don't even look at a credit card offer unless I see a 5-digit number beginning with a 2.

If AA is allowed to be run by foreigners, game over! Just look at British Airways for comparison on that.

Why would foreign investors drastically change the AAdvantage program? The marketplaces in which BA and AA compete are very different.

(Maybe they ought to allow foreign ownership of US airlines. There are many airline operators in the world that still understand the concept of a "premium cabin". ;))

BA
cant redeem for AA transatlantic
can do one-way on all oneworld
can do upgrades on BA

AA
cant redeem for BA transatlantic
cant do one-way on any airline
can do upgrades on AA

"..." :D

Marathon Man.....great post.....I am 46 and remember the times you spoke about very well......getting my first AMEX gold card......etc......

Marathon Man.....great post.....I am 46 and remember the times you spoke about very well......getting my first AMEX gold card......etc......

hehehe thanks! I am 42 in Jan and wow time flies! We signed up our 6 month old daughter for NW FFP and she already got the 1,000 miles email promo and 100 miles for the WP university questions. hahahaha. I answered them for her of course, but hey, she WAS on my shoulder banging her little fist on the keyboard while I fumbled away at the entry and then had to go feed her. :)

One day she will have enough miles to....

...Well, maybe I should sign her up for the credit cards now. I wouldnt be surprised if they gave her one! hahaha

(I wonder if they have mileage promos for preschool sign ups?)
:)MM

yeah, other than DL, what airlines have no avail?

I've been trying to using Delta miles for an award for several trips and can't do so.

I never get these comments...

Delta has been #1/#2 among domestic airlines with AA for redemptions in recent studies.

ive never seen any study showing DL being decent?

i called in the spring of this year, and asked about summer through end of the year availability for WAS > MTJ or TEX and was told there was no availability at all at any time.

UA i looked at once recently, saw tons of avail WAS>NYC at one-two months out.

I think the watershed devaluation for me was around 1995, when Delta brought in Skymiles and NW made a number of changes, including going to banked miles. CO had also done some bad things under the short-lived "Lite" management (remember the Greensboro, NC, hub?). I don't know about the others.

With DL's changes it brought in expirations and wiped out the opportunity to get some 50K miles in threshold bonuses a year. They also used to have 1K minimums on segments (+500 for elites), which really rewarded short hauls. Combining that with the threshold bonuses, you could do well by packing in segments.

CO was the leader back then except under the disastrous but short-lived 1994 changes. OTOH, many were saying it wouldn't survive, so there was a bit of a risk premium.

It was a different game after the 1995 changes, with programs starting to become more like each other.

And, lest we forget, around then the rental cars suddenly became worth a LOT fewer miles, like 50/day rather than 500 flat. The losers from that far outnumbered the winners.

i recently had success redeeming 50k DL miles for an ECON trip from BOS-AMS direct on NWA. We used NWA miles for the other pasenger.

however, the last time I was able to use DL miles to fly on a DL flight was 2 25k awards to Cali back in like 1995.

:)MM