There are some great insights on this thread. Management probably sees a race to devalue FF programs, and they feel comfortable taking the lead.
Like most of the posters here, I don't see the logic. If you're going to have a FF program, it needs to be competitive in order to move market share to your airline. Otherwise it's just throwing money away and you might as well have no program at all. It's really that simple.
... The critical turning point will be when the public no longer cares about 20k mile signup bonuses for credit cards. At that point the airlines will lose the revenue stream that they still believe to be permanent. And the new accounting standards will require the airlines to show a large liability for unredeemed miles.
Perhaps it's time to think the unthinkable: Why not just eliminate the FF programs and be done with it?
Well, this is a very good point. More so in the US than elsewhere, but still important is the revenue generated from selling miles via e.g. credit card AMEX etc. arrangements to those who still think the "air miles" still have some value. Perhaps the idea is to see how far they can eliminate the program benefits and still keep this addictive revenue stream?
Another one for the to do list:
- Terminate your co-branded credit card and encourage everyone you know to terminate their FB co-branded card asap.
The more I look at it and the more I guess that the unbelievable reduction in FB benefits is linked to some AFKL valuation objective.
As stated in AFKL consolidated acounts for 2007-2008 (ending March 2008), notes to the statements says:
3.7. Loyalty programs
Until June 1, 2005, each of the two sub-groups (Air France and KLM) comprising the Group had its own frequent flyer program: "Fréquence Plus" and "Flying Dutchman". Each program allowed members to acquire "miles" as they flew on Air France, KLM or with other partner companies. These miles entitled members to a variety of benefits such as free flights with the two companies. Subsequent to the acquisition of KLM, a joint frequent flyer program "Flying Blue" was launched in June 2005 combining the miles accumulated from the two previous programs. The probability of air miles being converted into award tickets is estimated using a statistical method.
The value of air miles is estimated based on the specific terms and conditions for the use of free tickets. This estimate takes into consideration the discounted marginal cost of the passenger carried (e.g. catering, ticket issue costs, etc.) and discounted cost of the miles used on participating partner companies.
The estimated value of air miles is recorded as a deduction from revenues and recorded under the caption “Deferred revenue on ticket sales” as debt on the balance sheet at the same time the qualifying flight for which air miles are awarded is recognized."
At end of march 2008 “Deferred revenue on ticket sales” stood at 2.279 billion€ compared to total equity value of 10.5 billion. That's a hefty percentage.
Of course it all depends on their "statistical estimate". In less than a year the number of miles required for a F award to the US is multiplied by 3 (it used to be 100K and will now be 300K), so their "debt"* for F award is divided by 3. Of course, any reduction in “Deferred revenue on ticket sales” will be an increase in "total equity". Similarly the lower earning benefit will reduce the "debt" in the future. If these FB benefit reduction lead to, for example, a 40% decrese in “Deferred revenue on ticket sales”, this will be a windfall gain for equityholders of close to 1 billion (40% of 2.5 billion). That is a nice way to boost profits in diffcult times. But it is a short term gain that might reduce operational profits in the long run if pax change their travel plans.
*The increase for C award will also drastically reduce the "debt" according to their statistical estmate. For example from 120K to 160K, and even 184K for special elite bookings, on a C return award to Asia
They are nuts. Compeltely insane. This will tremendously impact their business, they will loose most mileage-aware customers.
I will qualify for lifetime plat just because I went so far to get it, book all the F awards I can before April and avoid AF/KL as much as I can after that.
In good corporate governance, all stakeholders are treated with respect.
The major stakeholders of AFKL group are the equityholders, the employees and FB members. There are also financial debtholders but they are well protected contractually. As I stated above, FB members have a huge stake in the company, our stake represents more than 20% of equityholder according to AFKL current valuation. It is true that AFKL has the legal right to reduce benefits and even terminate FB without notice. But corporate governance principles suggests to treat all stakeholders with due respect. This is not the case here, despite the marketing blabla. I am not aware of any program which ever introduced such dramatic negative changes. I wonder what collective action could be undertaken. The media will only reproduce the press release/interview of AFKL staff unless we take some action. It would not be too difficult to address a nice piece to all media where some FB members have some contacts .
In good corporate governance, all stakeholders are treated with respect.
The major stakeholders of AFKL group are the equityholders, the employees and FB members. There are also financial debtholders but they are well protected contractually. As I stated above, FB members have a huge stake in the company, our stake represents more than 20% of equityholder according to AFKL current valuation. It is true that AFKL has the legal right to reduce benefits and even terminate FB without notice. But corporate governance principles suggests to treat all stakeholders with due respect. This is not the case here, despite the marketing blabla. I am not aware of any program which ever introduced such dramatic negative changes. I wonder what collective action could be undertaken. The media will only reproduce the press release/interview of AFKL staff unless we take some action. It would not be too difficult to address a nice piece to all media where some FB members have some contacts .
European-perspective post of the day!
Yes. Let's get on this.
KLM employees were threatened with losing (tax) free flying benefits, but through a concerted communication and PR offensive were able to reverse the company decision and even pressure the inland revenue service.
Moderator: Flying Blue (Air France & KLM), France and TravelBuzz!
Join Date: Jan 2001
Location: Paris, France, AF F+ Rouge pour toujours, Flying Blue whatever, LH nobody, HHonors Diamond, SPG Plat, formerly proud SCC Executive, now IC Royal Ambassador, hungry BA Gold in CE
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Quote:
Originally Posted by Dambus
I have to say I admire your positivity and optimism.
Not really. I am simply busy travelling across Europe and, as such, I am rather unimpressed with the low quality of the information provided and the time it takes me to wade through multiple web pages that do not give me a comprehensive and clear vision of the changes.
Regarding mileage accrual, I had already shifted my personal travel to the lowest (or close to) mileage earning classes. So I will be impacted by the extension of 25% accrual to E fares. Nothing will change for my professional travel across Europe, due to my need for flexibility.
Regarding mileage redemption, this confirms and reinforces the devaluation of miles initiated a few months ago. Clearly, I will need far more travel to afford the same type and number of award flights that allowed me some greater flexibility for last-minute travel or to share pleasurable moments with my family and friends. This is anything but an improvement. The evolution of the awards in the P cabin is dramatic and is not (yet ?) linked to a concurrent enhancement to the product offered. As such, it does not currently have any justification.
As I have moved away from mileage accrual/redemption concerns, the current AF/KL FFP is important mostly for the perks : lounge access, priority lanes, additional baggage allowance, Elite reservation desk that make my professional travel somewhat easier. The rest is less relevant than it used to be, and in a way, so is the FFP, and this is not a compliment. On the other hand, taking away what remains important for my travel comfort and stripping away what made my last flight to Athens most enjoyable by further stripping down the product with additional penny pinching would certainly be the last straw.
... I am rather unimpressed with the low quality of the information provided and the time it takes me to wade through multiple web pages that do not give me a comprehensive and clear vision of the changes.
I'm one of those people who work for small company and can choose my own carriers within reason. But my customers pay my travel costs, so I have to keep them sensible, and most of the time the travel is in Y.
With 5 years as PE, I reached a point at the end of last year where I needed a mileage run to keep it. Looking coldly at the FB program in November, even before this latest blow, I decided there was no point any more, for the following reasons (in no particular order).
Lounge Access - Have that with Priority Pass with an Amex card. OK, maybe the lounges aren't as good, but they are a lot less crowded than the Schipol lounges, and you can use them whatever metal is being flown.
Op-ups - I've had exactly 1 long haul opup in the 5 years of flying PE(Europe Select deosn't count, since you gain nothing, and sometime lose (from Y window, to ES middle!). I've actually had more opups with other carriers that I have no FFP with.
(Twice I've been op-downed, as it were. Removed from my exit or bulkhead seat, for obvious nonrevs, and stuck back some rows, only to watch my replacements chat all flight with their pals, followed by the usual bulging sickbags - Just for the record, I actually agree to the concept of staff perks, ut not at the expense of conciously acting to disadvantage a paying passenger)
Priority Baggage - never works for me , pretty useless anyway.
(In fact my last trip, through CDG, I had a 6hr transit, and they still couldn't get it on the same flight as me! - I only have about an 80% sucess rate of my baggage travelling to the destination with me, much worse than anyone I know , is it me or is it the 'Priority' label acting as some sort of strange cusre on me.)
Extra luggage - I do use this occasionally, and it's just about the only perk that I will miss.
Priority Boarding - Do I even need to explain?
Elite Check in - Where I fly from (EDI), this has for some time been combined with baggage drop for internet checked in passengers. Now it is just as long as any other checkin line, so the 'perk' is useless.
Select Seating - Used to work, and was a big positive a few years ago. But really hard to acheive nowdays, lots of phoning, getting an FB agent who can do it / knows it exists, etc. and since the 30hr internet checkin it's become a complete joke. And it'll only get worse as they roll out the idea of select seats as a benefit they can charge for (what's with the 115% award for a better Y seat? Who gets paid to think these things up.)
Award redemption - the redemption rates rising, the difficulty getting them, the 'taxes', as many have mentioned, they now have little value. (I have almost 1,000,000 miles. I've tried a few times to use them, and I never found availability in C. If I could get the availability in Y the discounted standard fares made the difference so small, it seemed a waste to use the miles, and I bought standard tickets.
I think that for me, the advantage of elite status was not really the award miles, it was the fact that in the past, it made the travelling easier (i mostly fly Y). Lounges, business class check in, good seats, early boardng, all made it so much easier for us Self Loading Freight. The AFKLM product has been deteriorating for some time, but the elite status conveniences have kept me there.
And what else have I to look forward too - long haul, I always seem to end up in tired 747 with prehistoric isle mounted monitor in flight entertainment, but I can look forward to them being replaced by 10 abreast airbus ( or is it Boeing, I can't remember). oh the joy
I only fly 1 or 2 times a year C class, and with infrequent use, the decline in the service is quite marked each trip. It's not really a serious product that competes any more.
Should I mention CDG as a transfer hub? Is it an airport or a bus terminus, hard to tell. (Maybe they should give us 'bus miles' at CDG). Was it designed some afternoon after a long lunch with excesse vin rouge consumed?
But I think now, it's time to move on. I could probably keep GE under the new mileage earning rules, but what's the point. The fact that the much touted elite benefis don't actually exist in reality when you travel make the program basically useless for me. I sometimes wonder do the people who run the FB program actually believe their own marketing, and think all these benefits like Select Seating, Priority Boarding etc. do work. Maybe, when they travel (as nonrevs of course), the benefits really work for them.
Some research required over the next few months on where to target my flight purchases.
The evolution of the awards in the P cabin is dramatic and is not (yet ?) linked to a concurrent enhancement to the product offered. As such, it does not currently have any justification.
.
Even if AF introduced a F suite such as CX or SQ and equalled their product in all respects, 400K for a return F trip to HKG, when you can get one for 180K (or less) on any *A airline, or 240K (or less) on any OW airline is a joke.
This is the best piece of news I have heard in recent times. I have been very stupid to always pay a higher price to avoid the 25 % booking classes. And flying to Shanghai via CDG instead of taking a direct flight from Helsinki can easily double the hours onboard at the airports. Finally, I get a proper meal on Finnair instead of the scanty salads KL offers on the short-haul routes not to mention about the generous TUC bisquits on the shortest KLM routes.
Now I can choose an airline which offers the best value for the specific trip instead of trying to be loyal on every trip. Even Ryanair can expect to sell me a couple of tickets. I have not spent a single mile for awards on AF/KL but now I am free to choose longhaul C class awards until the account is empty.
I will miss the access to lounges but I might invest in Priority Pass or I might enjoy a good meal at an airport restaurant instead.
To summarize: I am glad I won't have to be a Flying Blue mileage slave any more. Thank you.
I totally encourage you to keep on writing to them, definitely vent your feelings. But keep those letters short, they will never read them otherwise. Send several if you have a lot to say. I know, it takes time, costs postage, etc., but things won't change if we don't bombard them. I'm all for a deluge!
Definitely pass the word. I have been doing that in Geneva and Vevey today, to people who still refer to it as Fréquence Plus! Let's boycott AF and KL!
As a United 1K based in Europe I've found this thread very interesting.
When I talk to my non-frequent flyer friends it seems a lot fly with AF/KLM (usually because the offered the lowest price on a particular itin) they all complain about the experience of flying through CDG and the rudeness they perceive by ground staff. From what I hear the flight attendants aren't anything to rave about either. FFP aside -- how would you rate their actual product?
It really seems to me that airlines like AF/KLM and US Airways are trying to battle for first place when it comes to airlines nobody wants to fly.
This is I think a big issue -- if you only compete on price -- you will miss out on less cost conscious/experienced/frequent flyers -- with disastrous consequences for your profitability.
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