The new rule book is here! The new rule book is here! [merged]

[ranskis]

Originally Posted by nickyboy

At the same time, they get rid of those passengers who achieved the most expensive status in terms of milage accrual and soft benefits but brought comparatively little revenue to the business. They are not interested in Gold/Plat flyers who achieve this status on EUR10K pa

I don't really agree. I believe that turnover is generated by loads of "cheap fliers", be it for business or pleasure, and margin/profit is generated by high yield customers, less sensitive to price = some business travellers.

It is very difficult to have one without the other, hence the existance of excursion type fares, advanced purchase fares, non refundable fares etc.

- if you don't attract business travellers who are not sensitive to price, you need to have very very low internal costs, since your customers are price sensitive and they become even more sensitive if the service is less. Sometimes, it works, look at ryanair or easyjet. Most of the time it fails, because you cannot make money on your customers and the other customers who could spend a lot don't want to fly with you because you have 2 flights a week, 27 inches pitch, remote airports, additional fees and hassle for everything etc. Many LLC have disappeared and many existing ones have lots of troubles.

- if you focus mainly on high yield passengers, you will fly with empty planes. You will need to reduce frequencies and optimise schedules to make it profitable but at the same time less frequencies to choose from and/or product devalution makes it less appealing to high yield travellers => you are screwed, like EOS or silverjet went bankrupt. L'avion has been bought by BA leading to sometimes 3 flights a day PAR NYC, making it a true alternative, with competitive price (compared to AF) and good product. But this is rather an exception, they still need to discount quite many seats to lower yield passengers.


So AF needs desperatly both types of passengers. The good thing with frequent fliers that qualify on segments is that they pay regularly money to AF and fill in seats that could have gone empty. These passengers are really important to keep the frequencies that are sold for good money to full fare pax. You can either try to keep them by having lower fares, or by making them choose your airline in priority, FFP were made for that. Now it is changing indeed but for the worse, both for leisure pax and for business pax. It might be a reason why all fares qualify for elite segments.

BA neglected this target and counted only on high yield passengers that were numerous to/from LON. Now that premium traffic decreases sharply, they have no back up and are more severely in troubles than other carriers, that have more diversified bases of customers.

[nomad1974]

Originally Posted by UTA_flyinghigh

As of today, the FFP's of OK/CK/SU/AM all offer 100% on DL fares with some offering 100% on most AFKL too.

UTA

Well, I don't really see your point. As of today, FB also offers 100% on all DL fares. But, as we have just seen, there are no guarantees for anything.

[NickB]

Originally Posted by ranskis

BA neglected this target and counted only on high yield passengers that were numerous to/from LON. Now that premium traffic decreases sharply, they have no back up and are more severely in troubles than other carriers, that have more diversified bases of customers.

I am not so sure that they neglected them. Rather, they operate in a more challenging market than AF.
The problem for BA is that it has suffered much more directly the onslaught of the LCCs, with the two bigger LCCs (Ryanair and Easyjet) operating from LON for over ten years, both on domestic and European destinations. AF's market from France has been much more protected and only recently has AF been faced with LCC competition (and even now to a far lesser extent than BA).
Same reason accounts for the tendency towards decreasing number of transfer pax on BA: you cannot run connecting services purely on transfer pax. You need a reasonable load of point-to-point pax as well. Running a wide array of short-haul destinations cost BA comparatively more than it does AF. On intra-European routes with similar profiles, BA's lowest fares ex-LON are almost invariably lower than AF lowest fares from PAR as BA is forced to lower its prices to face the LCC competition. I would guess that AF will increasingly be faced with a similar problem as LCCs increase their presence in the French market.

[Klm is Dead - Long Live KLM]

Originally Posted by nomad1974

Well, I don't really see your point. As of today, FB also offers 100% on all DL fares. But, as we have just seen, there are no guarantees for anything.

The point is that although all ships may be sinking, temporary relief might be obtained by jumping ship from one quickly sinking ship to another more slowly sinking ship. In general, hungrier ships with less market power tend to sink slower.

[GUWonder]

Originally Posted by NickB

I am not so sure that they neglected them. Rather, they operate in a more challenging market than AF.
The problem for BA is that it has suffered much more directly the onslaught of the LCCs, with the two bigger LCCs (Ryanair and Easyjet) operating from LON for over ten years, both on domestic and European destinations. AF's market from France has been much more protected and only recently has AF been faced with LCC competition (and even now to a far lesser extent than BA).
Same reason accounts for the tendency towards decreasing number of transfer pax on BA: you cannot run connecting services purely on transfer pax. You need a reasonable load of point-to-point pax as well. Running a wide array of short-haul destinations cost BA comparatively more than it does AF. On intra-European routes with similar profiles, BA's lowest fares ex-LON are almost invariably lower than AF lowest fares from PAR as BA is forced to lower its prices to face the LCC competition. I would guess that AF will increasingly be faced with a similar problem as LCCs increase their presence in the French market.

Great points from both of you.

BA could have held onto more of the leisure marketshare and held at bay at least some of that LCC onslaught around London if BA would have had a more tourist-friendly frequent flyer program. Now BA is left even more to compete just on price than was the case before and customers in coach have largely gotten use to the LCCs and are unwilling to pay much (if any) premium to fly BA.

Now, AF-KL -- by doing these FF program changes -- are just setting themselves up for a BA type problem when it comes to the coach cabin. AF-KL would be better positioned to hold at bay the LCC competition for coach passengers if the FF program actually was an inducement for customers not to jump ship onto the LCCs.

Once customers get used to the LCCs -- and stripping the FFPs encourages that migration -- the legacy carriers' challenge with selling the coach cabin profitably become more of an issue than it would have been otherwise. The legacy carrier is just going to be left more and more to competing merely on price when it comes to the coach cabin. I don't think further commoditization of one's own business really serves the long-term interest of the shareholders of the business -- but that's just me.

[UTA_flyinghigh]

Originally Posted by nomad1974

Well, I don't really see your point. As of today, FB also offers 100% on all DL fares. But, as we have just seen, there are no guarantees for anything.

The difference is that these airlines have not announced any change to their FFP for the 2009, unlike FB.

UTA

[Gate45]

Originally Posted by florin

It doesn't work that way. Award seats are under serious capacity controls. You only got those 2 seats because they weren't going to sell them to anyone else. As such you have not deprived AF of €19k; you deprived them of €0.

Originally Posted by ranskis

You cannot compare A and P class. How easy is it to plan a return trip for 2 persons booked in A, compared to a return trip booked in P? Same questions for a CDG NYC first class trip...

You are of course both right, I'm well aware that my financial comparison was far-fetched. But the point about low-revenue Plats burning miles in high-revenue classes remains... I might also add that there are only 4 P seat on the 772, which makes it hard for RM to generate reliable statistics about this cabin. If you go O4 in J, you can still keep a few seats for the occasional "go-show" who pays full J. If you go A2, you're more likely to be turning your back to any last minute customer willing to pay full P.

And anyway, I very much like to think of my award tickets as me ripping them off, especially now that they've come up with those changes !!

[Simon78300]

Originally Posted by nickyboy

AF/KL have got it right. By making the changes they are making they achieve a major upgrading in their profitability due to the reduced accrual of FF miles and the extra cost of redemption. I hadn't appreciated quite the effect on the profitablilty of the FF miles accrual. This was the piece in the jigsaw I was missing

At the same time, they get rid of those passengers who achieved the most expensive status in terms of milage accrual and soft benefits but brought comparatively little revenue to the business. They are not interested in Gold/Plat flyers who achieve this status on EUR10K pa

They've looked at the BA model and decided it's the way to go. Load up the benefits for the people who bring in the revenue, forget about everyone else. It works exactly the same in all business. Why lavish corporate hospitality (which is just a bribe to keep business really, like FF miles) on some small customer, when you could give it to a big, important one?

For all those Plats that spend comparitively little (and I am one of them) we have to get over this and get used to a brave new world. If we can find another scheme that grants us the same privileges we used to enjoy in FB for comparitively little revenue that's great. If not, too bad

No amount of complaining is going to change the decision because, fundamentally, it is the right decision for the business.

nickyboy

I think you are spot on nickyboy, only missing the one point that Richelieu made (and that I didn't pick up on) earlier: that by changing the redemption rates the risk for AF/FB is that they do alienate those high revenue pax. However, another point that's been made is that some if not most of those high revenue pax may have little choice who they fly with and perhaps AF are so confident of the revenue they get from those corporate contracts that they have decided it's worth changing the redemption rates anyway.

As for some AF business going to LCC's....in France, what LCC's (and for those there are they have lousy slot times)? And as for using another carrier, it seems to me that AF has a big loyalty base amongst the French population.

Cheers

Sim

[GUWonder]

Originally Posted by UTA_flyinghigh

The difference is that these airlines have not announced any change to their FFP for the 2009, unlike FB.

UTA

DL-NW have already announced some changes for 2009 -- however, given the sleazy DL management culture, DL management is playing a lot of games with the "loyalty" program(s) customers in 2009 and only trickling out public announcement of the changes already planned by DL management.

Delta Airlines is a company where "loyalty" program customers are seen as the enemy or sheep to be fleeced.

[GUWonder]

Originally Posted by Simon78300

I think you are spot on nickyboy, only missing the one point that Richelieu made (and that I didn't appreciate) earlier: that by changing the redemption rates the risk for AF/FB is that they do alienate those high revenue pax. However, another point that's been made is that some if not most of those high revenue pax may have little choice who they fly with and perhaps AF are so confident of the revenue they get from those corporate contracts that they have decided it's worth changing the redemption rates anyway.

As for some AF business going to LCC's....in France, what LCC's (and for those there are they have lousy slot times)? And as for using another carrier, it seems to me that AF has a big loyalty base amongst the French population.

Cheers

Sim

This is what BA thought too way back some time. Year laters, the LCCs have had an impact on BA's pricing power when it comes to selling the coach cabin. AF-KL can expect the same.

[Richelieu]

Originally Posted by Gate45

If you go A2, you're more likely to be turning your back to any last minute customer willing to pay full P.

In that case, it would certainly go as "We're sorry sir, due to some unfortunate and unforeseen problem, we're unable to board you. Here is EUR 800 in coupons and hotel & food vouchers, and we'll board you on the next flight." The "cheap plat" will certainly be happy with that.

[UTA_flyinghigh]

That actually happened to me once, albeit with a voucher that was not worth €800.

UTA

[JOUY31]

Originally Posted by NickB

I am not so sure that they neglected them. Rather, they operate in a more challenging market than AF.
The problem for BA is that it has suffered much more directly the onslaught of the LCCs, with the two bigger LCCs (Ryanair and Easyjet) operating from LON for over ten years, both on domestic and European destinations. AF's market from France has been much more protected and only recently has AF been faced with LCC competition (and even now to a far lesser extent than BA).

AF's domestic market has been challenged much more by the TGV. On the other hand, the SNCF/DB partnership between PAR and FRA has not been very successful, yet.

[JOUY31]

Originally Posted by Klm is Dead - Long Live KLM

Your thinking that there is no evidence is not the same thing as there being no evidence.

There being no evidence is not the same thing as there being no collusion.

Cartel behavior and collusion are deeply rooted cultural traits of France, Germany, Netherlands, and many other European countries.

Particularly France has some of the best restaurants in the world in which to exercise concerted practices of collusion.

Well, until a court has ruled that there is collusion, the presumption remains that they are innocent.

[Richelieu]

Originally Posted by Flying Blue

Flying Blue changed the conditions with regards to the accrual of mileage to the fare paid for the revenue ticket and its conditions. The feedback we received from our Frequent Flyers is that it is considered unfair that members who pay a lower fare also earn 100% of the base miles. Next to this Flying Blue also made it easier for their members to claim their miles.

I wonder how they got the feedback that "we, high yield customers, are outraged that leisure fares bring miles to leisure travelers". I mean, I don't see high yield customers especially concerned with the earning and burning rate of other pax, really. If they were told "we want more miles when paying higher fare" and understood "we want everyone else to get less miles", I think they missed the point.

One of the other changes within the Flying Blue program is the validity of the award miles. The award miles first had a validity of 36 months if the member made a flight with one of our sky team partners, as per the first of April the award miles of all our elite members will stay valid for ever as long as they stay elite. For our Ivory members the validity changed from 36 months to 20 months."

Another extremely bizarre argument. If they want to get rid of elites not bringing a lot of value to them (which I can understand, of course), why bother extend indefinitely the miles of Lifetime Platinum who stopped flying? Because I can't see any other way than that to benefit from "elite miles don't expire" as you need flights every year to keep elite status...