sdsearch

I don't agree.

For starters, none of the legacies have 100% revenue-based earning. It's not revenue-based when you fly on their partners, or buy in "opaque" ways such as "vacation" packages.

Southwest is able to do 100% revenue-based earning because it has no partners nor "opaque" ways of buying its flights.

Southwest is able to do 100% redemption because they don't have multiple cabin classes, with different target audiences for cash vs points redemption in each cabin class.

Currently, there are times when few people fly on business (such as during the holidays) when legacy airlines can make business class (but no coach class) available at 'saver' redemptions on certain routes, while keeping business cash costs high in case some business person does want to fly then. If they went purely revenue-based for redemption, they couldn't do this, because every time they priced for high for the business traveler in cash it would price unusable high for the leisure travel using miles, and so they couldn't target leisure miles users separately.

So while there could be aspects of revenue-based redemption worked in, there would have to be exceptions to it, or airlines would end with both empty cabins up front (on days when business travel is poor) and the liability of too many unused miles on their balance sheets.

Finally, I hardly ever redeem miles for flights on domestic carriers these days. The "saver" availability (in business class) always seem to be on foreign carriers. Legacy carriers tends to have separate charts for redemption on their own metal vs redemption on partners. I can't imagine revenue-based redemption on partners (when those partners continue to be miles-based).

Dearelliot

Its been a great party, my wife and I danced and danced and danced, and we never had to pay the fiddler. We were lucky we got in soon enough, not at the very start of it, when ever that was, but in time to enjoy. Crazy no, virtually free business class to SE Asia, several times, Europe, Tokyo, Bali, traveled so much we had to send our passports in to have pages added. So now we are in our 80s, and well I cant travel the way we used to anyway. I just feel this had to come to an end, it just didn't seem possible it ever worked in the first place.

Andy2

I think the better data gathering, better internal controls, and lack of craziness in the economy will keep us from ever accumulating miles the way we once did. And the realization that they sold far more miles than they can allow to be redeemed will keep the airlines from ever providing good redemption opportunities.

In the days of truly free deals, those like the constant switching long-distance carriers every few months for 25,000 miles between MCI and Sprint was really caused by MCI's fraudulent accounting and a need to book new customers while ignoring the loss of old customers. How many times were we all "new customers"? The companies like valumags and emoneymail and C2it that allowed incredible opportunities were really just high-tech companies that had initial capital funding and didn't care how much money they lost while trying to get the higher revenues to support silly stock prices for themselves or their corporate "parent". The dollar coin program was an anomaly. The quirkiness of governmental accounting that benefited the Mint combined with a silly government program mandating dollar coin production was a once in a lifetime combination that will never re-occur. Tighter corporate and governmental oversight will never let these things happen again.

Manufactured spending techniques like opening bank accounts with large credit card funding were mostly a result of three companies selling banking software to various banks without placing a limit on the initial deposits at first. It was a cousin to the same high-tech bubble that produced opportunities for person-to-person payments and that bubble has burst with the need to show profits and put internal controls in place.

Credit card churning has now been limited by most if not all of the big banks, and they don't make more big banks. Decades from now it will still be Chase and American Express issuing any reward cards.

Manufactured spending is still alive but is a shadow of its former self with all of the limits in place by the stores and all of the card shutdowns. And for a lot of folks in specific geographic regions it is dead.

I simply do not see what could possibly arise that would allow someone to accumulate megamiles. The airlines have reduced capacity in terms of seats and have to play a balancing act between the bad publicity of not allowing them to be used (even though a record number of unredeemed miles are outstanding) and losing the cash that would come from selling those seats.

We will likely see a continuation of the British Airways / Virgin Atlantic technique of requiring large cash "taxes and fees" to redeem the miles, scarce award availability that must be booked almost a year in advance, and an increase in the number of miles required to redeem. They will have no desire to increase the quantity of unredeemed miles outstanding by rewarding frequent fliers and no incentive to do so anyway since the industry has become an oligopoly. The companies that used to buy miles from the airlines for a penny each will realize that their customers see no value to those miles and decline to purchase them from the airlines at such a price, and the airlines will not want to sell them cheap since the airlines are now profitable and dealing with too many outstanding miles anyway.

The biggest long-term worry to me would be a change in the system that allows high revenue spenders to have access to award availability not open to others. I believe that system already exists, but I figure it will be expanded.

The future of these programs has never looked so bleak.

StartinSanDiego

I think your first statement is accurate, Andy2. There simply isn't any way to accumulate mega-miles. For the few business travelers, perhaps, but even the ButtInSeat miles have been slashed, and it's going to take an awful lot of crisscrossing the countryside to get enough miles for a redemption.

Then take the average Joe with one new credit card. When an economy seat is 65K points/miles for the commonplace, "gee, let's go some where with the wife," points holder, it won't be long before discouragement sets in. How on earth will they spend enough money to get the points to actually go somewhere? They just don't see the value in the programs if the goals are so unattainable. The stick has to be short for the carrot to lure you along. Think of how many people in the past few years that you (average FT travel hacker) has coaxed into this game. For me, it's 3 active, miles earning, travel hacking individuals, and about half a dozen who learned a little and are using their miles in a more effective manner. All the rest just glazed over and never even tried. As noted above, I think they missed the easy pickings. The Chase Sapphire Reserve card just came out. Read through that active thread and note just how many FT's are under 5/24.

People need to feel that there is a value to these points/programs. I think this is why we are seeing more incentives... spend bonuses, reduced mileage "award sales" and the like. The airlines have got to keep the customers active and involved, without making it too gloriously easy for folks like us. They also need to reduce the level of unused miles out there in the world, there is simply a bloated supply.

Travel Codex has a great article today, "Are your miles getting more valuable?": http://www.travelcodex.com/2016/08/s...ravel+Codex%29

AlohaDaveKennedy

Don't forget Kennedy's Law - There are only three certainties in life - death, taxes and that internal controls degrade over time. As an old auditor I never found an immortal internal control.

MS lives on courtesy of Marie Laveaux. For every technique that dies, another rises from the ground. MS is a shadow of itself only because it thrives in the shadows.

AlohaDaveKennedy

When you carry inventory, "award sales" are sweet.

jordan_h

This point is the main thing that gives me hope for outsize-value redemptions in the future. Look at VX, which is revenue-based for their own flights but has an award chart for partner redemptions. Delta could probably do that if they wanted (and they kind of already do, since seats on their own flights are usually so much more expensive than on partners).

AlphaMan

Have you tried booking VA J or SQ J through VX? Good luck.

It's still valuable enough though getting to the point where I will probably stop or sit out until I'm under 5/24 so I can churn Chase again.

While I agree with you that the "prizes" can appear unattainable, they can be gotten pretty easy and 1 amazing trip is more than enough to make it worthwhile. I won't get into my entire list of trips/flights I've gotten because of travel hacking but 1 that stands out, 1 that is coming soon, and 1 that is coming in the future.

Past Trip: RT J on Air Tahiti Nui and 6 nights of IC Thalasso Bora Bora completely paid with points and miles.

Coming Trip: RT F Suite on SQ to Tokyo. Completely paid with miles. Also got 2 free nights at Conrad Tokyo, 2 free nights at PH Tokyo, 2 free nights at Intercontinental Osaka. All on points/miles/free night certs.

Future Trip: RT J on Etihad to Madlives with AA miles. Will cash in 125K Hyatt points for 5 nights at the PH Maldives.

3 ridiculous trips that would have cost me a fortune to pay outright in cash. Add up the cash value of all the above and we are easily talking $50,000 (minimum).

StartinSanDiego

Congrats, AlphaMan, on some amazing award travel. And, welcome to FT.

I love to research, and stumbled upon this article on credit card acquisition. It might be of interest to some of you, although it's circa 2013, which was, perhaps, a banner year for our hobby. In my opinion, though, the "Mr & Mrs Smith compare the credit card offers in their mailbox and choose the one with no foreign transaction fee" is still, today or 2013, not at all indicative of most credit card holders.

Most of the non- travel hacking people that I know just eventually get a new card when the timing is right. They need to buy something! Or, more likely, when the timing is right AND an appealing offer just showed up in their mail box. In other words, more than marketing, it's mostly pure luck and timing, with maybe a small scoop of analysis thrown in. They don't shop around, and they might not ask about what the card does in comparison to other cards. Very few of them use and exploit the value of the cards/miles/points/perks to the fullest. I think the fictional Mr. & Mrs. Smith in the marketing study are already a far cut above the average consumer. This is what the bank marketing departments wish motivated the average consumer. It's far more likely that it's sheer luck and timing. At a store, it might be as simple as 10% off of that purchase they are about to make.

The two big exceptions to this seems to be lounge access and cash back. Anyone I know with a credit card with either of those two perks talks about it and is pleased.

http://www.mckinsey.com/~/media/McKi...tribution.ashx

sdsearch

Different charts for your own metal vs partner airlines are common, and have been for a long time.

But VS doesn't fly longhaul international business (or first) class on their own planes. I don' t know of a single airline that's gone to revenue-based redemption that does. And if you compare the redemption charts for economy vs business, which is usually a 1:2 to 1:3 ratio, to the cash cost (and therefore revenue-based redemption cost) of those same seats, which is often a 1:5 or more ratio (economy:business).

So it's not at all clear how a legacy airline which flies longhaul international multi-cabin planes could come up with a "pure" revenue-based redemption chart even for its own metal, given that all the examples of "pure" revenue-based redemption on their own metal are airlines without such flights.

And Delta is a poor example of everything except obfuscation, of which it is an excellent example. They've eliminated the publishing of award charts, and so what they cost is hard to determine. Maybe awards on their own metal at low cost are fleeting, but they're do exist here and there (I booked one last year for LAX-xxx-AMS business class RT for 125k for April -- "shoulder season" -- of this year; apparently they don't make such redemptions available in summer but I didn't want to go in summer, I wanted to go in flower show season). How is that so different from another airline which has a fixed miles cost for "saver" redemptions but hardly ever makes them available (at the same ratio that Delta makes their lowest tier available)?

Basically, you could look at Delta as having "saver" redemptions (with low availability) plus "dynamic" pricing in "anytime" awards. And other carriers (such as American) are indeed experimenting with "dynamic" pricing in "anytime" awards (while still calling it "sort of" a two-tier chart, just with the second tier no longer having a consistent cost, or with the second tier having sub-tiers, whatever).

sbm12

The goal of the programs is to make money, not to support a niche industry and group of customers whose sole focus is to screw the company every which way they can. Getting rid of churners/MSers is good for business, not bad for business. Expecting that to soften up is misguided IMO.

The trend towards revenue-based is growing and will continue to be part of the evolution of the programs. Even where it is not 1:1 because of partner arrangements it is tied to fare classes, rewarding higher spend (on average) over lower spend.

The companies tolerate the edge cases until they can build up better controls to eliminate them. Not because they want those customers but because they don't want to kill off the other customers along the way. As they can better manage their systems the gamers will be pressured out. Some will remain, jumping through additional hoops to get where they're going, but the goal is to cut that out and it is not likely to come back.

It is not that hard. JetBlue does it already with its Mint product and a variable value revenue-based redemption model. There's no rule that says Biz/First redemption has to come at a better ratio than coach like some zone-based charts provide today.

lwildernorva

Although Gary has the degree in economics, it appears that you have a better grasp of the "margin" argument. I believe that businesses indeed "tolerate" such use until they make it a priority to fix the issues. Look at Citi. Threads at FT regularly included posts that heaped scorned on Citi for awful IT systems that allowed massive gaming of their various CC promotions.

In retrospect, those systems appear to have shared common issues--look at how quickly Citi shut down serial Hilton apps and then AA personal apps and then AA biz apps. Just how stupid does Citi look now? Or Amex? Or Chase?

Rules may be loosened eventually as the cyclical pendulum can swing too far, but the CC companies and the airlines have recast the playing field. The CC companies understand that "good" customers tend to have a few credit cards that they use frequently and over an extended period of time. FF programs understand that there's nothing sacrosanct about fixed "saver" and "standard" awards. As a result, it's becoming harder--not impossible, just harder--to find exceptional values in the CC/FF world.

There may always be "sweet" spots in any program, but the CC companies and FF programs are now more sensitive to those spots and keep an eye on the spots that get outsized usage so that they can be revised before causing too much economic damage.

sdsearch

The difference between coach prices in dollars and Mint prices in dollars (or any domestic First price in dollars) is much closer than the deep chasm between international longhaul coach vs business/first prices in dollars.

So just because JetBlue has done it domestically, where comparatively few people care that much which cabin they fly in anyway, and where the differences between cabins are not so night-and-day (pun intended; lie-flat seats vs barely-recline seats) doesn't really mean anything IMHO.

And in case you haven't noticed, business class tends to be priced quite differently than coach. On many routes, business class seats are the same price pretty much all the time (both in terms of when you fly and when you book), while in coach the price usually varies tremendously depending on when you fly and when you book.

And because of that, right now there's no correlation between when business class seats are made available as awards and a change in price. Airlines like it that way, because they can make seats available to "leisure" flyers through miles without having to lower cash prices to "dilute the value" of the same seats to "business" flyers. They couldn't do that if it were "pure" revenue redemption.

Besides, what's the big advantage to legacy airlines of having "pure" revenue redemption? The advantage of going to revenue-based on earning means they reward more those who spend more (as opposed to just those why fly more). But going to revenue-based on redemption doesn't bring in any more money that I can see, and it risks having the separate mechanisms for making awards available without lowering cash prices, and undoing that "split personality" might actually cause airlines that go to revenue redemption to make less money !

Dadaluma83

The result for me is I switched from an AA loyalist to a complete free agent. The combination of revenue based earn and hardly any saver award availability did it for me.

For the last few years I opened up a Citi AA card, took advantage of the merger by getting a Barclay US card to combine miles, and for my flying I would try my best to stay on AA, they were usually the cheapest, and when they werent I would justify it somehow. Like when I went to Ireland a few years back. Delta was cheaper by about 100 dollars, but I booked with AA and connected in London with a 23 hour layover and justified the higher price by getting to see London for a day. Now I would just book the cheapest. I wasnt a churner or MSer, I just used the card for all my purchases and flew on them every chance I got.

Now I use the capital one venture for the flexibility, and the only miles I earn are BIS. I figure I wont go out of my way to earn miles that constantly get harder to use and are devalued, but if I find myself with enough for an award and its available why not?

sbm12

He understands the business just fine: His (public) business is selling credit cards so he plays that role.

Yup.
The framework was established. Even if the exact same numbers are not used, building a system that successfully implements such does matter IMO. Also, Mint is lie-flat so the difference in seats there is arguably more pronounced than, say, what EK offers in Y v C with angle-flat business seats.

Business class prices vary dramatically by route, advance purchase, minimum stay and other factors, jut like coach fares do. Even excluding "mistake" fares I've seen a range of 3-4x from the low to high prices on many routes. A range of $2000-8000 in J or $500-2000 in Y is the same proportions and those numbers are far from unreasonable in long-haul markets.


Simplifies the program and gets rid of the "sweet spot" redemptions that are abused. That many airlines already allocate a dollar value to points and use the award price as an internal metric to help decide if award inventory should be made available furthers the idea that the market is already moving this direction.

It can reduce costs in very real ways.

Unlikely.