Air Houston

The long term effect will be less gaming of the system in a way that disadvantages the airline. Flyers won't be able to earn a free $1,000 trip by purchasing and flying $800 worth of cheap transcon tickets like might have been possible in the past.

This will lead to relatively more appreciation of the customers that provide the incremental revenue needed to make the airline profitable enough to consider expanding or upgrading their offering. Customers who buy last minute $1500 tickets for the convenience of going non-stop will be incentivized at the expense of low-price buyers. Those price flyers are still important to the airline - they are needed to fill up the airplanes - but there is no need to provide an incentive like free bags and upgrades when they will pick based only on price anyway.

B787938

UA is getting what they want. They are focusing on super elite GS who fly full fare J to Asia and Europe - and kettles who have an Explorer card. For the former Prem Execs who fly 60k of last minute domestic travel, we are totally hosed.

This year, most of my last minute mid con and cross country travel is on AS and DL. I'm starting to really like DL when I can't go AS. AS MVPG means I usually get exit row aisles on DL flights and the occasional upgrade. My upgrade success on DL as an an AS MVPG is about the same as a UA Gold.

My UA travel this year has been MP burn and A fares purchased when my plans allow a 21-day out booking. Love me some nice A fares...and there have been some nice ones.

Palal

In the medium term, UAX should go away.

IADDCA

All I know is that I plan to start playing the game where I try to wait until the last moment to purchase a ticket instead of purchasing tickets well in advance. I work for a large company where they treat me and my thousands of peers like a commodity.

At this point, if you don't care what the company is paying for your ticket, you want to purchase a ticket sooner so that you can get the good seat. United rewards you the same whether you purchase well in advance and pay $500 or purchase at the last minute for $2500. You get the same number of miles.

Next year, if you don't care what the company is paying for your ticket (since they cut your healthcare benefits), you purchase on the last day that you think you can get a decent seat. In that case, my boss (who just scr3w3d my over by cutting my healthcare benefits), will now be paying $2500 because I want the status and United wants the money (which doesn't bother me since my bosses stockholder get the bill).

I wonder how many others are going to play it that way.

Xyzzy

I don't think UA is early at all. UA fllowed DL and DL followed a bunch of smaller carriers and the European ones into a program that rewards revenue and not distance.

The key thing here that I've not seen anyone mention yet is what the reaction of two key entities 1) government and 2) business will be.

1) Government:
A while back the IRS decided it could not tax FF benefits as they were a form of rebate whose value can not be calculated. Now that the rebate amount is tied at the hip to the spend amount the IRS could well change its mind on this issue.

2) Business
Businesses like paying less. Business like discounts. Business like rebates. Now that the miles are tied to dollars businesses can better value what they are paying for the miles. yes - as purchasers of tickets they are paying for them. They could well get airlines to agree to discouted fares in lieu of miles. Another reason they might do this? Because many people are going to try to game the system as described here:

Airlines make a LOT of money from their mileage programs. They may think this is a wonderful new way to monetize their high value customers. But in doing so they've totally changed the value proposition in a way that could very well kill the goose that laid the golden egg.

callum9999

That's all well and good until the bosses notice that your travel bill has suddenly multiplied by a factor of 5 so they look into it and see you're deliberately costing them more money...

Tchiowa

... and then your bosses change that to say you were costing them money. Bye!!

PushingTin

Seems to me that with the new dollars-miles relationship, some people could get silly levels of miles from overseas J fares. But at the same time, they will have a tendency to be GS type people if they fly a good amount. What a GS would do with all those miles, if they are getting CPUs domestically and already flying J internationally? I think that they will accumulate a lot of miles and in response UA will raise the 'miles' for free tickets- removing even further the infrequent fliers earning maybe 10-30k miles a year.

BearX220

Weigh that against the loss of extra revenue that used to advantage the airline -- from customers who opted for United over the cheapest competitor because of the loyalty / reward factor, which is now much deemphasized -- and I think it's a wash at best.

First, be glad you don't work for me, because if I saw this you'd be polishing your resume up soon enough. Second, relatively few employees are in a position to deliberately balloon their subsidized travel spend for reasons of revenge, sabotage, or personal aggrandizement; they are not a big enough cohort for UA to hang a business strategy on. Third, do the dynamic analysis: businesses will catch on and modify policy. If I were running a large team of traveling workers, PQD would result in my transferring travel decision-making out of my workers' hands, over to a travel desk focused on low price, with zero weight assigned to traveler preferences.

Quite possible -- it would be hilarious if business flyers crowing over these developments found themselves in J or F owing to corporate contracts, but earning no miles.

They just make loyalty an ever-less-relevant factor because they don't like the "cost" of loyalty rewards, but pushing most customers to simply shop for lowest prices imposes a probably bigger cost in lost revenue in the long run.

escapefromphl

What they want to do is decrease the amount of miles they issue for flying, which they see as an expense and increase the sale of miles that they sell to partners, which is revenue in the door. Eventually they would like to be in a position where they profit from the sale of miles even after the cost of redemption is taken into consideration. I agree though that they risk losing leverage they have on the frequent flier. First they largely stripped the upgrade benefits for 1K's & now they are gutting the mileage earning ability. Consultants have been pushing this stuff to the airlines for a while now:

http://blog.wandr.me/2014/06/the-two...-award-points/

Southwest Companion pass here I come.

xox

We don't really have the numbers to play with so we can't really do the math.

But clearly the UA bean counters (who obviously would have access to the stats) believe the benefits UA was giving for the amount paid were too rich, and cutting certain benefits and requiring stricter qualification levels for elite levels would lead to greater profit.

Will the cost savings from RDM changes and tying elite status directly to airfare drive away so many elites that the lost revenue to UA will be greater than the savings? That's the gamble.

But United has not dramatically altered what I consider the top benefits at each elite level so I don't expect a mass exodus. (I know e.g. that SDC is important to many, but not to us.)

Top benefits by elite level (my list):

Silver: Economy plus at checkin ? / 1 free checked bag (get a credit card instead?)

Gold: Star Alliance Gold benefits (international lounges) + 3 free (heavy) bags + Silver

Platinum: Boarding Group 1? + Gold (#7 vs. #19 at boarding on the upgrade list? )

1k: 6 GPUs, 2 RPUs + Platinum

I speculate that most of us don't really care that much about RDM. My wife and I are sitting on over 1MM miles but we rarely use them/because we rarely use them. I like having them in the bank, I don't like watching them lose value, and I don't like that we will have to spend at least .18 per airfare mile post-March to break even with the current situation (we will probably spend about .15 per mile this year). But still it's not even close to being a dealbreaker for us.

I don't really think that the 2.5/5/7.5/10k PQD will drive away too many people. Now undoubtedly a number of elites skated on the PQD margins before, flying 1k and spending $9k, spending $4k and making Gold, etc. If elite status is really important to this group, they will bump up their spending. If not, they'll probably kayak and still occasionally fly UA. (UA fares are very competitive from my home of CHS.) I have been considering at what PQD level we would switch to AA, even though we all suspect AA will eventually require PQD.

The dealbreaker for us would be the GPUs. DL only offers them at 125k miles and then only 4 SWUs. AA has a better deal for SWUs, but their network isn't comparable and not as many of their TPACs and TATLs have lie flat seating. (And I suspect the SWU redemptions on their lie flat planes are the most difficult.) We fly to Asia/Australia at least twice a year and the $2k V/W fare vs $7k C fare means at least $20k saved for us. And we haven't suffered the discomfort of a TPAC in Y in several years.

So I do believe the savings achieved with the program changes will outweigh lost revenue from elites moving to kayak or other airlines.

inpd

Perhaps thats one of the answers. Some of us use each and every mile each year every year to fly on holidays with kids. For me the lost of RDMs is huge and I've already moved a lot of my business to AA. But from your perspective its a minor blip and other parts of MP are much more important. From my perspective I can't recall the last time I checked 3 large bags!

Lori_Q

That scenario has occurred multiple times already. United responded by offering promotions, extended status, and other perks. With all of these changes they're getting more elbow room to respond when the economy tanks, there's a PR disaster, or some other business risk occurs. If they can get us accustomed to bad treatment, slightly-less-bad treatment will seem like a reward.

Examples: In 2003 they extended the elite qualification into February and dropped the fares. (I went to Europe every weekend that month.) The first SWUs that were valid only for high fares (1999?) resulted in a mailing of those Sweet Spot upgrade certificates, ostensibly to celebrate the US Open, but more likely to mollify a lot of very-angry 1K members. And there have been lots of other elite-qualification and redeemable-mile bonuses, targeted at customers whose behavior they want to modify.