nsx

Darren Booth reports that at this weekend's Frequent Traveler University event
Echoing his earlier predictions,
Gary Leff said:
In his earlier predictions Gary pointed out that revenue-based earnings do not need to be coupled with revenue-based redemption. Southwest, JetBlue, and Virgin America do it that way, but a program could have chart-based redemption and revenue-based earning.

In fact, there once was such a program: America West's original Flight Fund. Wouldn't it be ironic if US Airways' new FF program were a near-copy of the old Flight Fund?

A program need not offer only chart-based or only revenue-based redemption. I'm hoping that both options are offered in the new programs, and that the award charts are not devalued too severely.

More or less by accident, Southwest Airlines currently offers both options. In the 2011 roll-out of the new Rapid Rewards, Southwest made it clear that the old "standard" Awards (16 credits for a capacity-controlled free round trip) were being phased out. Then this year the option to transfer points from Southwest to AirTran appeared. Now we can move points to AirTran credits for fixed-price redemption (also 16 credits per round trip) on AirTran, or transfer the 16 credits right back to Southwest for fixed-price redemption at the same rate.

For me, Southwest's new program devalued earnings by 2/3 from the ridiculously generous level that had persisted for more years than I ever expected. But on the redemption side I now have two options where once there is one. That's some consolation for the loss in earnings.

If US Airways and the other airlines are smart, they will move to revenue-based earnings and dual-track redemption, the same combination that Southwest backed into. I'm hoping that the other airlines do it intentionally. That will reduce our earnings on low fares but it will preserve the value of our current miles.

This structure will also preserve the value of miles earned from credit cards. This is crucial to the banks. As Gary Leff wrote:

tommyleo

Before anyone freaks out about this prediction, consider that it is still just one man's (Randy's) prediction of "certain." And a closer look at Gary Leff's linked predictions shows that Gary is not in any way strongly suggesting that US will go this route anytime soon. In fact, Gary writes, "I also don’t think it’s coming down the pike with the rest of the legacy carriers as quickly as Randy seems to imply." Yet that very telling quote was not included above. That's irresponsible reporting.

nsx

Yeah, sorry about that. Randy expects announcements in 2013 with 2014 being the transition year during which you will still be able to use the old program rules. I should have remembered that because I'm the one who asked about the transition.

In my opinion we have at a minimum until the end of 2014 to earn and burn miles under current rules. Maybe one year longer if the AA merger drags out. The comments in the OP refer to the post-transition program.

ByrdluvsAWACO

This is one of the primary reasons I don't want to see a merger. Doug Parker has a great history of screwing FFP members. If he gets his hands on AA, you can expect "enhancements" and devaluations to quickly follow.

etsmyers

Sort of Scary and has me a little concerned.

I made CP for the last 4:6 years, averaging 150+ segments.
Ball park that puts me at 40 4 segment flights, with an average cost of $375, some more, some less. This puts me at 15k for the year. Wondering what the spend threshold would be for status.

jfinsocal

They all "want" to go to a revenue based program but one of the legacies will need to jump first.

1) AA - Doubtful because they are still losing money and are being proactive in pursuing elites through matches and promos.

2) UA - Nothing would surprise me with these clowns but would they risk pissing off their core customers even more?

3) US - You'd see leakage to UA/AA/DL - don't know if they want to go there. I would probably leave if they made major changes - I pay for my own tickets and am price sensitive.

4) DL - They are the key player here - a saturated elite base and a FFP already devalued. My guess is they would be the first (second after WN actually) to go to a revenue based program.

thomwithanh

Once DL pulls the trigger do you think the others would follow suit quickly?

nsx

Rumors are that other airlines are well along in their software development. But that's what everyone said about Southwest, and their roll-out was delayed about 18 months by software development staffing and implementation difficulties. Even after that delay the roll-out was a fiasco, with server overload locking users out for the first week or so.

This kind of program overhaul is a huge software challenge. Starting the transition at the beginning of 2014 will be much easier said than done.

thomwithanh

It'd also mean the end of alliance awards (whether *A or *O at that point) as we know them, unless they went to a dual system like QF or AC with chart based "Classic Awards" along with dynamic pricing based on the going fare.

I don't see myself being able to retain elite status anymore either - assuming qualifying on segments is deep-sixed along with earning based on BIS.

javacodeguy

My guess is the threshold for CP would have to be between 10k and 15k. Status on VX is revenue based and Gold requires 10k in spend, so I'd expect the benefits that come with CP status would require a bit more spend.

thomwithanh

Weren't they talking about 25k over at United for 1K?

pbuntrock

I think this would be the dumbest thing that US could do. They have a very limited European network and no Asian network. I think I'm fairly typical for a long haul flyer. I use US almost exclusively for domestic, *A carriers for Europe and Asia and book my miles to US. The minute this happens I move to UA (if I stay in *A) or to AA/DL; US would no longer make sense for me. US loses my 6-8 transcons per year and assorted other flights.

US also has a very robust and profitable regional business. These travelers get their status on segments. This move will push them to be "free agents" as they will never be able to spend enough to make higher level status.

Of all of the legacy's it seem to me that US would be in the weakest position to do this and actually make it work.

geo1005

Agreed. The reason the revenue based model works for some airlines is that they have premium cabins that actually fill with paid passengers (think BA). US is not in a position to play hardball with their elites. Make it too difficult to obtain elite status (revenue based) and US becomes the easiest to switch away from. Sure they will have some captive members but the rest will shy away and become free agents (crediting pbuntrock for that term).

thomwithanh

^ Pbuntrock. It's a way to differentiate those who are driven out of the FF game from Kayakers (inexperienced travelers who go with the bottom line cheapest option because they don't know better/ care).

nsx

Revenue-based earning programs are aimed at customers who are just as smart as we are but who don't have the time, energy, or interest to learn the FF game. These customers resent the fact current programs reward OCD people like us and shortchange the non-gamers.

These regular Joe customers paying high fares are more numerous than us and they add up to a whole lot more revenue than us. Southwest is apparently doing very well at attracting high-revenue non-gamers. The non-gamers are smart enough to see that Southwest's top fare earns a 20% effective rebate (40% for top elites!) with zero need to game the system and zero difficulty redeeming awards. The ratio of earnings to effort cannot be beaten.

Very few FF program members are FTers or travel neophytes. Most of them are capable professionals who have lives and don't want to waste their time gaming FF programs. Revenue-based earning is an advantage to such people. We, not they, are the outliers.

Hotel programs already use revenue-based earning and chart-based redemption. Only hotels.com uses revenue-based redemption. That program is eminently fair and simple, meaning that it fits the non-gamers perfectly too.

Don't get me wrong. I love gaming these programs as much as almost anyone here. But I can see that we are not the kind of customers that the programs want to attract. The programs want high-revenue, low-maintenance customers. We are the opposite.