<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by RustyC:
And as for hard numbers on non-flight miles issued, the fact that they are so hard to come by should be an additional red flag.
Maybe a news outlet like the New York Times or WSJ should devote some serious investigative resources into finding out how much revenue that Leo, Gordo and others are looking for from these non-flight miles that are looking more and more like raffle tickets.</font>
For some good stats
http://www.webflyer.com/company/pres...cumulation.php
http://www.webflyer.com/company/pres...ts/top_ten.php
The number of miles awarded has increased at a geometric mean rate of 19% per year while the miles redeemed have increased at only a 10% rate. Note the big increase in miles awarded in 1995 as partners fully entered the picture.
In the early years of FF programs, miles often expired thus you used them or lost them. Now few programs have expiration dates, thus hoarding (saving) for retirement is possible, but clearly the trend seems to be that P, the number miles needed for redeeming, is higher.
The data show that the redemptions, Q, actually fell slightly from 1998 to 2002. I would argue that this may not have been only the airlines award holding inventory constant but the smart use of miles by consumers. If a transcon costs $198 in coach and Transatlantic costs $400, why bother using miles? As domestic prices rise, the use of miles will increase.
Moreover, I watched many FTers transfer miles to Hilton via reward exchange, but alas only AA is left there as a US partner.
As the expectation of P rising increases, consumers will rush to get their miles out, increasing V, but if Q is fixed, which I don't think it is, P must rise. Otoh, I foresee more consumers using their miles for award tickets to easy to get routes, those with excess capacity and less popular. Overall, I think both P and V will rise.
As for WSJ and New York Times looking into this. The airlines are losing billions of dollars a year collectively and selling miles is one bright spot for them. You can't open the Journal without hitting an article gleaned from the pages of FlyerTalk, and the Times has not missed this news either. They have published articles very similar to the Economist's article but customer relationship programs are still working the bugs out as firms try to increase profits and consumers, especially the gamers on FT, use the system to their best personal advantage.
Don't like the term "gamers"? That is what CRM programs call people who fly all around the world just to collect miles, who open credit cards just for the bonus miles, and read the fine print just the way WC Fields read the Bible "looking for loopholes."