Originally Posted by
TWA Fan 1
Of course my example is simplistic. It was intended to be, in order to make the point.
In the real world, there are millions of miles in customers' accounts, but relatively fewer award seats. If anything, the real world would magnify the effect I described in my simplistic example, because the asymmetry would affect many more potential roundtrip redeemers.
If there are actually 200,000 points out there split amongst eight passengers each with 25,000 (almost equally simplistic an example) then It doesn't really matter if one of the eight redeems for a r/t or if two passengers each redeem 12,500 for a o/w trip each. The same total number of miles is redeemed. In that sense the airline still collects 100% of the total miles that were going to be redeemed, just from two passengers rather than one.
But when the opportunity to play a bit of arbitrage with the miles and cash comes into play - namely the ability to book one way with cash and the other with miles - the difficulty in booking reward trips decreases. Certainly the chances of a passenger booking a one-way reward to London and then paying for a one-way ticket home are lower than NYC-LAX and back, but the option is there. Folks have been known to do similar things to get to CMB to start RTW trips, for example.
It is easier to book a reward trip when you only have to find inventory in one direction rather than both. Reducing the barriers to reward redemption increases the value to the consumer and that inherently reduces the value to the airline.
Originally Posted by
TWA Fan 1
As far as the second point, I still don't see how the airline suffers. No matter what, as long as customers are paying cash and keeping the miles in their accounts, the company benefits. The more expensive the one-way ticket paid in cash, the more the company benefits. But even if the one-way ticket is dirt cheap, the company benefits twice, first by keeping the miles away from an award and, two, by earning at least a little cash it othwerise would not have.
The airlines would much rather sell you a round-trip ticket than a one-way reward and a one-way revenue ticket in the vast majority of cases. Yes, the miles are a liability on the books but the cash income is worth more, even on those $99 transcon fares. It is all relative, so to speak, but the airline benefits more from the cash.
On the asymmetry front, back to our eight customers above. When it is easier for any one of the eight to book any one reward segment then the overall number of reward seats redeemed goes up, not down. Customer number 6 might not get the reward trip she wants but if number 3 and number 8 each book a one-way then the net effect to the carrier is the same in terms of miles off the books and revenue impact.
But if there are only reward seats on odd days and each of the three passengers want an outbound on an odd day and a return on an even day then you can either have some miles redeemed and less cash or all cash and customers still earning miles rather than burning them. The latter scenario is better for the carrier.
Originally Posted by
TWA Fan 1
The point remains that one-way redeemers add to the scarcity of roundtrip award inventory by creating asymmetry. If they are really doing a roundtrip by buying one of the legs, then the company benefits anyway.
Yes and no. The company clearly benefits more in terms of revenue if every redemption is a one way with cash for the other half. But there is no guarantee that the other half will be on the same carrier. There is no guarantee that the same overall number of redemptions would happen. And at the very macro level there is no reason to believe that the "other half" of that asymmetric scenario you've described would actually not be redeemed by another customer somewhere down the line.