Originally Posted by
sbm12
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.
If I understood your scenario correctly (and if I didn't, I apologize) you're discussing a passenger booking one roundtrip reward as compared to one or two passengers booking two one-way awards.
There is no doubt that is precisely the same thing. There is no benefit to the airline, nor is there a cost. It's a zero-sum game.
If anything, a slight advantage still goes to the two one-way redeemers, because in most cases each redemption involves a cash fee, so that the cash earned from two one-way redemptions will exceed the cash earned from one roundtrip redemption.
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.
Of course, but this is where the company can "outplay" the players, because every time one of these wily customers plays the system, he or she is adding asymmetry to the system. The one-way award is worth at least the same amount per segment as the rt, but now a roundtrip redeemer is locked out of at least one seat on this segment. That fact alone benefits the company.
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.
In the traditional linear analysis of this asset, that has been the going wisdom in the business. But for all the reasons we have discussed here, I think that is not necessarily correct.
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.
Obviously the airlines would prefer to sell a round-trip ticket than to have you go one-way on an award ticket and then sell you the return. But by the same token the airline also prefers to sell you a one-way ticket and have you take the freebie on the other leg rather than have you do the freebie in both directions. It's the same principle.
Of course, the airlines are the ones who came up with the idea of award travel, so sooner or later they have to allow redemption. But if a one-way award allows them to give the customer the option to only redeem a one-way award and then spend cash for the other leg, then they have added a revenue opportunity, all the while adding to the scarcity of inventory to roundtrip redeemers through asymmetry.
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.
Here's the thing, the awards are easier to book only for the one-way redeemers. As a direct result of the one-way redeemers, the awards become harder to book for the roundtrippers. On balance, therefore, fewer total miles are likely to be used in the long-run, which benefits the company.
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.
Even if the customer takes the other segment on a different carrier, the company still benefits, because this behavior adds to the asymmetry. Of course, they would prefer that you returned on their airline, whether by using cash or miles, but every one-way award used blocks double the miles from being redeemed on a roundrip award.