Let me see if I understand this correctly:

An airline creates a miles program to encourage loyalty and return business.

The program is designed so that loyal customers earn miles.

Miles can be used to book future flights.

When the loyal customer attempts to use those miles, 10 months in advance, there are no awards seats available.

When the loyal customer then tries to use miles to upgrade, he is charged the economy seat price, plus 40k miles, then on top of that he is charged $1,100 to use those miles that he has earned. That is almost double the cost of the original economy seat.

Can anyone justify this as encouraging loyalty not to mention breaking an agreement that miles can be used for future flights?

How does this encourage loyalty?