Originally Posted by
Darlox
There's some old adages in science, that also apply to business, about changing multiple variables simultaneously. When things go badly, it's difficult to tell which change was responsible, and so you make bad decisions based on the data...
Great point. Among other things I do for a living, I design surveys, mostly in B2B applications. A common mistake clients want me to make as they edit drafts is testing for multiple variables in a single query. You test for one variable at a time, or the resulting data can't point you to what to adjust.
Originally Posted by Darlox
In addition to all of the other merger-related changes in the last ~16 months:
Nobody knows what effect PQD will actually have on recurring revenue.
Nobody knows what effect ceding Int'l routes to *A partners (JV or otherwise) will have on long-term traffic or buying patterns. (Or why these routes are profitable, or strategically valuable, for partners but not UA...)
Nobody knows what effect the two above, combined, will have long-term, so long as UA forces 016-plating, but then cannot (or will not) sell partner flights at consistently-competitive fares, after they've forced Int'l traffic onto those partners.
And certainly nobody knows what effect other loyalty and associated product (Club, Premier-status value, etc...) changes will have on HVFs or FFs in general.
UA clearly has hypotheses in mind for all their experiments. I think in pretty much every case they are risky bets:
PQD:
UA hypothesis: FFers will divert spend to UA metal and will pay unnecessarily higher prices for 016-ticketed partner flights.
Likely outcome of the experiment: revenue-neutral at best as many customers will prefer partner metal over increasingly flimsy MP benefits, and will resist the added costs of booking partners through UA.
Network reductions / ceding service to JV partners:
UA hypothesis: fly less, make more money.
Likely outcome: reduced business from FFers over time as holes in the network degrade the whole UA value prop.
Cutting mainline capacity:
UA hypothesis: right-sizing to regionals means higher load factors, more profit.
Likely outcome: further erodes the network value prop, and an increasing number of us facing a 1000+ mile plus sector would rather fly a Southwest 737 than a UAX CRJ, especially with...
Reduced MP benefits:
UA hypothesis: revenue-positive, as their retention costs go down.
Likely outcome: revenue-negative, as their acquisition costs go up. (We already know about the HVF exodus; replacing them isn't cost free, and the replacement customers represent less revenue for the company, so you need more of them. It takes 8 $1,000-a-year customers to replace one $8,000-a-year customer.)
Whenever another cut, reduction, or fee/price hike comes to light, there's a loyal chorus who retort that "United is a business" and "United has a right to make a profit," etc. But
in aggregate all these reductions could thin the value proposition so much, they have the ironic effect of worsening UA's fortunes. That is what I think is happening.