Originally Posted by
Kacee
This is one possibility.
It's also possible that the reason for the devaluation was as stated by UA, namely to reduce costs incurred in paying for partner awards. This seems to me the more likely explanation, in fact, given the market's focus on earnings rather than balance sheet.
Of course, since none of us have access either to UA's internal financials nor its strategic plans, we are all speculating as to what will happen with miles pricing.
I do believe though that the recent drop from 2.3 cpm to 2.1 cpm was not coincidental, and that we will see further price cuts as the effects of the devaluation are slowly acknowledged in the market. To me, this is basic microeconomics. If you overcharge for a product in a competitive market, demand will eventually drop, and the net effect will not be revenue neutral.
I think we are really saying the same thing in two different ways. Reducing the costs of paying for partner awards simultaneously reduces the liability on the balance sheet. They no longer have that ongoing threat hanging over their heads, and apparently there were a lot of people taking advantage of it, judging from all the outrage.
I don't fault them for their focus on earnings, but they seem to be going about it in very peculiar and ineffective ways. Cuts are the only real noticeable method, and today's customer is simply too demanding for that to grow legs. That, of course, is an entirely different discussion.
As for the "drop" you cite from $0.023 to $0.021, that is really interesting. We regularly see different offers being proposed to different people here, and this is another fine example. I have been seeing $0.021 for years on international flights. This usually includes even my award bookings on CM or AV within Latin America which are always under 1000 miles.
If you have been receiving $0.023 offers, but now see $0.021, perhaps they are expanding the group of customers to whom they are offering the lower rates. That would be a price decrease of sorts, without lowering the bottom rate. You're certainly right in stating that we are simply speculating, but we are a pretty astute group.
On a side note, back before they changed the award offers to a greater number of miles than the scheduled flight, I would often buy the accelerators on my flights inside Latin America. I liked being able to spend very few dollars to get credit for the actual miles I was flying. While the additional mileage offers are probably a good thing for those in need overall, I have no interest in buying 6000 miles for a 1400 mile trip, where I may have still had an interest in buying the 1400 miles.
Perhaps I could still do it 1 out of every 4 if the price was right, but it's still a psychological barrier that prevents me from clicking through. I guess they want to keep it simple, but adding one more option for actual miles would certainly create more revenue for them from this passenger from time to time.