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Old Jul 12, 17, 4:03 am
  #94  
rucksack
 
Join Date: Dec 2014
Programs: DL PM
Posts: 1,073
Originally Posted by minnyfly View Post
No, there isn't economic profit on the consumer side. In my econ language, since award ticket redemption is a monopoly market, flexible rates with no charts are designed to reduce utility for the consumer and increase "profit" for the airline. The current system makes it much easier for Delta to guarantee that award redemption rates will be low for every route--lower than the price for earning them. And it also increases the effectiveness of change and redeposit fees. Win-win for them. Lose-lose for you. Being able to offer a "cheaper than competitors" 10,000 mile Y one-way MSP-DEN that costs $83 in real life isn't high utility for consumers. It's still a win for the airline.

There's simply no point to debate with your hypothetical. In the vast majority of paid routes, there isn't a true monopoly, and there would never be a pricing strategy like that. I truly have no idea what you're intending to prove.
Award tickets are not simply tied to cash fares – there is still wide variation in award ticket mileage valuations. For example, here are some flights I've gotten with the new chart-less system in the past year:
ATL-ORD RT: 10k (~2 cpm)
ASE-SFO: 5k (~6cpm)
ATL-ANC RT: 25k (~3 com)

Look, I'm not saying that miles haven't been devalued – the evidence is clear that they have been for international (especially J) award tickets. But that's a separate issue of what Delta sets award ticket prices at – if Delta still had a chart-based system, they could just as easily increase chart prices as American recently did.

My point was that removing the simplistic chart-based pricing structure isn't purely bad – it gives Delta more flexibility in pricing, which in fact has increased the number of lower level (as compared to the old chart system) domestic award tickets Delta has been willing to offer. This isn't hypothetical – this has been observed through analyses.

Also, award ticket pricing is not monopolistic because people have a choice in the credit cards they get and the frequent flier programs they use. Especially with how important credit card revenue has become for airlines, airlines have big incentives to demonstrate the value of their miles.

Last edited by rucksack; Jul 12, 17 at 4:11 am
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