Motnot, I can't speak to FC because I never fly it but as far as Biz class goes there seem to be lots of award travelers in the cabin and lounges at least on the transatlantic routes. Maybe they are all very frequently fliers and would be travelling with award travel anyway based on the revenue model but I am not sure.

Things change at the margins and my point was that if you could take maybe 10-20% of people who now use biz class because of non revenue miles and relegate them to coach, then coach would most likely improve and it would make things less crowded for the revenue based FF. Possibly the outcome would just be a more clear cut version of what we already have. Some airlines that are known for low cost and just pack everyone in and other airlines that are know for superior coach service and comfort but who charge more. I suppose the main outcome might be that airlines like AA and UA for example would substantially improve their coach service whilst offering some extra perks to the very frequent fliers that they have even more of an incentive to keep.

We are in complete agreement on one thing, it will never happen because of prisoner's dilemma logic. In fact if it ever happened on an industry wide basis you can bet that there would be all sorts of lawsuits alleging collusion.