Originally Posted by
findark
...I can't imagine getting what is easily a 30+ percent rebate on $12,000 of spending pretty much anywhere else (at least not where I'm buying a relatively low-margin product -- "30% off" department stores not included).
It's related to the cost breakdown of air travel:
high fixed costs vs. low variable cost.
The plane will fly from A > B regardless of how many seats are filled and you'll have the same fixed cost for the crew, the FAs, the fuel, the landing fees, the airport fees, etc., meaning the only variable costs are those relating directly to what a passenger would consume (can or two of coke, maybe a biscoff, whatever the FFPs are worth, etc.).
If the fixed cost to fly one Y seat from A > B is $100 (the airline is paying this regardless or not if the seat is occupied) and the variable costs is $10 (this is the extra the airline has to pay only when the seat is occupied) than as long as the airline scores at >$10 in revenue, they're coming out ahead. Sure, selling the seat for $11 does not make them profit but it reduces there losses by $1, and once the door to the plane closes with the seat empty, the seat spoils. Why? Because the airline has exceeded the $10 of variable costs to service the passanger.
So taking this all back to United and Chase's relationship - UA going to a revenue earning (miles_earned / $ vs miles_earned / distance) and revenue burning (miles_redeemed / $_fare vs miles_redeemed / distance) allowed the average customer to see the true value of a mile in terms of revenue vs the more opaque distance model. Once the average customer understood miles-in-terms-of-$'s vs. the more enchanting miles-in-terms-of-distance, the behavior shifted to favor the more lucrative bank programs with their no-nonsense $0.0150 travel value floor (or the flexibility to transfer to whatever partner on demand). Even worse for UA, this is not a unique-to-FT issue. This is something the average customer can (and did!) pick up on.
tl;dr - UA changed M+ from a travel reward program into a spending reward program but is struggling to balance 1. the cash-generating-cc-spend-value proposition against the 2. "free"-liability-generating-mileage-for-buying-tickets. The former aspect of M+ is not compelling enough to compete with pure spending programs (UR / MR) but UA's constrained in how generous it can be by the latter and all the while the banks continue to improve their offerings as they compete with other banks.