Originally Posted by
UA_Flyer
Originally Posted by
deskover54
if UA believed they would get 10k new small businesses using their card by doing this change, they would do it in a heartbeat. that's real cash.
Can someone educate me what UA get out from small businesses charging expenses to their Visa cards?
I know the UA sells miles to the credit card issuers, so there is some revenue (but limited) there. Does UA get anything else?
Unless there is a huge payoff, I fail to see there is a lot of benefits to UA. However, I am constantly learning.
Originally Posted by ctwonflyer
Chase pays UA much more than .5 cents/mile.
As I understand it UA is getting part of the interchange fees kicked back in addition to the revenue stream Chase buying the miles to cover what the bank hands out. Based on UA pushing back against Chase's UR/CSR program last year, it would seem the swipe fees are more valuable to the carrier than the revenue earned for supplying Chase with miles.
If UA's still getting revenue for the miles Chase "redeems" for UR members, UA should be somewhat agnostic as to what the consumer swiped at the point of sale. Whether it was a UA co-branded card earning 1mile / $1 or a CSR earning 1UR converted to 1UA mile / $1, UA's still getting paid for their mile so why fret about how the initial mile (or UR point) is earned unless there was a revenue differentiator?
There are a few other nuances here too I won't get into but the key is UA's behavior last year evidenced they prefer the swipe fee over what they earn from selling points.
See this thread for more info:
United pushes JPM on Sapphire Reserve
Originally Posted by
spartacusmcfly
This is where I think you are grossly underestimating the abuse by the broader cardmember base.
You raise a valid point but I just don't see small/medium businesses being able to ramp up this kind of spend in the current climate where cash is king. Consider the following: if a business
could average $570,000 of spending monthly - or $19,000 daily - May through December on a 2% cashback card, they'd earn ~$80,000. While I know the FT answer to the following question, ask yourself what would the normal, rational person choose: 1. 4m UA miles + GS for life, or 2. $80,000 USD*?
My bet is the latter, not the former.
*and yes, I know the USD is being printed into oblivion, negative oil prices, deflation, hyperinflation, FED buying up everything, etc but assume 80k is really 80k for the "normal" person.
Originally Posted by
bigshooter
If a person can only make a certain status level based on CC spend and not by BIS or butt in bed, how often would they actually be using the earned benefits? Would said person automatically start flying more on routes that there is a ton of competition on already? I’m sure in aggregate it would add some additional load and competition for upgrades, but I doubt having 1MM or even 2MM status would make that person start flying more. I guess it could steer more passengers towards United if they are flying a lot elsewhere, but in that case why weren’t they earning on their preferred airline?
"Elite velocity"
Originally Posted by
J.Edward
The concept of monetary velocity "V" is useful to try to think about the impact on the elite experience.
Consider "elite velocity" which is the number of times an elite member is in a position to use an elite benefit - say to score CPU or request to redeem PlusPoints for an upgrade.
If UA made every single American a GS through 2021, but no one flew, the elite velocity would be zero (0) and even though a wide array of elites exist and are eligible for a CPU, none of them are in a position to actually use the benefit. It would like if the US Treasury deposited $1,000,000 in every American's checking account but people were too afraid to spend the funds. The base money supply will have shot up but (hyper)inflation will not have taken hold as those newly created dollars are being saved/hoarded and not chasing the same amount of goods and services meaning prices remain stable. This is how I read DL's logic here: demand is shot and even if the elite ranks swell on paper but the actual number of medallion members flying is low, there won't be an erosion of benefits.
If UA accurately forecasts demand not rebounding to late 2019 levels until after 2021 then they should juice the elite ranks to drive business on the margin to themselves. The low demand implies people are flying less and therefore the large paper uptick in elites won't actually result in harder benefits (e.g. upgrades) due to a low elite velocity. Now if UA, or DL, get it wrong and demand roars back, they'll be issues as there won't be the limiting effect of low elite velocity and you'll have a very large pool of premiers/medallions going after the same number of benefits.