Originally Posted by
CyBeR
I hesitate to call this a problem as it is the entire point of the system of offering benefits to customers in exchange for their loyalty, with the gamble being that offering those benefits costs the airline less than the extra business is worth. The point at which one offers those benefits should be such that this is the case in almost all circumstances. It only becomes a problem if you have misjudged that point and too many customers are sitting on the wrong side of that eqation, possibly due to not needing to meet qualification requirements (e.g. due to lifetime status) along with having unprofitable travel habits.
Well, whatever semantics we use, it's clearly something AFKL struggles with based on what Ben wrote. It's not really an FFP problem, it's a yield management problem. It will still be a problem whether you have 1000 or 10000 elites.
Airlines rely on certain groups of passengers buying higher fares. But many of these passengers are frequent fliers, thus get the perks of higher packages for free, and lack incentive to pay up. So they end up buying fares which were only meant to fill up the plane with price-sensitive customers who want nothing but a carry-on and a random seat.
The problem is partially a result of AFKL's self-destruction when they decided to join the race to the bottom (and removed reasons for people to pay extra money just to be on their flights, forcing themselves to offer lower prices), but as the European catering changes show, this is still very much their strategy and therefore the problem persists and needs to be solved somehow.