<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by mjschill:
An alternative position....
In business school, they taught us a two step system to revive a dying company.
1) Stop the bleeding...save every expense you can.
2) Infuse blood....find every red cent you can get your hands on, and squeeze tight.
Thinking about this, I would suggest, their decision to remove points from low end yields makes perfect sense to me.
10% of their flyers are full fare...what does this represent, say 60%-70% of their revenue...the old 80-20 rule. This move will not affect these flyers.
About 50% of flyers don't collect frequent flyer points...again no change to them.
The 40% of you who do collect Dividen points and only pay $200 a ticket, are the ones (through no fault of your own) who are bleeding this company dead.
Say you pay $200 for a BUF-MCO ticket. I could argue the airline isn't making any contribution on this at all. However let's say they actually made 10% on a fare this low...$20. In return they're awarding you nearly 3,000 miles, or 1/8 of a free ticket. The variable cost of that...meaning the fuel cost to move your ... from point A-B when you do redeem a ticket, is worth at least that same $20..their contribution....making their $200 completly un-profitable
Frankly, if this 40% were to stop flyig US Air, I would suggest it represents maybe 10-15% of their revenue and maybe 20% of their expense, based on the Dividen mile redemption.
Additionally, if they cut out the most un-profitable 40% of their fliers, they'll also free up that much of their fleet as well, which can be re-leased or re-sold for more cash.
They just can't afford to give away free flights and perks for yields that are un-profitable to begin with.
In my eyes, it's a good move to go about saving the company.</font>