Just to clarify a point on this statement:
"Leisure flyers who always chase the lowest ticket price regardless of brand aren't exactly unwelcome -- but they're not the focus, or the key to profits (see the BA model), and they shouldn't necessarily get loyalty rewards."

I would never suggest that passengers who only chase the lowest fare without any brand loyalty should get the goodies like Medallion status...but, the passenger who pays lower fares (remember that only K Class or higher can upgrade to First anyway) AND who gives the vast majority of their business to one carrier (such as Delta) irregardless of how Delta's fares match against other airlines, SHOULD be rewarded for their brand loyalty to that carrier...even if the fares they paid were lower than the next guy whose company paid high last minute fares. The lower fares are still restricted, bought and paid for well in advance, and still result in revenue for Delta, even if the yield is lower. It shouldn't make them any less of a customer.

Delta's incentive goal (any airlines' goal) should be to encourage brand loyalty, expand and maintain their customer base, and reward those regular customers who book 90%+ of their travel on Delta with these basic perks such as enhanced check-in and boarding, mileage bonuses, and space available upgrades. Regular customers translates into constant revenue. Alienating or forcing the lower yield customers away, will result in a much smaller customer base, and I dont think that the remaining pool of high yield business travelers will be big enough to support their operations, let alone the operations of three remaining "business airlines". The end result could be the entire airline business in this country shrinking and segmenting into two distinct brand types: 1) the business airlines who offer premium service to only high yield passengers and who choose not to service low fare passengers. 2) the leisure airlines who offer no-frills cheap transportation to the masses and count on sheer volume to generate net income from lower yields. I think that shift would be a mistake, and end up causing a miserable travel experience for those of us who were the loyal, but lower yield, frequent flyers in the middle.

Bottom line is that the airlines made their bed (by creating these incentive based marketing perks in the first place), so they should be forced to sleep in it. They can cut costs in other ways, without alienating those of us who have long term relationships with their brand. I had a longer post in the Continental group to discuss what could be trimmed from operations without alienating their broad customer base, while maintaing the most basic perks that we all enjoy, such as the first class upgrades, separate check-in, boarding, etc. There should be more creative thinking "outside the box" in airline management, and less "punish the customer" thinking. It is understood that the airlines are losing money, and that costs must be cut to stay in business...but it should be done carefully and selectively...not by swinging a machete at anyone who doesnt pay full Y.