Originally Posted by
ANDREWCX
On the topic of credit cards - the banks pay a lot of $$$$ to the airlines for those miles, and with restrictive redemptions, the liability isn't anywhere near its book value.
In recent years, yes. In future years, who knows? Banks are having a tough time with the credit crunch. Will they continue to pay airlines $300 to acquire new customers with 25k bonuses? I doubt it. More crucially, will customers continue to prefer 25k miles to a $300 cash bonus? That I
seriously doubt.
I think we are seeing the last days of the airlines' cash cow known as affinity cards. This in turn will change FF programs from profit centers back to marketing expenses. More reason to devalue.
Originally Posted by
ANDREWCX
If FF programs really don't have any value to the bottom line, I am sure Southwest, AirTran, JetBlue etc etc would have dropped their programs.
Herb Kelleher hated the idea and resisted it for years before finally giving in and creating one for Southwest Airlines. Would he make the same decision in 2008? In 2009? I doubt that he would have found legacy FF programs in their current devalued form very much of a threat. Therefore it's entirely possible that low-cost carriers would eliminate or eviscerate their FF programs, especially if the banks stop buying billions of miles.
Elite status was grafted onto frequent flyer programs and is logically distinct. Any airline could easily operate a recognition program which offered preferred booking, lounge access, boarding, seating, upgrades, etc without any type of redeemable miles program.
Entirely correct. This is an attractive option for the airlines.
Originally Posted by
redwall850
Changing loyalty FF programs to award miles or points based on dollars spent makes way more sense for a cost standpoint.
Dollars spent don't correlate as closely with profitability as does fare class purchased. Within a wide range of distances, fare class alone would be a reasonable proxy for profitability.