williwaw

soartoday

Thanks for posting. Not much of a divergence from previous public comments... "We can always change the mileage later" is what we're all anxious about

Visconti

A few thoughts, off the cuff:

1. Could be wrong here, but I think DAL was the first to adopt a revenue based program and devalue their currency? Not an airline analyst, nor do I follow the industry closely, but DL is the best run outfit (of the legacy carriers), in my view. Mostly captive hubs, monetize F, devalue miles, non-unionized, and, very well run operationally. For me, from their shareholders' perspective, it was a huge positive when most the FT community/bloggers complained & trashed DL's transition to a revenue program and constantly debasing "sky pesos."

2. At present, in my view, ALK's management is right on not following the herd, since this sort of behavior always ends up badly. It's better to stand out and do things differently by offering an alternative; of course, ultimately, the endgame will be devaluation, as is the case whenever more of any currency is printed.

3. I wonder, if they could do it over again, would they still have offered to buyout VA? I'm undecided on this one and would find views on this extremely interesting.

At present, there exists a pretty wide spread on F TPAC redemptions. Usually, in a free market, arbitragers will close this very quickly, but this spread has existed for 5 years? While anything is possible, I just can't envision a scenario where this can continue in perpetuity.

ashill

MSPeconomist

Xrayman

Be the best that Alaska air can be for its limited route map and engender loyalty for the long run. Doing what delta does and not having the more extensive route map would then really make Alaska a less attractive alternative particularly without the Asian, European, and South American routes. I suspect that revenue based system is really good for personal or business travel based on a few over seas trip annually.

I certainly hope Alaska doesn’t cede the differentiator that it has compared to Delta now that Delta is a viable competitor in Seattle.

ashill

QF isn't strictly revenue based. (Not sure about the other airlines you mention, but I think without checking that they're broadly similar to QF; I know BA is.) They have a much more sensible (IMO) system than the DL-led US big three kludge of elite qualifying miles and elite qualifying dollars. It is based entirely on distance flown per flight and fare class, like RDMs on US airlines. One major difference is that status credits are set by bands of distance and increase more slowly than linearly: the status credit bonus for flying 7500 miles over 1000 miles is only a factor of 4.5, rather than a factor of 7.5 for RDM systems. The other major difference is a bigger multiplier for premium fares. The upshot is that it takes more flights to earn status flying deep discount economy on long haul flights with QF than it does with AS but significantly fewer flights flying short haul premium fare flights.

I agree. The statements in this investor day transcript are heartening in that they recognize this as an advantage. Of course, AA said the same thing right up until the moment they went revenue-based, but AA was bigger than DL after their merger, whereas AS very much is not.

And Southwest, despite also having a North America-only network (albeit a much bigger one than AS) is basically revenue-based as well.

tusphotog

The way Southwest does it makes more sense to me than anyone else. Your flight costs $100, you get 600 points (fare*6). Your AT or BS fare that's $400, you get 4,000 for AT (fare*10) or 4,800 for BS (fare*12). They don't even look at mileage calculations.

MSPeconomist

ashill

Yeah, I agree, especially because it rewards customers who spend more than they have to. I've always thought of the point of frequent flyer programs from the airline's point of view as driving marginal spend: getting customers to fly your airline even when it's a bit more expensive, a bit less convenient, or not quite as good a product as the competition. Certainly that's how AS says they view it. WN is more about getting WN customers to buy up. Pure revenue based programs don't really do either; they mostly reward people who were probably going to spend significant money on your airline anyway, I think. Certainly these days, that approach is working out reasonably well for the big three.

Xrayman

I used to fly southwest for business when it was the best option for my main travel cities. I must say that regardless of what fair I had (business class ticket same as saver) for seat selection - ALL coach and 100% filled in front 10 rows and NEVER ever a empty center. The only benefit was the points earned was extra. However didn’t help with status for a business traveler as I would always be able to achieve the companion status as using the credit card for everyday purchases counted towards elite status. $99 or $530 same seat humble seating situation.

With AS now serving my major travel cities there is NO chance I would select an alternative carrier as status on AS is meaningful with added value. It’s a bonus that the are an outlier with retained mileage basis for status compared to the legacies. I’ve been fortunate to have AS slowly but surely advance their route map in matching with my business travel needs.

I_Can_Fly_US_Airways

I was happy to read about this change. Anything that keeps the "low rollers" and "mileage runners" from cramming up the first class cabin, I am in favor of (-:

pdx1M

I found the comment about the "sickiness" of going first to the Alaska website interesting because I am a great example of the cost of not understanding that. I was highly loyal UA flier (and as a result a lifetime 1K with them). My typical behavior pattern when booking was always to go to the UA site and if they had a flight that "worked" for me (not utterly crazy schedule/cost/etc.) I would just book that without comparing alternatives. When UA went in the toilet post merger (not specific to the revenue based change) I stayed with the behavior for a couple of years but ultimately gave up and started searching with a general booking site. This ultimately cost UA quite a bit (10's of thousands or more dollars) because I book first/business for any trip over a few hours (because I can afford to) and even though UA has gotten back to being reasonable to travel with they now get only a small sliver of my travel - even with my lifetime status - because if I book premium cabin it doesn't really make much difference to have the status. So I applaud AS executive for understanding what some of the real "costs" of changing your customer's behavior patterns are beyond the narrow analysis that the financial guys bring regarding only the immediate transactional costs.

sdsearch

"Revenue-based" by itself (or applied to "program") is an ambiguous term. You have to specify which aspect(s) of the program are or aren't "revenue-based". Southwest has revenue-based redemption, the legacy US3 airlines only have revenue-based earning of redeemable miles (and not even that in all cases) plus a spend requirement on earning status. So there is no such one thing as "revenue-based", it covers a wide array of scenarios.

Visconti

Likely common knowledge for many here, but I've always wondered how the Partner relationships work.

By flying Partner A crediting to AS, the former deposits agreed upon miles into AS Mileage account, either from reserve or bought at a predetermined price? And, when redeeming Partner flights, AS pays for the flight with its own currency? Or, Partner currency which they in turn must purchase at a predetermined and agreed upon price/unit?