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Parker: "To try to change the program (to revenue based) right now would be foolish."

Parker: "To try to change the program (to revenue based) right now would be foolish."

Old Aug 6, 14, 1:51 pm
  #16  
 
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Originally Posted by linglingfool View Post
If AA stops chasing lower-yielding traffic with loss-making fares, that may have the same effect on the bottom line as imposing a revenue requirement.

Just food for thought.
But not every "cheap" ticket is necessarily loss-making unless they're flying extra planes solely to cart the people paying the cheap fares around.

It costs very little to carry additional passengers if the seats would otherwise be empty.

At the same time, I do favor more rewards for those who spend more. I am somewhat screwed by where I live (DFW) and my travel patterns and am stuck as a bottom-tier elite despite frequently flying multiple trips per month, usually on not so low fares on short hops to mid-cons. If I lived in a non-fortress hub market, my fares would often be lower and I'd easily be Plat. Obviously, it does make more sense to reward those who have more travel options - but I do think there should minimally be some increased reward based on fare if it's even, say, one of the "low" refundable fares. I don't think there should be a complete switch to dollars instead of miles for status or award miles, as selling extra seats at any price is still close to free money for an airline.

Last edited by TXguy; Aug 6, 14 at 2:02 pm
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Old Aug 6, 14, 2:37 pm
  #17  
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Originally Posted by Flyer78 View Post
Yes, will see if that "innovation" indeed makes sense...
Scary that he called it an innovation. I'd calling it throwing away a significant advantage AA has over the others.
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Old Aug 6, 14, 2:52 pm
  #18  
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Originally Posted by bhrubin View Post
Anyone who doesn't think that AA-US will eventually go revenue-based after its merger is completed is kidding themselves. With DL and UA already revenue-based, the only competitive thing to do is match that...or lose revenue opportunity.
I disagree. AA saw its program as a significant advantage and began to poach DL and UA flyers that were unhappy with the changes made to those programs. Being competitive doesn't mean following your competition to the bottom and copying their moves. It's about offering an advantage over the guy to get people to choose you over the other guy. You don't create that by being the same as the other guy, you do it by being different.

It'd be a waste of money and effort on AA's part to throw away the advantage it used to gain those flyers. If they become the same as the airlines they poached from, where's the incentive to stay?

NOT having a revenue-based rewards program will only get AA-US the lion's share of mileage run hoarders which will LOSE the airline of potential revenue, which is why UA followed DL's lead. Like it or not, revenue-based awards programs are fairer in rewarding those who provide the most revenue for the airline as opposed to those who fly the most; an airline is not in the business of providing mileage but in the business of making money, after all.
Oh, those pesky mileage runners. They're such a huge problem that the airlines better cut them off at the knees They're ruining the airline. Please. Mileage runners are a very small minority. You go outside of FT and people will look at you like you're crazy if you talk about mileage running.

Of course the airlines are in the business of providing mileage - they make money off of it. Otherwise, there wouldn't be credit cards offering tons of mileage bonuses and giving miles away like candy for using their cards.

Of course, it also makes sense to assuage current AA-US flyers that a switch to revenue-based program won't YET happen...so they don't jump ship any sooner. AA-US is likely benefitting NOW that they are the only legacy carrier without a revenue requirement, but that won't last.


If they're benefiting from it, why would they kill that advantage? If they know that people would jump ship by changing, why on earth would they change? Conversely, how can a change that causes customers to leave and take their money with them (and therefore not in AA's pocket), be good for the company? The two statements aren't compatible.

If a revenue program is really better than sliced bread, then there's no reason not to change to it ASAP.

But your statement confuses me: is a revenue based program great for the airline or will it cause people to jump ship and take their money elsewhere? Which is it?
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Old Aug 6, 14, 3:02 pm
  #19  
 
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Originally Posted by linglingfool View Post
If AA stops chasing lower-yielding traffic with loss-making fares, that may have the same effect on the bottom line as imposing a revenue requirement.

Just food for thought.
Surely AA only offers cheap/MR priced tickets because Revenue Management believe they cannot sell those seats at a higher price? Do they really 'chase' low-yield traffic?

I buy cheap tickets and have done pure mileage runs to reach EXP, but the introduction of a revenue based programme will likely end my loyalty to AA, simply because it won't make sense anymore.
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Old Aug 6, 14, 3:03 pm
  #20  
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Originally Posted by TXguy View Post
But not every "cheap" ticket is necessarily loss-making unless they're flying extra planes solely to cart the people paying the cheap fares around.

It costs very little to carry additional passengers if the seats would otherwise be empty.
Better to get something for a seat than nothing at all. I'd rather lose $100 than $200, but hey, that's just me.

At the same time, I do favor more rewards for those who spend more. I am somewhat screwed by where I live (DFW) and my travel patterns and am stuck as a bottom-tier elite despite frequently flying multiple trips per month, usually on not so low fares on short hops to mid-cons. If I lived in a non-fortress hub market, my fares would often be lower and I'd easily be Plat. Obviously, it does make more sense to reward those who have more travel options - but I do think there should minimally be some increased reward based on fare if it's even, say, one of the "low" refundable fares. I don't think there should be a complete switch to dollars instead of miles for status or award miles, as selling extra seats at any price is still close to free money for an airline.
I'd rather see bonuses for buying certain types of fares. I buy only refundable tickets for work (today's purchase booked into L), yet I get pretty much the same as buying a cheap ticket - despite the fact that the L fare was about 3x more than the cheap ticket.

AA's already unique in that the EQPs can screw you if you fly on mixed tickets, so I think there's already a penalty revenue component there. Any high EQP earning is offset if you fly on cheaper fares for leisure. It's not bad if you're buying middle of the road buckets or better, So you can be left earning status from of EQMs if you throw leisure fares into the mix. It makes EQPs an all or nothing proposition.
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Old Aug 6, 14, 3:04 pm
  #21  
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Originally Posted by PhilWW262 View Post
Surely AA only offers cheap/MR priced tickets because Revenue Management believe they cannot sell those seats at a higher price? Do they really 'chase' low-yield traffic?
I don't think anyone does.

I buy cheap tickets and have done pure mileage runs to reach EXP, but the introduction of a revenue based programme will likely end my loyalty to AA, simply because it won't make sense anymore.
+1, but that also goes for UA and DL too. If my loyalty isn't worth anything to them, then my loyalty goes to my wallet. They all lose.
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Old Aug 6, 14, 3:34 pm
  #22  
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Originally Posted by Palal View Post
So no changes before the merger, but after the FFP merger - anything goes.
I would expect revenue-based earnings to start in 2016.
+1 It's going to happen eventually. Just about every other industry has a loyalty program based on how much the customer spends. Under the current system, those who live in "cheaper" airfare cities benefit while those who live in "expensive" airfare cities lose.
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Old Aug 6, 14, 3:38 pm
  #23  
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Originally Posted by Superguy View Post
If my loyalty isn't worth anything to them, then my loyalty goes to my wallet. They all lose.
No, those who do spend alot money with a single airline will actually win (less competition for upgrades, fewer people in the Elite lines, etc.), if people just decide to fly with the cheapest carrier. Plus, you may have to pay for your luggage, economy plus seating, early boarding, etc. So, it may be a net positive for the airlines if there are far fewer elite passengers.
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Old Aug 6, 14, 4:00 pm
  #24  
 
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Originally Posted by TXguy View Post
But not every "cheap" ticket is necessarily loss-making unless they're flying extra planes solely to cart the people paying the cheap fares around.

It costs very little to carry additional passengers if the seats would otherwise be empty.
Of course, but there are definitely routes that continually have low PRASMs and little cargo to compensate.

Originally Posted by PhilWW262 View Post
Surely AA only offers cheap/MR priced tickets because Revenue Management believe they cannot sell those seats at a higher price? Do they really 'chase' low-yield traffic?
I don't think anyone actively chases it, but there certainly has been a drive to consciously reduce targeting this kind of traffic on highly competitive routes like JFK-LAX and chase premium pax instead. It's possible AA doesn't see any changes being necessary if waging price wars and subsidizing low-yielding routes isn't something they plan on relying upon going forward.
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Old Aug 6, 14, 4:02 pm
  #25  
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Originally Posted by formeraa View Post
No, those who do spend alot money with a single airline will actually win (less competition for upgrades, fewer people in the Elite lines, etc.), if people just decide to fly with the cheapest carrier. Plus, you may have to pay for your luggage, economy plus seating, early boarding, etc. So, it may be a net positive for the airlines if there are far fewer elite passengers.
Yeah, we've heard that all before. And guess what - it ain't happening on DL or UA. Go read those forums and see how well it's working out for them. It's a means for the airlines to reduce what they have to shell out without actually having to give anything in return. It's naive to think that fewer elites is a benefit to anyone but the airline (and even that assertion is questionable).

If anyone wants to see how well this idea works, look at UA - especially if Dougie's looking at further cuts. I think DL's doing well despite cuts to its FFP due to improvements on the front end (better IFE, improved hard and soft product, etc).
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Old Aug 6, 14, 4:08 pm
  #26  
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Originally Posted by linglingfool View Post
I don't think anyone actively chases it, but there certainly has been a drive to consciously reduce targeting this kind of traffic on highly competitive routes like JFK-LAX and chase premium pax instead. It's possible AA doesn't see any changes being necessary if waging price wars and subsidizing low-yielding routes isn't something they plan on relying upon going forward.
I think UA's done it to a degree. UA's focusing on the big spenders and the Kettles, and firing everyone else in between. While they permit access to the elite program at 10 cpm, it's generally not interested in pax if they fly < 18 cpm.

They still have to give people between 10 and 17 cpm some sort of perks.

The Kettles are there to be fleeced. They'll take the cheapo fare, with the hopes of either selling a TOD, Premier Access, or E+. The focus is getting them on the plane and then upselling the crap out of them. They don't get that ancillary revenue out of the "cheaper" elites. The perks they pay out are a cost.

I don't think it's a strategy that's working out too well.
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Old Aug 6, 14, 4:28 pm
  #27  
 
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Originally Posted by Superguy View Post
I don't think it's a strategy that's working out too well.
I think in part because, as mentioned upthread, it doesn't really reward those who travel on very high-dollar fares with the cap on RDMs, and because there are a fair number of kettles out there who will be turned off by earning in a program they have no chance of making status in, regardless of whether or not they actually had a chance beforehand.

(And also because SMI/J is still having a hard time living down his over-entitled comment.)
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Old Aug 6, 14, 4:33 pm
  #28  
 
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Maybe a jab at Jeff Smisek too, UA and CO are still not a single airline, yes the FF programs are merged but aside from that they might as well be 2 separate airlines at this time. I even hear pilots still saying thanks for flying CO...
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Old Aug 6, 14, 4:45 pm
  #29  
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Originally Posted by linglingfool View Post
If AA stops chasing lower-yielding traffic with loss-making fares, that may have the same effect on the bottom line as imposing a revenue requirement.
And if AA joins UA and DL in providing little to no incentives to non-HVFs, it just propels a very large cohort of mid-tier customers out into the marketplace to choose the lowest price or best service, which hurts AA and all the legacies.

Originally Posted by Superguy View Post
UA's focusing on the big spenders and the Kettles, and firing everyone else in between. While they permit access to the elite program at 10 cpm, it's generally not interested in pax if they fly < 18 cpm... I don't think it's a strategy that's working out too well.
UA has a doughnut-hole problem which is reflected in lagging PRASM: it's held onto a core of HVFs, mostly via sweetheart corporate contracts and hub captivity, and it attracts non-loyal Kayakers with low fares. Those in between don't have much reason to fly UA anymore. I doubt AA wants to replicate the UA situation.

Originally Posted by bhrubin View Post
NOT having a revenue-based rewards program will only get AA-US the lion's share of mileage run hoarders which will LOSE the airline of potential revenue.
Le sigh. FT is a great community, but it suffers from two collective crises of perspective. One is that an airline only needs super-premium HVFs to prosper, and no other customer segment warrants rewarding. The second is that mileage runners are ruining everything. There aren't enough HVFs to save an airline, and there aren't enough mileage runners to wreck it. Put away the boogeyman dolls.
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Old Aug 6, 14, 5:19 pm
  #30  
 
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Quite a bit of funny talk here, if AA goes to a revenue system model and we are talking about most flyers who need to travel on an airline similar to AA, this conversation of taking your travel elsewhere...there really would not be other "better"choices. Or I think people meant elsewhere, as in whatever is fare friendly (WN/VX/B6/other legacies).

I don't expect AS will hold up its miles system for those partner accrual whose own system is based on revenue (or you will not get credit unless ticketed via AS sort of thing).

So, I think this mostly means another year (2015) of miles-based elite and accrual processes. Good news.

Still a lot of work out there to convince AA about the importance of not going to a completely revenue based program beyond today's EQPs.

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