BearX220

Good for you, but think about what a rare and unusual customer you are in the overall spectrum of AA customers. Of course you should get proportionally greater rewards; you always have. But now you feel you deserve most of the rewards, and a lavish amount thereof, to the point where your overseas J/F tickets will effectively be BOGOs every time while a less spendy but still loyal customer will take years to amass enough chips for such a redemption, assuming he doesn't succumb to rationality and bug off to JetBlue.

If the FF program is build entirely around customers like you, and the other 98 or 99 percent are cheesed off, it is not good for the overall equilibrium of this or any airline. The mistake UA/Smisek have made is to focus all their love on GS types. Even UA 1Ks feel now they count for nothing and are flying Virgin America, etc. -- and UA has the guts to explicitly discourage a vast sub-1K customer cohort in a period of atrocious reliability and service levels.

Whenever I see an FTer who flies overseas in full-fare J once or twice a month gloating about how meet and right it is that most of the award-oxygen in the room end up in their private tank, I wonder how long they think their airline would last were all the screwed customers to migrate elsewhere or stay home.

Not if the UA experiment backfires, and not if some non-lemming in revenue management figures out how much marginal / incremental revenue you kick away when you get everyone below the 1-2% super-duper-elite shopping for flights on price and price alone.

I fully agree. ^

It's also scary and sad that the FT of ten years ago was largely about sharing the wealth and showing others in the community how to get ahead; now, with points and miles programs in decline, it's more about a minority of super duper customers kicking the lower tiers off the rope ladder and down to the Greyhound depot.

FWAAA

Easy enough to offer a triple/quadruple RDM bonus for purchased Business or First Class fares in 2015; no need to gut the program for the other 99% just to offer huge rebates to the top 1%.

If AA sees premium cabin bookings slip early next year, it would be child's play to make sure the monthly trip to NRT yields 70,000-75,000 RDM. If that's all it takes to lure someone away from UA or DL, you can bet that AA will do just that.

It's possible that some of the big companies (where lots of employees spend lots of OPM flying long-haul flights in premium cabins) will revolt when they discover that UA and DL have incentivized their employees to buy full J instead of discount I or D so they can collect even more redeemable miles. It's not a certainty that DL or UA will succeed in their attempt to convince employees to waste their company's money.

BearX220

There's been a lot of this kind of discussion on the UA board and I think it's potentially a real problem for both the airlines and its customers. If I were running a company with a lot of travelers, the UA/DL model would lead to me yank decision-making and booking out of individual hands, period. Conflict of interest. You'll fly who's cheapest, and if that's Icelandair via KEF and you earn no miles at all, so be it.

eponymous_coward

Anyone who's flying monthly intercontinental trips (or more) probably wants more free travel like a hole in the head; acquiring a million+ RDM a year when you're on the road a ton already almost certainly means the airlines will get some "breakage".

UA's already done some of the "breakage" already in the form of devaluation; witness how much non-UA longhaul F is these days. DL's award chart seems to be similar, with half a mil+ for TATL J at super-peak times.

That being said, maybe airlines competing on the basis of what they actually give you in return for what you spend isn't so bad compared to "fly our horrible airline a lot and every so often you can fly some OTHER airline that gives you caviar and Dom", which is a lot of what the UA value proposition seems to be on FT.

Oh, and look at overseas. You're an LX customer who has FTL and saved up enough for LX F? Not for you, peasant. Senator+ only.

xliioper

You continue to beat this strawman to death. While higher fare pax are being rewarded more richly, it is absurd to say the the FF programs are built "entirely" around them. Only a small minority of low fare flyers will be cheesed off enough to actually change their flying habits. The majority of flyers do not obsess about getting the absolute maximum number of points like FT'ers. FT'ers have derided DL's program for ages. If the general public is as fixated on points as you suggest, how has DL continued to remain successful?

VickiSoCal

What makes you think companies aren't already doing this? Many, many companies use booking engines like Concur, with lots of rules in place and travel approval workflows that show what a employee booked and what other cheaper options are available. Even for people who fly international business class.

dcdavido

I think companies are losing perspective on what a frequent flyer program was meant to do: they are loyalty programs meant to get you to be loyal to their airline.

Take Hilton. At Gold you get breakfast and free internet (which is cheap for the hotel, but valuable to the consumer since it is always ridiculously overpriced). And every now and then, I'd get a room upgrade. Now they sell the room upgrade and I have the credit card giving me Gold status for $85. Before I HAD to stay at a Hilton, regardless of whether there were cheaper alternatives or more convenient options. I'd go out of my way to stay at Hilton Hotels. Now I don't sweat it. Still my preferred hotel, but if another hotel is more convenient or more than a couple dollars cheaper they get my business.

Take United. Same deal. They pretty much got rid of status upgrades. You want an upgrade you need to pay for it with points or money or a higher fare ticket - whatever. They'd sooner sell an upgrade to Ma and Pa Kettle rather than give it away to 1K. I am 1MM so have Gold for life, but I could just get the credit card. You get the basic benefits - early boarding, free bag check, etc... Again, I used to HAVE to fly United. I'd make up reasons to fly United. I'd pay whatever they charged and put up with awkward routings to fly United. But now there is no incentive to do so.

The "Doughnut Hole" theory is correct. I'm the "middle class" of flyers. I fly 100K a year, some high-end last minute travel, some well planned cheap travel. I've paid for business/first class, but not at rack rates. American makes money off my last minute business travel, and I just take up a seat on my vacation travel. Either way, they need me and a lot of people like me to fill up the planes. And I put up with awkward routings, pay whatever it takes to fly American, but in exchange want upgrades and to be treated special. Take that away, and I have no incentive to put all my travel on American.

BearX220

It is far more absurd for a tiny minority of super-flyers to keep pushing the "Airline X doesn't want your business, too bad, you're fired, nothing personal, it's just business" storyline on everyone below them on the customer totem pole. Loyalty programs actually have greatest influence on the so-called middle tier of mixed-ticket flyers. The outlier top-tier elites will tend to fly nonstops that suit their schedules, or carriers with which their corporations have made sweetheart deals. Kayakers gonna Kayak. The vast middle, however, is fishable, and it's dumb to kiss them off or, in gloaty FT parlance, "fire" them. This person here is a textbook example, as am I:

And American thereby loses the avalanche of small premiums paid by people who could just book the Southwest nonstop, but book AA in exchange for fair rewards. If most customers shop for low price alone it hurts the whole industry, except for Spirit, Sun Country, and Allegiant.

DL succeeds because in this shrunken, lower-choice environment of just three network megacarriers, a good product at a fair price outweighs a crappy FF program. UA probably won't succeed on the same basis for obvious product-quality reasons. When FF programs cease to exert influence (the rewards are elusive or out of reach, status tier privileges are duplicated by getting the credit card, etc.) service, price, and quality factors mean more. Where AA ends up on this scale is anyone's guess but if I were Doug Parker I would zig while the others zag.

As for me "beating this strawman to death" -- sure, my posts on FF strategy are consistent, and I think it's important to counter the myopic view that one or two percent of high-spending customers deserve the lion's share of loyalty rewards while everyone else is "fireable," and if you find this storyline tiresome (which is how I'm starting to feel about the "Works for me!" posts from super-duper elites) I would be pleased to have you use the "ignore" button on me.

dml105

Wow! I had never thought of that being a strong reason to keep mileage-based points, instead of revenue-based points, the latter encouraging corporate fliers to run up the bill. FF programs are supposed to get the employee to steer the employer towards using a particular brand every time. I would not have thought it until you said it that revenue based programs put the employee and employer at odds with each other more than they already are. (Employee probably picks the more expensive flight already when it's on the airline she likes.)

dcdavido

What the airlines don't take into account is the cost of customer acquisition. "Fire" a doughnut hole customer and you have to replace something like 20 trips a year. That's the problem UA has and why PRASM is suffering. My $15k in business was replaced by 20 trips and $10k in kayakers - if they are lucky.

I was UA, now AA. But I am running out of places to run to. My next step will to fly whatever airline is cheapest, most convenient, or where I can "buy" a cheap upgrade. No loyalty.

BearX220

Natural tension. If it's October and I need another $5,000 of spend to requalify for 1K or CP or whatever, I am going to (A) claim to need to take more trips and (B) try to justify unnecessarily expensive fares. My boss, if he/she is smart, will take countermeasures. I will be upset and my boss will be perpetually suspicious, especially when I start lobbying not to take more trips as I find out I've been booked on Spirit.

TXguy

The way to combat this problem is to offer more rewards for employers.

SS255

Or (C), make up the difference out of your own pocket.

3Cforme

You're right. Corporate relationships with airlines have survived all sorts of inducements to employees to travel more, and to travel on higher fare codes:

- bonus elite miles and/or redeemable miles on higher fares

- higher upgrade priority on higher fare classes

- instant upgrades on Y/B fares

- eligibility (on some carriers) to upgrade with miles or SWU on restricted fare classes

- richer rdm bonuses with higher fare classes/cabins on new route promos

Fare-based rdm changes the calculus very little, and, as you point out, many firms with big travel spending already have the tools in place to manage behaviors.

Superguy

Sad thing is that most of those people are flying on OPM and don't see the forest for the trees. Eventually, that flying will stop. While they may have been able to cash in short term, there's going to be nothing left for them once the party's over. Then what?