Agreed. I'm a DL supporter, but this is icky. If you release P/A that close in, let the YBMs get an UP

I thought Y would have gotten the up, regardless of P/A. Agree on B/M, yet that doesn't appear to be DL's strategy.

I'm not picking sides, yet.... it depends what type of supporter you are, whether as a customer, or an investor.

As a customer, I've accepted that the days of flying 75k EQM and getting unlimited EUAs while paying for the T-bucket are over. I gotta be a DM, and better be buying into K+ and/or have a Reserve card, to get that EUA. The rest of F is going to -UPs, or FCM. The rules have changed, and I can adapt, I just choose not to (or don't have the means too, at this current point in time).

As an investor, I have to accept that DL has to squeeze every drop of blood from this stone. It'll take a while for them to find the balance between -UPs and EUAs, yet if someone is willing to pay a $500 premium to buy a restricted -UP, that's a potentially huge amount of cash-flow. And as I'm seeing it, the customer can't exactly jump to another carrier, as all of the carriers appear to be evolving to this business model.

If a customer wants to get into F, the strategy to get there will have to change (and probably include more cash to do it).

The people around here that cite economic theory (actual, not I slept at a Holiday Inn Express last night) are clearly in the "Delta is shooting itself in the foot" camp...

I don't think that is the case at all. To the extent there is a clear divide, it is between marketing/sales types and finance types, not between those that understand economics and those that don't (though far more finance types understand economics than marketing/sales types do). I would note that, to this point, virtually all of the evidence supports the finance side in that fight.

I see it this way. The only goal of DL is to return value to shareholders. The marketing types had a 20+ year shot at doing so. They failed. Miserably. Were the argument "yes, we messed up, and here is a new strategy", then people might listen without rolling their eyes. But, when the argument is "yes, we messed up, but maybe things have changed, so let's try the same thing again", nobody can hear anything over the laughter filling the room.

Free EUAs failed. I struggle to begin to grasp how someone could think that doubling down on such a proven loser is the smart play. One can develop all the theories they want, but at some point you have to test your theory and those tests do not support the hypothesis. We'll ignore, of course, the fact that the theory in question (FFers can be induced to pay above-market rates to receive benefits) defies logic to begin with.

I dismiss the tooth fairy too. I dismiss the value of loyalty because that value is unproven and fails to pass basic tests of logic.

You can only extract value from loyalty when you can charge discriminatory pricing to the loyal. This is such a fundamental and basic concept that I really am aghast that so many can't seem to grasp it.

"Loyalty" itself can not be quantified;however we might come up with some proxy for "loyalty" that can be measured.

So we might come up with something as follows : 1) # of elite members gold and above year over year, 2) $ Revenue all elites year over year, etc. You might be able to think of others.

While not zero, I suspect the impact of FCM on these metrics has been minimal. In those few markets where there has been pushback cut capacity.

Customers generally fail to make economically rational decisions.

Price discrimination plays no role on the sellers ability to extract a commercial benefit from intangibles.

To the extent there is truth to this, it is not the same as saying that they generally make the same irrational decisions. For the purposes of this discussion, it is not the same as saying that the consistent irrational decision will be for all consumers to pay a premium for a product (upgrades) that they are not eligible to receive.

It sure does play a role when those intangibles are targeted. Elite upgrades don't matter to non-elite passengers. Since some material portion of your passengers are non-elite, your pricing must be set at a point to provide only those tangible and intangible services that the non-elite passenger will pay for.

I know that you think all passengers are perfectly irrational and willing to pay for things of no value, but barring that being the actual, observed behavior, I'm not buying it.

Maybe I am confused, but are some posters here saying that people do not choose a higher Delta fare with a poor connection so they can keep their status level and fly First Class more in the future?

Maybe I am confused, but why should we presume that said seat(s) would go unsold otherwise?

I could buy the argument that some elites would be willing to pay a premium to remain loyal and to maximize benefits. What I don't buy is that those elites make up a sufficient proportion of passengers for DL to charge that premium. As long as DL must sell seats to non-elite passengers, they must set their pricing at a point which will attract those non-elite passengers. Elites buying during any period when DL is seeking to sell to non-elites will receive non-elite pricing - they will not pay a premium.

ARe you of the economic theory that when people choose price and schedule vs their favorite airline that prices will be driven up or down?

It's also a false concept.

A $500 ticket on DL with a 75% chance of upgrade is a better buy, for me, than a $400 ticket on AA with a 0% chance of upgrade.

A $400 ticket on AA with a 0% chance of upgrade is a better buy, for me, than a $500 ticket on DL with a 10% chance of upgrade.

If the pricing were the same, but the timing of the AA flights more convenient, the same would apply.

It doesn't matter whether DL charges me a discriminatory price (compared with someone who has no status with anyone and therefore no loyalty), a 75% chance of upgrade will gain them $500 revenue in this situation, and a 10% chance of upgrade will gain them $0 revenue.

Simple economic theory: if DL reduces the value to me of flying DL, then my incentive to fly DL is reduced, and the amount of DL flying I do will tend to be reduced.

Some people do (or at least did) make that decision. However, now that Delta has pretty much taken "fly First Class more in the future" off the table, how likely are they to continue doing so?

Holiday Inn Express.:cool:

Because that is the only way in which this type of discretionary, high fixed cost, perishable market can have a stable equilibrium.

The core tenet here is that if one airlines RM people suck (required for this to not be true) that airline will get better RM people, or go out of business.

Cutting capacity is also not a stable strategy for the long term as it is has a limit to which it can drive shareholder value before it puts the company out of business and/or encourages new entrants to the markets or re-regulation.

Fares will go down if no loyalty is shown, ceteris paribus.

Who said that?

You missed the point entirely - a consumer will make a purchase decision in an effort to maximize their utility - very simple premise and one demonstrated time and time again in the decision literature. If you understand the concept of utility you naturally appreciate the subjective rationality in decision making.

Second, in an effort to do this, the consumer will apply, to the extent necessary or desired (the disutility or cost associated with seeking additional information is the offset), the probability of the product having a benefit to their willingness (their expressed preference) to pay for that benefit.

The product with the highest perceive net benefit will be selected. Whether or not you would make the same choice as this consumer is irrelevant. Hence the statement of "irrationality."

When the combination of ALL benefits of two products are perceived equivalent, absent a price difference, the consumer will be indifferent as well.

Please remember, in the case of airline tickets, the consumer's choice set is not within but rather between airlines. Thus, if a flier perceives upgrade potential as "valuable" to them, and the net benefits of the choice (inclusive of the price difference, if any) of offering A exceed offering B, they will select offering A.

When the flier perceives the upgrade potential as less valuable (or in the case of a non-elite as non-existent), under the same paradigm, the choice may now favor offering B.

And that is why FCM can and will impact on Delta's business - and it has nothing whatsoever to do with discriminatory pricing.

As for the requirement of "discriminatory" pricing to effect a commercial benefit from elite programs - all I can say is - Wow.