Global_Hi_Flyer

LVCs get monetized in other ways, such as bag fees, seat fees, Buy-on-board, etc. YQ also hits folks that shop based on advertised fares.

Taking a page from the entertainment (concerts, sports) industry - profits are not made on the gate ("ticket sales") except for the most expensive seats. Profits are made on the ancillaries - beer/drinks, food, parking, merchandise sales, etc.

This is what yield management is about. I had a yield management guru tell me one time "if you sell the last unit of inventory, you're charging too little for it". In the current environment, "loyalty" means nothing compared to profitable customers.

Load factors can still go up - adding capacity is a step-function, and a very hard decision to make. If the airline sees that LVCs will be dilutive to earnings, they won't add the capacity.... let someone else take the loss.

DL2SXM

FYI, skis are going to cost you more no matter what.

mersk862

From a yield management perspective, that is all fair and true on full flights. However, many hundreds of flights do not go out full or close to it...that's when you need the load factor side to drive RASM. Yield is about finding the balancing act on what's best to get the most money out of a flight...sometimes it's closing off inventory, sometimes it's making sure its as open as possible.

BHMFlier

I don't travel much in comparison to many of you on here. I've flown 42, 981 miles this year and have earned every one of those miles. I have read the comments on FT about monetizing the frequent flier programs and I believe that I have contributed my fair share to Delta's bottom line in 2011. Furthermore, I hope and believe that my 42,981 miles is worth more to Delta than someone who has an American Express card but doesn't ever fly their airline. However, with Birmingham being a Southwest city, it would be easy to fly with them rather than having to connect through Atlanta of Memphis any time I want or need to go somewhere. I've stayed with Delta because of my loyalty to their program and the benefits I've enjoyed as a silver medallion the last few years. If they take that away, I have no reason to go out of my way and extend my travel time to fly through Atlanta or Memphis when Southwest can get me there faster and cheaper and with no bag fees.

GUWonder

It's increasingly the norm in the US airline industry for the airline "loyalty" programs to have become frequent shopping programs where credit card affiliation is a big part of picture for customers and airlines too. With increased concentration of power into the hands of fewer firms in the US industry (by way of DL-NW and UA-CO combinations) and the US firms' TATL/TPAC JV partners granted other governmental favors, this kind of development is anything but a strategic mistake on the part of an industry that can get away with behaving like customer-unfriendly lemmings. I wish it were otherwise, but I expected this from DL in particular.

MR_MAMA

But wouldn't you carry on the second bag?

GUWonder

Skis and a ski boot bag -- even when packed separately -- have been quite often considered a single checked baggage item despite having separate tags for the ski bag and for the ski boot bag. But a person needs more than skis and boots to go skiing.

Either way, this is just another way in which flying DL to ski destinations at peak ski times is going to get even less welcoming for DL elites.

avidflyer

That is the rub. In the airline industry adding inventory (airplanes) is something that cannot be done easily and absolutley cannot be done with just HVCs. The moment one of the airlines adds inventory on a route it is a free-for all to fill the plane with as many LVCs as they have to to keep the opportunity for the HVCs. Airlines are a much different animal than concerts (I am also in the music biz) because the inventory for concerts is essentially static. The "gate" in the airline industry can make or break them in that if you cannot fill the plane with 80% LVCs you do NOT get the opportunity to sell the high margin ticket to the HVC. The next place to go from here is more inventory... A healthy stable of "elites" can ensure that the LVC portion of that aircraft has a slightly higher yield than using pure price trumping. This is a very delicate balance and one people are paid good $$ to understand and implement. I am not second guessing what these folks do for a living just applying my basic business knowledge to the current Airline Industry. It seems to me the inventory is at or close to levels that are on the crispy edge of requiring more. The "more" is where I think they will have a problem.

TWA Fan 1

Pretty good timing...ha ha!

Oh well, I rarely ever check a bag anyway and being silver medallion, although nothing like being Diamond medallion, sure beats being a kettle.

The main perk for me is being able to select premium seats before OLCI. I'm sure I'll get very few upgrades as a silver, but at least now I can book exit rows and bulkheads.

And there is the 25% mileage bonus...

Global_Hi_Flyer

No question. It's a balancing act between load factor and average RASM. What we've seen lately is airlines reducing inventory by either down gauging, reducing frequency, or outright eliminating routes. And that has to be balanced against the cost of parking the aircraft & eating the lease payments.

What is clear is that the airlines attitudes have changed: where they'd stick additional or larger aircraft on a route in the past, they are now content with using smaller planes/less frequency at higher fares.

Or they down gauge. We've seen a lot more willingness to cut flights even if HVCs are hurt. Obviously they have to maintain adequate destinations to keep the HVCs coming back (DL & UA are large enough now to not need loyalty programs to ensure that passengers come back, their ability to serve more destinations makes them a "first choice" compared to someone who serves less destinations).

I was in the entertainment/music business for a number of years. I was not suggesting that the airlines are identical to the concert industry - they are different - but the airlines have been deriving much more money from ancillaries than they ever did in the past, and that monetization of ancillaries is similar to what the music industry does.

From the concert perspective, you want more folks in the gate (even if you don't make money at the gate from them) because ancillaries are such an important part of revenue. Folks like Ryanair and Spirit are following that model.
Agree, except I don't think we're at the hairy edge of needing more inventory. The carriers are still cutting back, and if the AA bankruptcy results in a reduction of available seat miles (either reduced flying or consolidating with another airline) we will see even more. That will force prices higher.

I have little doubt that there's a lot of study - and some experimentation - on the supply/demand curves. There will be a point where demand collapses and discretionary travel drops, but I don't believe we're anywhere close to that yet.

AUDirt

How much longer do we honestly expect those benefits to continue? I suspect that any benefit that costs DL money will be revoked for FOs in the future. This includes the mileage bonus and baggage allowance.

Upgrades and premium (non-EC) seats are probably safe, though.

TWA Fan 1

My sense is that the one free bag will remain as a valuable carrot.

Same for the mileage bonus. If they really want to restrict award travel, they won't do it by reducing the bonus, but by making it more difficult to acquire award tickets.

DLdweeb

Very true, however this discipline won't be permanent IMHO. Boeing and Airbus are raising production, and they and the leasing companies will want to place these planes somewhere. For example, WN just ordered over 200 new 737s, so unless they retire some 737s/717s to offset this, capacity will increase at some point.

Also, expect AA to offer some fare sales as they try to retain their customers during BK.

altod

Just so everyone knows American Airlines allows there Gold Status Members to Check 3 bags at 70 pounds each. I just reached elite status and i love it!

SDQBound

Since When?