StayingHomeIsBetter

I, too, was triggered by this and had to retreat to my safe space for a considerable period. But, my teddy bear and I are venturing forth again.

minnyfly

No, there isn't economic profit on the consumer side. In my econ language, since award ticket redemption is a monopoly market, flexible rates with no charts are designed to reduce utility for the consumer and increase "profit" for the airline. The current system makes it much easier for Delta to guarantee that award redemption rates will be low for every route--lower than the price for earning them. And it also increases the effectiveness of change and redeposit fees. Win-win for them. Lose-lose for you. Being able to offer a "cheaper than competitors" 10,000 mile Y one-way MSP-DEN that costs $83 in real life isn't high utility for consumers. It's still a win for the airline.

There's simply no point to debate with your hypothetical. In the vast majority of paid routes, there isn't a true monopoly, and there would never be a pricing strategy like that. I truly have no idea what you're intending to prove.

PayItForward

Not exactly accurate as hotels also sell rooms at pre-paid rates which cannot be cancelled for a refund nor made changes to.

rucksack

Award tickets are not simply tied to cash fares – there is still wide variation in award ticket mileage valuations. For example, here are some flights I've gotten with the new chart-less system in the past year:
ATL-ORD RT: 10k (~2 cpm)
ASE-SFO: 5k (~6cpm)
ATL-ANC RT: 25k (~3 com)

Look, I'm not saying that miles haven't been devalued – the evidence is clear that they have been for international (especially J) award tickets. But that's a separate issue of what Delta sets award ticket prices at – if Delta still had a chart-based system, they could just as easily increase chart prices as American recently did.

My point was that removing the simplistic chart-based pricing structure isn't purely bad – it gives Delta more flexibility in pricing, which in fact has increased the number of lower level (as compared to the old chart system) domestic award tickets Delta has been willing to offer. This isn't hypothetical – this has been observed through analyses.

Also, award ticket pricing is not monopolistic because people have a choice in the credit cards they get and the frequent flier programs they use. Especially with how important credit card revenue has become for airlines, airlines have big incentives to demonstrate the value of their miles.

TomMM

REI had a liberal return policy like that but changed it to a one year return policy a few years ago.

orca15

Hey OP (if you are still around) I think DL now allows payment of change fees with miles, so you could save the 130K miles, pay 75K in change fees, and still come out ahead.

apodo77

Where has this analysis been done and there proven to be more low level awards offered?
I am a skeptic when it comes to airlines doing anything to benefit the consumer.

scottsam66

Comment of the decade!

xliioper

I've documented the sub-12.5K awards a number of times (note they have changed to prefixing the fares with "YSV" more recently and eliminated the 3 week advance requirement on many of them).

https://www.flyertalk.com/forum/28482780-post10.html

Kevin AA

Changes to award redemptions is not a new thing. Many years ago (but after deregulation), when FF programs were new, all award tickets within the U.S. cost the same number of miles and had no limits on availability. The airlines noticed that they were flying widebody jets to Hawaii with a few paying passengers and lots and lots of award redemptions -- big money loser!

A similar thing happened with Jim Bakker's PTL Club property (Heritage USA) in Fort Mill, SC. He sold the rights to free hotel nights for life in exchange for a $1,000 donation, and the number of outstanding hotel nights far exceeded availability. That's where the analogy ends, as airlines don't literally screw over people named Jessica Hahn and engage in financial fraud. LOL

rucksack

Well, since you asked:

A rigorous analysis by IdeaWorksCompany, a consulting firm that specializes in revenue management, customer experience, and loyalty programs demonstrated that Delta not only has been improving, but also has much better award availability than United and American:
http://www.ideaworkscompany.com/wp-c...eport-2017.pdf

This analysis by a fellow FT member @javabytes found there is much more availability at the lowest award tiers for domestic coach travel:
Revisited: Award Availability (3-tier vs. 5-tier vs. Dynamic)

And finally this analysis found a large number of days with low level availability across a few selected routes:
http://blog.wandr.me/2015/03/some-in...campaign=14371

minnyfly

Those "wide" variations - and subsequent "good deals" - are getting fewer and fewer thanks to the variable-priced system without an award chart. By largely tying award tickets to fares, DL can eliminate unfavorable redemption rates in the customer's favor. That ~2cpm is a not a favorable redemption rate. You can buy miles on sale for basically the same price. They will sell you that ticket all day long. If you simply want to burn miles, sure, go ahead and buy it. But for those wanting to gain maximum utility from their miles, it's a poor deal. Even 3cpm isn't a great deal. It's barely a deal at all. Good deals, in particular for premium cabins, are rare, and that's DL's goal. Those "low level" awards are usually only good for burning miles. They're not for maximizing miles, and so they have little to no use for folks in that group. The other negatives vastly outshine their gain.

Award ticket pricing is absolutely monopolistic. You might have a "choice" of which program to use, but once you make that decision, the market and pricing is a monopoly. If you want to buy a ticket with your SkyMiles, you have no choice. There is one seller in that market. Even award miles in general are monopolistic. The sellers set the rate of any product you want to buy. Just because you can use your dollars (miles) to buy different things doesn't mean the market isn't monopolistic. The definition isn't having only one type of product to buy with your "money". The fact that DL and other carriers can universally devalue their miles for an economic gain proves then existence of a monopoly market.

CarmenOM

Continuing this OT sub-discussion, REI still has a liberal return policy in that you can return things, such as hiking boots, that have clearly been used but haven't worked for you.

Nordstrom used to have an anytime, no-questions-asked return policy; I don't know if that's still in effect.

rucksack

Think about the absurdity of what you just suggested: that miles be worth more than what you can buy them for. How do you think that would work out for Delta? If I could buy miles for $0.02 each and could redeem them for $0.03 each, I could profit $0.01 per mile bought!

They can't though - airlines don't have unlimited power to devalue their miles. The devaluation of miles across the industry over the past decade reflects the overall trend of consolidation in the industry that has given airlines more power over consumers.

Airlines would have to collude to completely devalue miles (which I'll remind you is illegal). In the absence of collusion, airlines would never act to devalue their miles too much due to market pressure. It would disadvantage them vs. their competitors when it came to selling fares and getting people to sign-up for co-branded credit cards. Looking at award pricing in isolation doesn't tell the whole story.

Ber2dca

The thing to remember here is that 'miles' are basically administrative fugazi or fairy dust if you wish. They are nothing but a highly sophisticated and elaborate version of a coupon in the mail for a repeat customer. The system has to be so complex because so many quite intelligent people spend time thinking about how to game this system. But at the end of the day, this is Delta saying to you, we like that you fly with us, here's a bit of an extra incentive to do it again. It's marketing, nothing else.

People who expect 'miles' to work like regular currency are delusional.