ATOBTTR

Good to know. While oddly I'm in AA country in TX right now, I've been able to get DL enough to maintain DL status with no issue and given the choice between the two, my preferences is almost always DL. But if I end up somewhere where DL is really no option with the GSA contract fares and end up with AA on a more permanent basis, it's good to know there's a potential route to getting the EQDs via CC spend.

flyertalker28120

This is implausible.

The airlines use the loyalty programmes to generate *incremental* revenue. They don't want to reward someone who must fly DL all the time due to a corporate policy. If the guy must fly DL no matter what, you don't need to incentivize the guy.

The truth is that a loyalty programme cannot incentivize every programme member perfectly. It doesn't have all the info to do that. The rules of the programme would likely be way too complicated as well.

But I think a programme that uses nothing but spend/MQD is unlikely to work very well IMO.

metalblaze

This is not quite true - UA's MileagePlus program is based on higher spend (DL's equivalent of MQDs) or flight's flown (DL's equivalent of MQSs) & lower spend. The thresholds to qualify have been reduced this year due to COVID, but otherwise, I believe the program has worked quite well.

flyertalker28120

So you're not exactly refuting my claim that a programme based solely on spend is unlikely to work. UA MP has an option to qualify that involves your flying profile, in that sense qualification isn't based solely on spend. Furthermore, there's also the redeemable miles (non elite-qualifying) side of the programmes and, due to things such as flights on non-UA stock or dynamic pricing of redemptions you cannot characterize it as purely spend-driven, either. (It's quite conceivable dynamic award pricing rewards certain low-spend type customers more.)

In my opinion, that is yet to be seen. Clearly, there is a "switching cost" associated with moving your business between airlines, alliances, and frequent-flyer programmes. People started 2020 with existing FF status attained under the old scheme, mileage balances, perhaps a branded CC, etc. The new MP rules have been in effect for a mere nine months and in a period for aviation that was anything but ordinary. I think your claim that the new MP programme has "worked quite well" is highly speculative at this point. It also remains to be seen if the youngest generation of frequent flyers (for whom switching costs are much less relevant) will engage with the new MP programme.

RobertS975

Nonetheless, the miles are actually meaningless to the airline except to incentivize flying more miles for the least cost. They could do and either/ or program.... 125K MOMS or $15,000 spend.

flyertalker28120

I believe it's more complicated than that.

Why can spend be a poor indicator of loyalty? Because some high spenders may be free agents which always purchase the cheapest option (within reason) and their spend is high because they fly a ton.

Obv, the better criterion would be share of wallet. If somebody spends $6,000 with DL and $6,300 on air travel overall, that guy is pretty loyal to DL. If somebody spends $6,000 with DL but $19,000 on air travel overall, that guy is illoyal. So you'd want to reward the first guy but not the second.

Now, with MQM/MQS, you can run into the same exact problem. One guy might have 40k MQM and 58 MQS with DL and 42k MQM and 60 MQS over all airlines and another has 40k MQM and 58 MQS with DL but his total flying over all airlines is for 130k MQM and 154 MQS.

However, I believe there is some additional insight from using both pieces of info, i.e., MQD as well as MQM/MQS. When taking into account multiple observables, it typically becomes easier to find out if someone is loyal or illoyal. (Whether somebody is, in fact, loyal or, in fact, illoyal, is an unobservable, "structural" parameter.)

I don't want to get into the technicalities behind this--this is discussed in detail in the field of econometrics under the heading of "identification"--but generally, you are not going to do worse if basing your empirical measure of loyalty on more as opposed to fewer observables (mis-specification issues aside).

EDIT: Obv, in the example above, both the illoyal guy and the loyal guy are observationally equivalent if spend is your sole criterion (as both spend exactly $6k). But they may not be observationally equivalent with regards to MQM, MQS or other variables.

EDIT2: BTW, allowing CC spend to stand in for some or all your MQD requirement is actually interesting from the perspective of the loyalty programme. People generating miles through CC spend (or through other purchases) is actually a decent indicator of their loyalty to the airline (= they're not just flying with the airline, but engaging with it through other channels).

The Situation

The big hurdle for Delta to implement this is the agreement with AmEx. MQM promotions are a meaningful way to generate new card sign ups and incremental spend on credit cards. Additionally, Delta would also lose the ability to sell MQM's at ridiculously outrageous prices to people that are just short of status.

dliesse

I know the marketing folks will never go for it, but this is what I've long thought is the most logical setup for a program:

1. Status should be based on the number of actual trips (as indicated by what would have been an X in the Stopover box on the old paper tickets). What you want to do is reward someone for choosing your airline over another. Status would be used to qualify for non-monetary rewards such as a dedicated customer service line, priority boarding, etc.

2. Rewards should be based on the dollars spent, although I've never come up with a viable formula (nor have I really tried). For the sake of discussion (you'll quickly figure out that the numbers I'm using are way out of line), assume $10 reward for every $100 spent. Each reward dollar then offsets $1 of actual spend. Spend $1000 and you have $100 reward money available which you can then use for inflight purchases, apply toward airfare or bag fees (if applicable), and so on.

Rewarding by mileage has never made any sense to me, especially back in the days of $99 flights coast-to-coast while the poor guy in Des Moines is paying through the nose to get to Chicago and make a connection. And why should it cost the same number of miles for a ticket SFO-ATH as for BOS-DUB?

willsplashing

Just curious why the airline FF programs have been based on mile/segments in the past. And similarly why Hotel programs are still based on night. It seems logical from the company's perspective to reward based on spending, for airline, hotel, car rental etc. Why didn't they do that 10 years ago?

ATOBTTR

Because if you’re spending $10-$15K on a J ticket in D1 to JNB from ATL, you’re less likely to need a loyalty program to influence your decision. You’re probably going with DL because DL offers a nonstop on the route and you’re already willing to pay the premium for it without further incentives being offered. Similarly, if you’re flying ATL-CVG or ATL-LGA or ATL-ABQ weekly, again, you’re likely not making your decision off of “loyalty” - you’re doing it off schedule and the nonstop and DL being the only main option with a nonstop on such routes. Again, DL doesn’t need to offer FF benefits to entice you. They already offer what you need. FF benefits are not aimed at the lowest or highest spenders who are making decisions either completely based on price or for whom price is completely irrelevant. FF benefits are aimed at those who have options who look at a mix of cost and schedule and benefits to influence their purchase decision.

MSPeconomist

At least in the past, USA airlines and other USA based frequent guest programs were reluctant to base the programs entirely on spend because doing so could create incentives for business travelers to pick more expensive tickets, hotels, etc. in order to gain more benefits for themselves. I think the fear was that this could cause employers to refuse to sign corporate travel contracts or permit employees to select their airlines or hotels (for example, as part of a preferred list of travel providers).

Miles and nights are easy for people to understand and would seem to raise fewer incentives issues for business travel. They're also an unambiguous measure of "frequent" travel with the airline or hotel chain.

jrl767

many employers implemented “we paid for the ticket/hotel/car, we own the miles/points” travel policies — many of which were ultimately rescinded, as many employees found many creative ways to sidestep complying with them

moreover, these programs came into being almost 40 years ago ... compared to what goes on today, the level of in-depth (or, perhaps, compulsive or obsessive) analysis of maximizing benefits within and across programs was nonexistent

ATOBTTR

I believe even the government had such a policy at one point (decades ago). The only benefit one could actually keep and use was "status" if earned, but the government initially tried to keep the miles for tickets purchased by the government for official travel, which I guess the they walked back because the government found mileage tickets and points too inflexible to use.

While I'm not usually one to balk at travel (I usually enjoy it and any chance to travel is a chance to collect miles and points), my view point, as I'm sure if the view point of many/most on here, is those points & miles are my "reward" for being on the road away from home and family to then use to travel with my family.

rylan

Also with the conversion of 'miles' earn directly tied to ticket cost now, and redemption of those 'miles' heavily reflective of the price to buy the ticket, we are essentially operating in those cash systems where you earn a certain 'rebate' for how much you spend. Simply, the burn is 1cpm if you use pay with miles, and the earn is variable based on your status plus bonuses.

It isn't worth DL's time to drastically revamp the system at this point, especially when everything is messed up due to covid. I'm sure there will be modifications to qualifying next year, or mqm and mile bonuses as business travel slowly recovers... but at the rate things are going it doesn't look like there will be much if any further travel recovery in the first half of 2021.

ATOBTTR

The reason airlines don't do this is because of how they compete and who and where they are competing against. Airlines don't need to unnecessarily reward someone who is already choosing the airline because the airline offers want the passenger wants/needs without additional incentives. Take for example ATL-PDX. DL is the only airline operating a nonstop on this route. DL already offers more than AA or UA do on this city-pair by offering a nonstop. AA and UA require connections, which is less desirable to travelers with time-sensitive needs who are usually willing to pay a premium for a nonstop. DL already offers a "superior" product for those who choose on time and schedule. The nonstop also means less "risk" from delays and missed connections. While some people still consider it, a significant portion of travelers are going to prefer a nonstop over a connection, even if a connection might come with FF benefits on another airlines (yes there are exceptions to the "rule" as FT demonstrates). UA and AA are having to use price and their FF benefits to try to entice travelers between ATL and PDX to instead choose UA or AA over DL. Conversely, take a route like RDU-PDX. No airline offers a nonstop. All airlines require a connection via a hub. Thus each airline is competing on a more equal footing, thus each airline has to do "more" to incentivize passengers to choose it over another - one such way is with FF benefits.

With most airlines going to revenue-based models for earning, this is sort of how it is already. Across the US3, base members earn 5 miles per $1 in spend. Another way to think of that is they are "paying" $0.20 for each redeemable mile when they fly. Elite members then earn various bonuses, some earning up to 11 miles per $1 in spend, or "paying" $0.09 for each mile. With all airlines moving towards revenue-based redemption models, you can then begin to see/calculate the redemption values, even if the airlines themselves aren't publishing such figures publicly. Via "Pay With Miles", DL miles are worth at least $0.01 per mile, so you can then see how that translates to the "spend vs. reward". Base members can earn at least a "5%" return/rebate, "paying" $0.20 per mile and redeeming at $0.01 per mile. DM's can get above an 11% return/rebate, "paying" $0.09 per mile and redeeming at $0.01 per mile. The redemption rates can be adjusted/calculated if you're also earning the additional miles for putting the ticket on an airline branded credit card.

Why does a LAX-PVG ticket sometimes cost less than an ATL-CVG ticket? Individual airline tickets are not based off a cost plus profit margin model. Yes the overall CASM to PRASM model across the whole network can make it look that way, if say an an airline's average CASM is $0.14 and the average PRASM is $0.16. But airline tickets are priced based on supply & demand and market factors. The same is true with mileage redemption rates now as airlines move away from the fixed-priced redemption models, so your SFO-ATH and BOS-DUB tickets with miles are now going to be more reflective of what the cash ticket would cost. But prior to that, it was for simplicity to create "regions" for redemptions.