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I knew many of the US FF programs were already revenue based or going that way, but I didn’t realize that was coming to Europe as well. Quoting from an email that I got from Lufthansa’s Miles&More program today:“As announced by the Lufthansa Group airlines in December, the way your award miles are calculated will change with effect from 12 March 2018. From that date onwards, your miles will be allocated based on the fare – i.e. the ticket price plus any surcharges levied by the respective airline. To calculate the number of award miles, the fare will be multiplied by a factor that is dependent on your frequent flyer status and the airline operating your flight.”

Wanted to start a speculation on whether AY would be following suit and why (or why not). Thoughts?

Courmisch

I would guess that AY+ will switch to revenue-based at some point after the three big European airline groups, or when the next global economic downturn hits.

But perhaps more interesting is if the tier earnings will also become based on revenue.

Ed Size

Wait and see, at least LH still give status miles/points distance based. AY did not follow the trend to devalue discounted business class tickets, so I hope they do not follow the revenue based trend too soon.

But even, if they keep the points for status like in the moment that would be still OK with me (even if it will be a big drawback).

intuition

I think this is an non-issue. I have never heard or seen anything indicating AY is contemplating it. Of course that is no guarantee, but it seems like a subject that preoccupies people on FT a lot more than most execs at europeean airlines.

Anyway, why on earth would revenue based be a good thing for loyalty program?
A loyalty program awards your purchasing actions with the purpose of affecting your purchasing pattern:
They give you some non-monetary advantages and in return you do less scrutinizing. That is the upside to tha loyalty program. Already before you even decided to buy a flight, you are predisposed towards AY. You are less likely to look at the competitors, ie it skews the free market. You check AY prices and if they are OK, you buy.

A revenue based system is not rewarding loyalty to brand, it rewards spend. Spend ≠ brand loyalty. Spending 4000€ on a flex ticket with AY does not make me one bit predisposed to buy AY next time.
Award programs that use spend is just a (very complicated) discount system.

Norwegian has such a system - and I use it - but no way in the fiery underworld does it make me loyal to DY or predisposed buying DY. The only effect it has, is that IF I decided to buy DY tickets, then I will use the DY credit card to minimize the ticket price.


A quick real world example:
Flying AY ex-HEL is expensive due to many factors (direct flights, few competitors, nationalism, et.c.). In a revenue based system HEL based flyers would be awarded more points than others.
Let me see a show of hands: anyone who thinks that double points ex-HEL will make you happily choose AY for all your business, paying 3400€ for each ticket if QR offers an equivalent flight at 1700€?

FFlash

Hand up here if company pays
Hand down if my money

aama

This is exactly what I was preaching on AA forum when they went rev based.

The future is, sad to say, Frequent Spender Programs.

ffay005

AY is in a different league from LH or AA/DL/UA here. I find Intuition's analysis very good. What I might add is that AY+ isn't there to make Finns loyal, they are loyal anyway, partially out of necessity. A revenue-based programme combined with a goal of creating loyalty in markets where ticket prices are lower would, as an unwanted side-effect, create masses of higher-tier Finns.

Otherwise, I'll refer to my post https://www.flyertalk.com/forum/29284795-post32.html in this Finnair Plus will get ”fantastic new improvements” thread.

heatsink

And on top of that I don't even see the point of trying to prevent people from benefitting from the current system. The assumption would be that people like us manage to squeeze so many points out of each euro that we're not very profitable. So what? If the alternative is that we quit our hobby entirely, that's still less money, even if they're just making a 0,5% profit on us.

The people buying 4000+ euro tickets are not the ones actively hunting for 1099 euro 200% weekend trips to XIY. The current system attracts both groups.

Guillou

In Y the current system where cheapest tickets earn only 25% of points is already somewhat indirectly based on what you spend. The biggest effect would probably be to discounted business tickets but as long as most people still simply book the cheapest Y fare they can find the problem seems marginal (and mostly limited to few flyertalkers ).

Of course, AY might decide to install AA type elite qualifying dollars (euros) thresholds but even that system offers some leeway to game it (OW partner flight EQDs calculated still based on distance + fare class, not spend). Would have hard time to imagine what the real benefits for AY would be should they switch to a purely revenue based model.

intuition

What the heck. Let's help Finnair design their new spend based "loyalty" system. I will below, for free, offer a thorough analysis of the fare structure and suggest how to calculate what spend will earn how many points.


Let's take the artery HEL-ARN. At a certain time, prices in economy ranges from 32€-610€ (R, Z, O, ..., ..., H, B, Y). Numbers here are the published base price (excl taxes and crap), which is likely what a spend based system would work on.

The base earning (ie the 100% option) today is 1000 point o/w, ie any Value ticket earns 2k points r/t

Transferring to spend based, we first need to find the pivot, or how much spend should be equivalent to that 100% level. Let's say the Value in T fare (at 300€) is that pivot. So 300€ earns 2k points, which corresponds to the old Value 100% level.

From this pivot all other earnings can now be calculated. A full fare Y (ie the Pro Y) is 610€ at this point in time and will thus earn at the 205% level.

OK, it seems like we have chose the pivot pretty fairly, right? Sure 205% is higher than the 150% it earns today, but what the heck, no one buys full fare Y anyway, right? The cheapest Pro (H) will earn 153% so it all seems pretty fare.

Now let's check the other end. The cheapest ticket (a Light in R class) is 32€ and will thus earn at the 10,7% level. Whoops.

In fact, all tickets listed below will earn less than todays minimum 50% if a Value T earns 100%:

Light R 11%
Light Z 17%
Light O 24%
Light Q 34%
Light N 47%
Basic R 17%
Basic Z 24%
Basic O 31%
Basic Q 41%
Value R 21%
Value Z 27%
Value O 34%
Value Q 44%


Any alteration to the scale making the cheapest fares earn better will make Y skyrocket. Any attempt to limit earnings in Y will make earnings in the cheaper fares disappear.
Sure, you can tilt the scale by adding multipliers - "light earns 150% of their spend" "PRO earns 50% of their spend" - but is it really a spend based system then?
Also, isn't that what they already do (think ticket types)?
And how are they going to explain that to the customers? "Yes we are now spend based, but if you spend too much on a ticket" we will limit you earnings". Great slogan...

With current fare structure a spend based system is not feasible. Full stop.



Here is homework for anyone still wanting to go spend based.

FFlash

just dont give them too much ideas...