Is the FF program on the way out?
 

Given the recent changes in the the redemption requirements and changes to the lounge fees et al a big question comes to mind.

Are the airlines having second thoughts on the monster they released. When the FF program first started, it had a purpose. But then the airlines got greedy and every tom dick and harry credit cards started giving mileage. Has the program become too large to manage? I mean, free(?) flights in all classes, upgrades to biz and first based with no direct revenue of a paid ticket? As I see it, mileage requirements have changed, and lounge fees have increased. So, what do you think.

Is the FF program on the way out?

I see no reason to believe FF programs are going away, but they certainly have been deteriorating in value over the past few years.

Is the FF program on the way out?
 

I think there is a minority if the population who churn through the credit card sign up bonuses and the companies probably lose money off of them. But I suspect the vast majority generate miles which the airline will get paid for by the credit card company which may not be used plus there is probably some loyalty bought where people are willing to pay a small premium for the early boarding, free checked bag, etc.

I wouldn't be surprised to see more of the mandatory minimum spends for status and a further expansion of availability reserved for people who actually fly frequently as opposed to people who just have the cards.

Go look at how much revenue FF programs generate for airlines in SEC/stock filings, and then come back to the thread. This should tell you the answer.

The other thing: FF programs are like casinos; it's entirely up to the airline/casino how much value to return to the customer. I don't think Harrah's is going to shut down their casino just because someone was able to count cards and come away with a few thousand in winnings. They just make it tougher to count cards and change the rules (blackjack payouts going from 3/2 to 6/5).

They have become huge profit centers...many airlines have spun them out as separate entities. They are not going away...changing yes....

Definitely changing for the worse, but I doubt FF programs will go away. Some airlines' miles are literally worthless, but the programs are still around.

I've mostly been a low-level elite on United for the past seven years (I was 1K one year). Almost all of my travel has been personal. I think the erosion of FF benefits gets more pronounced the lower down the totem pole you go. The UA/CO merger made things a lot worse for me. Losing the right to reserve Economy Plus seats at the time of reservation without paying an extra fee was a big negative for me, but I couldn't find a better alternative. The minimum spend also annoys me, though it's not a big deal at the lowest level ($2500 a year for UA? Not difficult if you fly overseas twice).

Increasingly, the best perks -- the perks that drew me to the program in the first place -- are withheld for the top tier(s). I completely understand this as a business decision, but as a passenger, it irks me. Airlines no longer seem to value loyalty below 50,000 miles a year (or more, in some cases). I'm hoping to land a job with lots of travel when I graduate this summer, but for now, I'm stuck with whatever I can get.

I will close with a "Mean Girls" quote that seems very apt: "She knew it was better to be in the Plastics, hating life, than to not be in at all." Yep, I'm the Gretchen Wieners of the FF world.

FF Program on the way out
 

I'm in the same boat as Erdehoff. My international travel will pick up again this year (usually IAD-LHR), but the attitude exhbited by United in the latest changes to their FF program has driven me to Southwest for most of my domestic travel. I'll fly UA enough to keep my account active, but I see no reason to support them any further (610k miles in their FF program) when they clearly have no interest in earning my loyalty.

Agree, agree, agree!

I've kept UA Gold for quite a few years with travel that is 90% personal, and can meet the minimum spend because most of my travel is trans-Atlantic, but I don't really care about award trips--I'm in it for the extra legroom and to be treated like a human being when I call for customer service or when, as happens more than half the time, my bags don't make it onto the domestic leg of my flight when I recheck them at my port of entry into the US. I'm starting to think it might be more worthwhile to pay for the extra legroom and just put up with a crap attitude when I call for customer service and give up my "policy" of paying $100-$200 more per flight to be loyal to UA.

After the Continental/United merger, getting upgrades has become very difficult (and expensive if using miles). Platinums and IKers all looking for the uypgrade on any United flight. I don't bother using CC's for miles any more, I take the cash from AMEX.

For those holding AA and US Air, this could give everyone a prelude of what to expect later with the merger of these 2 airlines.

If they are 'huge profit centers' why are the airlines making them so unattractive? I still receive miles for flights, but I don't bother with mileage earning credit cards anymore. I remain with oneworld because AA and LA/JJ are so dominant in South America, but I wouldn't stick with oneworld for status anymore because its value is so dominished. I always buy premium fares anyway so status really doesn't offer many benefits. In my view, airline loyalty will soon fade away as a practical matter, but it's hard to predict if any one particular airline will benefit or lose more than any other.

I think the airlines realize they created a monster and would like the programs to go away. The erosion of value in the programs is just a beginning. Eventually they will be gone. Good reason to burn your miles ASAP.

Obviously (based simply on the ratio of premium seats to non-premium seats) you're in the minority on that.

But indeed class of booking largely trumping status is true even on award travel. You get the same or even better lounge access traveling "way up front" on award travel than you get traveling in the back with AA Platinum status (internationally).

So, yes, the more you "exclusively" use premium cabins (whether paying or using awards), the less relevant elite status is. Which is why I don't mind redeeming for business class (or above) international travel outside of oneworld, even though I only have meaningful status on oneworld.

Now, back to your first question. In part, they're making so much profit because they're giving away little while promising a lot. If they gave away all they promised, it wouldn't be a good profit center! So I don't see why it being a profit center for them is in conflict with it not being the best experience for you. The best profit center I would guess would be Delta, where they trick people into collecitng miles that few seem to ever be able to redeem at good value (much less than at UA and AA, anyway). So the airline sells the miles, but doesn't have to pay if nobody can redeem!

Status is much more relevant to the person whose company won't book them into anything above coach, and they have to use that status to either upgrade or at least get into a "better seating" section within coach. On most planes these days, there's no such thing as upgrading beyond the class above coach (whatever it's called), and up front there's no "betrter seating" section within a cabin that status can get you into.

Similarly, in premium cabins, you get boarding priority and check-in priorirty and free bags at least to about the same degree that status gets you.

So status benefits are clearly not aimed at those who exclusively fly in premium cabins. But what benefits could they create that would appeal to those who exclusively fly up front by nature of their ticket? :confused:

I agree with [/bold]sdsearch[bold/]'s analysis. But still, it's hard to understand why airlines would systematically discourage the loyalty of their most profitable customers and cultivate the loyalty of the less profitable economy class customers. Unless, they're aiming mainly at the loyalty of 'full-fare' (Y and B) class customers and discouraging both discount economy and premium fare customers. As for "giving away little while promising a lot," I certainly agree with that conclusion, but it is sure to kill of the appeal of miles/points in the medium term. I, for one, now only collect miles when I can't avoid them (i.e., for flying). And I use them mainly for friends who are willing to accept economy seating in return for a cheap (not 'free' anymore) ticket.

I agree with sdsearch's analysis. But still, it's hard to understand why airlines would systematically discourage the loyalty of their most profitable customers and cultivate the loyalty of the less profitable economy class customers. Unless, they're aiming mainly at the loyalty of 'full-fare' (Y and B) class customers and discouraging both discount economy and premium fare customers. As for "giving away little while promising a lot," I certainly agree with that conclusion, but it is sure to kill off the appeal of miles/points in the medium term. I, for one, now only collect miles when I can't avoid them (i.e., for flying). And I use them mainly for friends who are willing to accept economy seating in return for a cheap (not 'free' anymore) ticket.

This sums it up pretty well. Better to have a base Lexus than a loaded Toyota. But personally, the dreariness of Toyota as well as Lexus is enough to kill me.

Southwest is a popular airline and has a popular mileage program that seems to be 100% revenue. Very few FTers seem to use it (I myself never fly Southwest, only because they don't service my airports well), but customers seem to appreciate it. Many people i know in California use their Southwest cards and fly Southwest religiously. So FF programs will exist in some form. They will just be more revenue based, particularly within the US. International redemptions will probably remain zone or mileage based in some form; they will just be devalued. The issue is that there are too many points out there, not the programs themselves.

Airlines would go broke if they flew with full J cabins and empty Y ones. It is instructive to realize that SQ, a lauded airline, couldn't make all-J work on SIN-EWR/LAX, and the number of airlines that DO make all-J work is tiny, mostly restricted to LON-NYC.

Many economy customers are actually paying for tickets and will remember good service. I've been on the EWR-SIN all J flight. The flight was 60% full at best and most customers either paid with someone else's money (like I did) or or redeemed an award. The route was more or less subsidized by coach tickets purchased elsewhere in the network, and it eventually wasn't worth it. Airlines need customers willing to pay to sit in coach to travel somewhere. Most customers aren't premium.

It's 100% revenue in terms of earning and burning on the airline itself. But it's actually closer to 0% revenue than many of the legacy airlines in terms of partner earning!

In other words, while there are, for example, several airlines at several hotel programs where the miles you earn are proportional to the spend you do at the hotel, Southwest gives a flat number of points per stay in every hotel program, so hotel partner earning is 0% revenue with Southwest, but some sizeable percentage of revenue with some legacy airlines!

Southwest gives also a flat number of points per car rental.

So the only partners that Southwest has where earning is revenue based are the dining program and the credit card (and that's only regular earning, not the singup bonus, of course).

Even that's not clear (in terms of redeemable miles). The issue: Southwest can get away with it because it's a single-class airline. With miles programs, the number of miles you need for business class (or domestic first class on two-class planes) is only about 2x the number of miles you need for coach class, and the number of miles you need for "true" first class (ie, on three class planes) is only about 2.5x to 3x the number of miles you need for coach.

Simiarly, most airlines have both "saver" and "last seat" awards. In a given cabin, the "last seat" awards take only 2x (AA/UA) to 3x (DL) the number of miles as the "saver" awards.

However, in cash prices, business/first is typically 5x to even 10x the cost of coach (especially if looking at advance purchase). And advance purchase vs "last seat" in cash prices is also about 5x at least on the legacies. (There's somewhat less of a difference between advance purchase and "last seat" prices on Southwest compared to the legacies, which also helps make it possible for Southwest to get away with being revenue based for burning.)

So redemption couldn't easily maintain these ratios on the legacies if it were converted to being closely tied to revenue while keeping cash prices where they are.

... There is, however, an area where legacies are definitely moving in the "more revenuie" direction, and that's the qualifying / requalifying for elite status. Both DL and UA gave already implemented a requirement for "qualifying dollars" in additon to qualifying miles for reaching elite status, making reaching elite status purely by flying a bunch of ultracheap fares no longer possible at these airlines. I think there's more interested in fishing out "cheapskates" from elite status that they are in converting redeemable (not status) mileage programs to revenue programs.

However, there are other kinds of changes (than moving to revenue) possible, with precedents for them: BA / IB Avios points are redeemed based on the length (in point-to-point distance) of each flight segment, on a per-flight-segment basis. That's quite different than the US airlines which require the same amount of miles for flying all the way across the country as for flying a 45 minute hop to a city that's a four or five hour drive away. It can take way fewer Avios points than (BA/IB's partner) AA miles if your flight is a midcon-or-shorter nonstop flight.

BA switched from miles to Avios points a couple years ago. Why is it not possible that some US legacy airline might switch to something like that, rather than revenue-tied redemption?

I am a regular on the WN board. You overestimate the popularity of Rapid Rewards. Most people did better under the old system, which was easier to "work."

I don't think anyone on FlyerTalk is representative of the wider population.

Most people I've talked to in the real world love Rapid Rewards. These people don't come to FlyerTalk. They don't want to read about complicated stopover rules or region transiting. They don't want to "work" the system.

These are the people who want to get from Point A to Point B with their rewards, and Southwest does a great job making it super easy for these people. That's why it's popular.

What does your question mean, that the FFP is "on the way out?"
 

If you mean, are airlines transitioning to a revenue-based model for direct benefit accrual, yes.

Does this mean, it will become less worthwhile doing MRs and so on? Yes, and the perks of the regular tiers (non-secret spend-tier based levels like GS, 360 etc) will diminish.

If you mean, in the broad economic landscape, will FFP shrink and disappear? Most assuredly, no. Evidence contradicts that claim.

They already function as profit-centers and alternative currencies. Redemption options are increasing, additional ways/links to other programs are being introduced every week e.g. UA MP/Marriott or DL SM/Starwood (an unbelievable conjuncture of what is best in class with what is :-: mejor en su clase :-: ) Net value is INCREASING, at the same time as core value generation via flying rapidly diminishes. Customers will have to pursue other paths to generate benefits, such as allied programs, credit card spend, partner company patronage and so on. Exactly as intended.

If Bitcoins - which are gray-market instruments at best - are expanding, appreciating and becoming more useful, compare them with FFP which are far more embedded into our daily lives and institutional fabrics already.

They are already functioning as partial alternative currencies.

If I could issue a private currency that I could devalue at will, why wouldn't I?

I do not agree

If I could afford to pay Biz/First class, I'd simply pick up the best and more convenient flight, so for sure a FFP could not offer me benefits like free class upgrade, dedicated check in and lounge access because or not possible or already included in the service.

I have no clue why such a customer decided to stay with an airline or an alliance. Perhaps he doesn't....

But I can not afford to be elsewhere if not in the economy cabin. Now, FFP benefits like free class upgrade, dedicated check in and lounge access are really attractive. And I think I'm not alone in this opinion. I look forward them, I use them and I like them because they make my travel (i.e. life) a bit easier.

From time to time I redeem a long haul award in biz/first class and whatever the airline, it's a wonderful experience because I usually sit something like 30 rows behind !
By the way sitting on the back using a 200 EUR ticket vs sitting on the same seat but after having paid 980 EUR, gives the same in flight service just a very few more miles (not a lot more).

Free ticket ? I hope your wallet never experiences the pleasure to pay the AF/BA/LH fuel surcharge. I was surprised to discover AA and UA still offer almost free ticket, i.e. tax as low as 3 USD.