Isn't that the Delta way to screw up the elites? Any person booking high eco fares is bound to make an elite level sooner then after. Except of course if they're travel is ocassional (so no long term commitmend and income for LH) or governed by convinience (of connection for example - might be different next time with other carrier).
Also, would be quite a challenge for LH IT to determin which fare is the highest with connection from countries with various pricing models.

Unfortunate for some people but you hit the nail on the head.

How so? Marginal cost to LH of an OP UP is 4000 USD?

It doesn't really seem to be implemented yet.
Quick story from Tuesday this week:

PVG-FRA, booked in H class, reserved and online checked in emergency exit with SEN number. Got to the check-in desk, they welcomed me "Mr. Vinonobile, you've been upgraded due to overbooking, not a single seat left in economy."
Got the C boarding pass, asked them to change the mileage credit to my UA 1K account (needs to be credited there for the company, SEN is my private card).
She grabbed my boarding pass, said "op-ups only for senators". I try to argue that I am a SEN, just can't credit this flight there. No way to convince her. She takes 5 minutes to clear me a middle seat in the back because 32b and all other exit seats have been given away. (given she op-uped a middle seat in the back, I tend to think that person wasn't a SEN, at least not one who knows to reserve seats in advance)

Now, despite the disappointment about the missed op-up, I know I have no claim on that. But what really pissed me off is that it also cost me my seat reservation - the only possible way a tall person can stand LH Y. I thought about just taking my OLCI print out ... but I didn't think any good would have come out of making a fuss in the plane and confusing an innocent (and happy) person in 32B.

Being a SEN doesn't get you anything, crediting to UA 1K in H class (not a bad one if one thinks in the new supposed hierarchies) doesn't get you anything either. Only gets you neck-pain and numb legs in the back of the plane.

How so? This change in the OpUp priority (again - the only change is that passengers on V fares, no matter what status you have, are bumped off the OpUp list) does nothing to the fact that LH is giving away an upgrade anyway, it only affects who gets it. So no matter how high the costs, they won't be affected. Maybe giving the OpUp to the FTL / *G with a Q fare instead of giving it to the SEN / HON on a V fare will give higher revenue in the future, but some doubt it.

+1

Also- the marginal cost of upgrading a customer to business on an oversold flight is only what he/she consumes in the lounge and any bottles of alcohol which are required to be opened for this customer only and that would not have been opened if this customer was not in the upgraded seat.

Two "V" class bookings 5-8 June 2011 and interesting outcomes. As a LH SEN I have had my share of op-ups on long hauls.

LH752 (HYD-FRA) was overbooked I was informed. Prior to check-in they indeed verified my status and confirmed that "V" is not upgradable. At check-in they offered upgrade for miles which I declined. At boarding at least 2 (if not more) were upgraded to Business cabin - one of them flying for the first time (guess: not a Y or B fare). Thought the new policy is in place.

LH764 (MUC-BOM) was overbooked and they sought two volunteers against 600 Euro compensation for arrival 12 hours later. As I boarded, the machine beeped and I got the new business class seat.

That's exactly the point: LH chose to oversell a cabin by x amount of seats anyway.
If they did not oversell there would be no need for op-ups.

Good point- surely it is better to oversell and get some increased/incremental revenue than not sell and get zero incremental revenue?

Casual travellers won't know anyway, and book whatever is cheapest.

And it does imply that a SEN/HON/FTL from the higher buckets would be upgraded first still, so it may cause the frequent flyers to take that into account when booking, and so might, in fact, generate more revenue.

Frankly speaking though, while op-ups are nice (and have happened to me a few times over the years), if I can't stand flying Y (and I can't, really, but that's a different story), I book biz, or expend the miles to upgrade.

Booking the cheapest available fares and expecting the be op-uped first is, honestly, a bit arrogant; regardless of status.

Well- it is a good way to fly Y I suppose :)

Only if they cared and knew about the changes. Apart from the few people here, I doubt that is the case. Also, the booking requirement is inconsistent with other upgrade policy and inconvenient, since LH booking engine gives V as a default "basic plus" class (if available).

You miss the point completely. Nobody is talking about costs to the airline. We refer to the expectations of passengers.

If a frequent flyer comes to expect frequent and regular upgrades from cheap fares to the business cabin, then he/she is unlikely to buy business-class tickets. A situation unloved by the airline.

LH would, I think, far prefer the upgrade to be a rare event whetting the appetite of travelers to the delights of the forward cabin.

However my own history of upgrades is so very low in percentage terms, I feel the OP may have been over-egging his history - or I am flying the wrong routes at the wrong time!

I'm guessing you're talking about me and not Rambuster (who is the OP). Definitely not "over-egging" my op-up probabilities.

Nothing to do with me either.
I just reported the new policy.
It doesn't affect me, as I don't book economy class.