Revenue based programs coming, according to this article
 

Not sure which board this belongs to, so figured a general miles and points forum would make sense!

I've heard all about the revenue based program and whether or not they would spring up, especially at Delta where rumors were pretty strong. Anyway I was reading some other article today when I saw a link to the following article: http://www.bizjournals.com/bizjourna...iggy-bank.html

In it the author argues that one shouldn't accumulate without spending miles which is something I definitely agree with. He then goes on to say the following:

So is this old news (I know its from October 2012)? I never saw this talked about as definite to occur. If so, thoughts on which airline's plans he was shown? Seems pretty clear that it'd be Delta. :td:

There are (were?) some very large threads discussing this on the Delta board.

Revenue based program coming according to this article
 

Yes there were many threads about it. Delta calls it medallion qualifying dollars (or something like that) Google it. It's more of a hybrid than SW. The dollars you spend are thresholds to meet while still accruing miles. Your avg spend per mile must be $.10 per mile to meet their qualifying tiers.

They are frequent buyer programs rather than frequent flyer. They may be great if all your travel is for biz in higher buckets, but this concept sucks for mixed fares travellers - part biz and part leisure. If one carrier keeps the current system, they are likely to get a lock on most mixed fare travellers and that is a huge market share.

I don't want to start a whole other discussion here, but it's possible that may just be "Phase I."

I don't think it works for me personally, because I'm anything but a high rev pax. However, it does seem fair and consistent with rewarding the customers who keep you in business. What I'd be interested in seeing is how it would impact two major carriers in a competitive market if only one were to do this.

I don't have stats on this or anything, but I think that sale of points to banks (and other entities) is a big part of the business model for many of the major airlines.

Wirelessly posted (BB Curve: Opera/9.80 (Android; Opera Mini/7.5.32193/29.3075; U; en) Presto/2.8.119 Version/11.10)

The worst will be the Fare Based Award Ticket Redemption (FBATR) that DL has been kicking around. It will make redemptions similar to WN's points system. It will effectively make business class award tickets non existent or beyond the reasonable value equation.

Good point. Maybe we will be seeing some type of hybrid for accrual but revenue for status.

Can't the airlines effectively do this within their existing structures using Elite Qualifying Points? AA has long had this concept...although not really leveraged as much as they could. Instead of 0.5, 1.0, and 1.5 they could get more granular and ramp it up higher for the higher fare buckets. Not that I *want* them to do this...just saying they could do it without a system overhaul and without a lot of fanfare that would get them clobbered in the mainstream media.

Well, that could cover the earning side. FBATR is another animal...it would effectively render everything a simple rebate program.

Long ago, I thought the system of mileage was intended to keep the airfares at arm's length from the rewards. When this was all hatched in 1980, with the sole target of FFPs being business travelers and the sole way of earning miles being to buy plane tickets, I imagine that a straight rebate would have looked and smelled a bit too much like a kickback.

Now that all of these companies are essentially credit card marketing firms that operate aircraft as a side business, I guess it's less of a big deal.

'cept for many many many people qualify for status on AA using EQM.

That is what I was thinking, most airlines already reward less miles for discount economy tickets and extra for premium cabin travel. I think thats a pretty good compromise.

I do hope that the new Delta elite requirements are the end of their changes but based on the author's article, it sounds like one or two airlines are definitely going to do this switch.

As far as a revenue based program for both earning and burning, I love it for an airline like Southwest or Jetblue. However for Southwest especially, it works very well as they don't have a true premium cabin and don't fly internationally (until fully adding Caribbean routes from AirTran). Previously their system made it that you would only ever redeem credits for a long expensive flight but the problem with that is they were capacity controlled. Now you can effectively use it for any flight since earning is all the same. However to call it a frequent buyer club or a rebate program is more accurate. I think it probably makes one less loyal when you're getting back a % as a rebate than the current programs we have today.

Another thing I would wonder about is if say Delta does this, how does that impact their relationships with other alliance partners.

True, but my point is that they could find a way to reward revenue within their existing systems and structure. Say, a new tier that is *only* reachable with EQP. Some current ExPlats would love it; some would hate it. By doing this and spinning it as a "new feature", they can start to go down this path without winding up on the front page of the Wall Street Journal as they do it.

All I'm saying is that there are ways for them to get where they want to go without blowing up the entire legacy FFP structure. I have to think there's *some* value in keeping the mileage-based aspirational awards in the system. After all, they still have their capacity controls in place. The J/F seats they actually have a good chance of selling aren't available as awards unless I want to spend an insanely high number of miles.

Perhaps just wishful thinking on my part...an FFP would become a lot less interesting and valuable to me if it was just about clearing out my account the minute my existing credits are greater than the cost of the next flight I plan to book.

It wouldn't have to be too high of a revenue minimum to keep the mileage runners out. Just say nobody gets top tier for under 7 CPM in spend. I have to believe the ranks of top-tiers earned at really low CPMs has got to be really small though. And they're all on FT.

Everytime I see this, my brain interprets it as FUBAR.

I do as well... and it will be beyond all recognition as an award program if/when it gets implemented.

The sad reality, as pinniped inferred, is that airlines have become too dependent on the easy money from pumping out credit card miles. While it seemed to be a low-hanging fruit, it has now turned out to be the forbidden fruit that's going to get frequent flyers kicked out of Eden.

The author's facts are wrong, so why not their conclusions?

One key claim of the author is:
Not at all. With Southwest, you still earn a flat 600 points for just about every partner activity, except credit card and dining. Doesn't matter if your hotel room is a cheap Super 8 or an expensive Hilton, you get the same 600 points (before any bonuses). Doesn't matter if you rent a subcompact or a luxury car from Avis or Hertz, you get the same 600 points. Now, maybe that will change at some point, but so far the biggest airline with a so-called "revenue-based" program isn't 100% revenue based. (Also, earning on Southwest flights isn't as simple as based on revenue, it's even more dependent on the type of fare you buy, which may or may not mean more revenue!)

Having said all that: All the above airlines which have gone to a mostly-revenue program are airlines which don't belong to alliances or have much in the way of airline earn or redeem partners.. However, an airline that belongs to an alliance has to maintain some system of earning and redeeming across the various airlines in that alliance.

The one thing you can't do across an alliance is earn status (by the rules of another airline in the alliance). So it's much easier to make status-earning acrrual-based (as Delta just did to some degree) than to make earning, or especially burning, of an airline in an alliance (or with tons of worldwide partners, even if not in an alliance, as in the case of Alaska), be totally revenue based.

And, as has been mentioned before, factoring in revenue into status earning, as well as into some bonuses, is not new at all. (We've all seen bonuses that upon reading the fine print only turn out to work with fairly expensive fare buckets.)

Why would an airline want to keep a mileage runner out?

For one, I totally agree with you - they are statistically insignificant to the overall pool of elites. And second, a happy mileage runner could become an evangelist for your brand in a way that your typical business traveler never could. Somebody who loves United and/or MileagePlus enough to fly around in their planes for no other reason than to collect miles and status might also be someone who would tell others about the experience.

The fact that they collected more miles per dollar than the typical business traveler is a tiny cost to pay. After all, by the very method with which mileage runners seach for fare deals, they'll likely to end up on off-peak flights anyway. The airline isn't *losing* money on them. They're simply beneficial in a different way than the normal business traveler.

(For the record, I am not personally a mileage runner.)

The same airline that recently changed their policy to keep mileage runners out is the same one which has far worse redemption (in part due to the 3 redemption tiers rather than just 2) than the others.

So do you really need to ask "why"? That airline already likes to p*ss off those who care about FFP value. Isn't this new action consitent with their previous action (both p*ssing off those who care about FFP value)?

I think a mileage run doesn't hurt the airline much. What does hurt is the significant portion of mileage runners who are also chronic complainers (to get compensation or otherwise) and who pounce on mistake fares for themselves and 10 family members at a time. That type of customer can't be good for an airline.

I doubt the airlines have a problem with people who do one or two mileage runs a year to supplement normal travel patterns.

Chronic complainers get cut off eventually: they have systems in place to control for that.

It's also their systems that issue the alleged "mistake" fares. Strong emphasis on alleged... If I book a fare that they issue, why is that my problem? If they make 11 seats available in a given fare bucket and I book them all, why is that a problem?

If that kind of customer isn't good for an airline, stop issuing those fares. The airlines themselves completely own and control their systems and their QA processes.

For what it's worth, I can understand how any airline's first mistake fare was an actual mistake. Subsequent "mistakes" are a conscious cost-benefit decision to undertest the applications or fail to alter known system features. That's okay, as long as they then behave honorably in the marketplace when they issue these fares.

If delta does move to a southwest style revenue based FF program the vast majority of Delta Amex customers will move to other products...short term most will be ignorant, long term the revenue they now enjoy from AMEX will dry up.

Would Delta even be profitable without selling miles to AMEX? I have serious doubts they could remain profitable long term. I'd love to know the spend & carry rate for the Chase SouthWest visa compared to their other products (BA & UA namely)

The premise that mileage runners hurt airlines is completely illogical. MRs are a boon for airlines. Now I'm not talking folks who keep capitalizing on mistake fares and errors, I'm talking about the vast majority of the small minority that comprise the FT mileage running universe.

Every single ticket a mileage runner purchases is 1 less ticket the airline needs to sell, and sell at that price. You think they're butthurt about higher demand? What kind of silly argument is that? An airline will take 2cpm from a novice traveler as happily as it will from a seasoned mileage runner who thinks he's 'gaming the system'. When the airline has exhausted its supply of lower priced tickets (thanks, mileage runners!), guess what the next step is? They may think of raising the price.

Supply meets Demand. The market clears. We're not gaming them by mileage running, boys. Not even close.

This is the last thing an airline executive will think of when proposing a revenue based program, and those who think otherwise have an overly self-inflated opinion about what their activity means to the airlines.

The airlines are quite good at supply and demand; they have far more man hours in research and fine tuning this than any of us have (unless one happens to be doing that sort of thing).

The reality is that there are price points that the airlines will sell their seats at, and once that particular inventory is gone, they move up in price... supply and demand.

What the airlines also want though, is to maximize the profit, so they are hoping they can get a premium out of each person, and to offset any "perks" that have to be afforded to the person sitting in the cheap seat. For example, an elite that buys the cheapest fare, then gets to choose and Economy +/Economy Comfort/MCE seat, which means one less seat that could have been supplemental revenue, or if upgraded to first, via miles or other means, one less F seat to try and upsell, not to mention whatever cost that may entail for supporting an elite sitting in this cheap seat (calling in for an upgrade, free standby due to status, etc.).

So one way to capture some of those "true" elite dollars is to bring in a revenue based elite track. They want some tangible dollars for the perks bestowed upon us.

The other way is to get revenue from non-elites that will be interested in paying cash for an upgrade, or extra cash for extra inches, or priority boarding, or changing same day flights, all for a price.

I think historically, airlines originally thought of status as a reward for the frequent flyer, assuming that the more you flew, the more you spent. As a result, those perks should come with that frequent flying. As the industry got squeezed in the past couple of decades from all sides (operating cost, lower fares, etc.), they have taken a hard look at these perks and realized there is an actual cost associated with them and there is now a desire to get some of that back in form of revenue, one way or another, via a la carte services/perks, or a revenue floor that qualifies one to be an "elite" or frequent flyer. I am sure this has been aided by MBA number-crunchers and the development of systems that allow for data-mining.

It's ridiculous to believe that MR's have any impact on airlines AT ALL! For every 10 mileage runners you know on FT, there are 10,000 people in this country who would look at you like you are NUTS.

The more that Jeffy Jeff and Jeff worry about this stuff, the more they lose sight of what really matters.

Why, also would they want to run off us mixed fare flyers? If they screw me on my leisure trips, then why should I go out of my way (and often I have to with our corporate travel office) to fly them for biz? Answer - I won't!

I have never done a MR and never flown an LCC on domestic or TATL. I have flown LCC's a lot intra-Europe because most of the European carriers monkeyed around with their ff programs to screw leisure flyers. Now BA has swung back and treats all flyers fairly on earning miles (though not on YQ), so I have been doing more flying on them.

It's not the paid flying at low yields that hurts the carriers. It's giving them top-tier status that does. Now you have a guy flying around in upgraded first that's displacing higher-yield travelers with lower status.

You make it sound like there are mileage runners who go from 0->100K. That's just ridiculous. Maybe somebody does a MR or two get from 90K->100K, but that's hardly saying that that customer brought no revenue to the airline. And then we can debate what you call a mileage run -- if I'm at 94K in December, and decide to spend a long weekend in Hawaii at the end of the year, is that a mileage run?

I stand by my statement -- the number of folks doing pure MR's are so small it's not even worth thinking about, let alone trying to do something about.

It amazes me how many people seem to live in a black and white world.

I agree. A lot of people end up within a couple thousand miles (or less) to an elite level by December.

I think DL is counting on AA and UA to match. But you can lay this one directly at the feet of consolidation and lack of competition. With 3 major legacies you've got hub captives being divided up and much less competition. It's easy to see the old NW being a holdout on this if DL had tried it with 5 or 6 carriers, but we know what happened there.

I think the unintended consequences could be serious. Companies and travel managers already hate FF programs and see them as a form of kickback incentivizing bad behavior (like waiting until the last minute to request your trip). This draws an even straighter line there and throws down the gauntlet.

If you're in back on a leisure trip and not getting the mileage bonus (or only getting 25%), and are regularly #70 on the upgrade list or not there at all, other stuff like bag fees start to annoy if you can fly WN without them. Or what about Spirit, which is awful with the nickel and diming but might be $60 RT on a sale where DL would be $200.

For that segment it could accelerate the trend toward price being everything and LCCs and ULCCs getting most of the new market share. In my own case, rather than flying to cities like SEA so I can take DL to Asia, maybe I take the cheapest option and bank miles in that program.

You'll also have more people giving up on trying to get status earlier. DL is counting on many of them to fly anyway because they're probably captives.

+1. I like to think it's skill, but it also helps to not have much of a conventional life.

OK, let's play this one out.

While a person is engaging in the mileage run itself - and let's assume some sort of extreme 0 to 100k mileage runner, going bonkers in January - he's purposely flying the least-desirable times and days for a business traveler. That's how he scored the MR-worthy fare. Probably bouncing around from hub to hub on a Saturday or whatnot. Or maybe flying internationally, taking upgrades out of the equation entirely.

So during the MR, nobody's getting displaced. If the flight was that full of elites to begin with, it wouldn't have had the MR-worthy fare.

Then, later in the year, if the mileage-runner wants to displace these other travelers, what does he have to do? He has to buy a ticket on that higher-demand flight, probably paying a higher yield himself in the process.

I think of it just like any other form of status comp, gift, fast-track, challenge, etc. Setting aside for a moment that there are probably 10,000 RSM's flown by "real" elites for every 1 flown by any kind of "lite" elite, the only way the "lite" elite can ever gain a benefit is by, you guessed it, buying a ticket and engaging with the brand.

In other words, although I'm not a mileage runner and never will be, I lose zero sleep at night that the miniscule cadre of people around the world who do this are ever going to wind up snagging the *last* available upgrade seat on my specific flight where I'm using a mid/low-tier elite status, relegating me to coach. It's the same amount of sleep I lose wondering if I'm going to win the Powerball.

It sounds like since you may be aware of how people at AA did it in January 2012. People living in three states were able to get triple EQM for a month on some hub-to-hub routes which were often on sale due to VX starting competition (or ramping up competition) on the same routes. And since VX was competing with sale fares, AA was often matching VX's sale fares (for advance purchase).

There were so many FTers taking part in this that a thread got started in the CommunityBuzz! forum tracking who was on what flight, taking statistics on upgrades, organizing meetings in lounges, etc:

http://www.flyertalk.com/forum/commu...t-january.html (of 2012)

But it was something that worked at AA only, because AA didn't restrict the fares at which DEQM/TEQM was possible. UA partly overlapped on some of this promo, but it's version of the promo was not valid on the lowest fares as I recall, and so it was not ripe for "mass MRing" the way the AA promo (for those in certain states, anyway) was.