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Upside Down Earning Situations?

Upside Down Earning Situations?

Old Jan 15, 15, 5:52 am
  #1  
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Upside Down Earning Situations?

This is a very generic observation I've had tonight, but is it just me or is point earning on a number of FF programs becoming detached not only from distance traveled (something that I am honestly surprised didn't happen long ago), but even from actually using the airline at all? The hard crash-off in earnings levels at a number of airlines, either associated with the shift to spend-based earning (Delta jumps to mind at the moment) or just in general (Emirates comes to mind) seem to place actually /using/ an airline as an increasingly inefficient way to earn points. I can't think of too many cases where the incentive is actually upside down in Economy (i.e. more efficient to use another source to earn an airline's points), though I can pick some out in Premium Economy, Business, and/or First (usually because those distance-linked miles don't get piled on nearly as fast as the ticket cost rises...for example, on VS a "lowest" JFK-LHR economy ticket will earn you 6916 miles for $1222 (5.6 miles per dollar) while a "lowest" upper class ticket on the same flight will get you 10374 miles for $6812 (1.5 miles per dollar). At the latter rate, you're better off getting points through someone like Hilton (where you can effectively get 3 points per dollar). The damage is lessened at upper tier levels, but not eradicated entirely. Probably most shocking about this is the fact that VS hasn't had a major devaluation that I heard about (granted, I'm new to this, but the United/Delta changes have gotten a lot of press and notice).

The observation is striking because this sort of behavior seems to be showing up more and more often due to the massive devaluations out there, and it seems at least somewhat perverse to the point of these programs (after all, the point is presumably to get people to use your product...not to use someone else's product, convert points, and then use yours for free). I do expect that some rounds of devaluations will "fix" this situation and the trend towards spend-based earnings will do this as well...but for the time being it seems that there are increasing cases where things are a bit upside down. Am I the only one who is observing this and thinks it a little on the odd side?

The other bit I have found odd is that in tandem with the massive devaluations, earning via credit card spend alone is in many cases more of a factor with a given airline than actually earning with the airline. Again, this seems just a bit odd to me for a whole host of reasons...but maybe it's just me?
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Old Jan 15, 15, 6:32 am
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mia
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Originally Posted by GrayAnderson View Post
... on VS a "lowest" JFK-LHR economy ticket will earn you 6916 miles for $1222 (5.6 miles per dollar) while a "lowest" upper class ticket on the same flight will get you 10374 miles for $6812 (1.5 miles per dollar)....VS hasn't had a major devaluation...
This actually reflects a Virgin Atlantic devaluation. They used to award 2X miles by distance on all Upper Class fares, but they reduced this to 1.5X on deeply-discounted fares a few years back.

To get a more accurate picture you also need to look at the Tier Points that you would earn on these flights, the elite status bonuses, and the miles earned if paying with Virgin Atlantic's affinity MasterCard. The $1,222 fare will generate another 3,666 miles through the VS MasterCard, but the $6,812 fare would generate 20,436. Virgin Atlantic has designed their program to reward the engaged flyer (earned elite status, carries credit card) more than the one-time buyer of a premium cabin ticket.
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Old Jan 15, 15, 7:34 am
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Originally Posted by mia View Post
This actually reflects a Virgin Atlantic devaluation. They used to award 2X miles by distance on all Upper Class fares, but they reduced this to 1.5X on deeply-discounted fares a few years back.

To get a more accurate picture you also need to look at the Tier Points that you would earn on these flights, the elite status bonuses, and the miles earned if paying with Virgin Atlantic's affinity MasterCard. The $1,222 fare will generate another 3,666 miles through the VS MasterCard, but the $6,812 fare would generate 20,436. Virgin Atlantic has designed their program to reward the engaged flyer (earned elite status, carries credit card) more than the one-time buyer of a premium cabin ticket.
True...though I guess this also stands out as odd in its own way (the card generating roughly twice the miles in such a situation as the actual trip...I'm used to a ratio that's either around 60% of base earning [Hyatt, Virgin America] or equivalent to [Amtrak], but not substantially in excess of).
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Old Jan 15, 15, 9:04 am
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Upside Down Earning Situations?

I think your starting premise (after all, the point is presumably to get people to use your product...not to use someone else's product, convert points, and then use yours for free) is no longer true. Airlines sell their FF points to third parties and these are now a major source of revenue for the airlines.

So the trend to cut points earned for flying and to encourage points earning via third parties simply reflects the airlines' desire to maximise revenues and profits.

The days of rewarding frequent flyers with free flights are gone. Loyalty is now rewarded through status benefits.
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Old Jan 16, 15, 9:09 am
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True, but I have to question the alternate premise (that airlines arguably benefit more from selling a lot of points to outside groups and then letting folks exchange them for flights).

The internal card situation sort of makes sense insofar as I believe a given airline (or hotel) saves themselves some CC processing fees...but I find the 3-points-per-dollar standard which shows up most of the time to seem to be of dubious benefit to the issuing company (since the effective redemption value of those points generally only sits around 1% or so if the consumer redeems them for something like gift cards; from what I can tell, you can usually get more than that with a little bit of effort)...

...of course I'm also assuming logical behavior on the part of consumers, which is often a bit much to expect.
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Old Jan 16, 15, 10:01 am
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Originally Posted by GrayAnderson View Post
... card generating roughly twice the miles in such a situation as the actual trip...
I wouldn't generalize from one example. Many flights generate more distance miles than payment card miles. You can fly from MIA-SEA-MIA (about 5,400 miles, roundtrip) for under $500. As airfares rise the proportion earned by flying (distance) rather than paying (dollars) will be reduced. This isn't any type of program devaluation.
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Old Jan 16, 15, 10:42 am
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Originally Posted by mia View Post
I wouldn't generalize from one example. Many flights generate more distance miles than payment card miles. You can fly from MIA-SEA-MIA (about 5,400 miles, roundtrip) for under $500. As airfares rise the proportion earned by flying (distance) rather than paying (dollars) will be reduced. This isn't any type of program devaluation.
In a sense, it is a type of devaluation.

As prices rise (not just airfare, but general inflation), the number of miles needed for awards have to rise as well. For zone-based awards, it doesn't happen smoothly; instead it happens in chunks. This has to happen -- if prices double over a 10 year span, they can't give you a free flight for spending the same number of nominal dollars on their credit card, since that number of dollars is worth half as much. It has to be inflation-adjusted.

As a result, if they stick to "1 mile per mile flown", those miles flown become worth half as much. What they should do is increase the miles earning rate as they increase the number of miles in the award chart, but this never happens.

Revenue-based models don't suffer from this problem.
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Old Jan 20, 15, 9:59 am
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I will say this: as the miles earned from flying have decreased, I've moved back to a very neutral position when it comes to any kind of "loyalty". I hold very simple, low-level statuses that give me basic access to Oneworld and Star Alliance (AA Gold and A3 Gold). That is, borderline humane treatment (usually) and one checked bag. Throw in non-alliance airlines that seem to treat fliers humanely (usually) - Southwest, Aer Lingus, Jet Airways have all been fine for me in the past couple years - and I usually have a lot of options. (If I felt like I needed Skyteam, there's probably a credit card I could get that would make it semi-tolerable.)

If I was really doing 100,000 miles BIS, then maybe I'd still care about loyalty. But at the low-tier level...25k-50k miles flown per year I just want more direct routes, less hassle, and decent airfares, and I'm not going to give up those things to get a few more miles.
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Old Jan 20, 15, 1:55 pm
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Originally Posted by pinniped View Post
I will say this: as the miles earned from flying have decreased, I've moved back to a very neutral position when it comes to any kind of "loyalty". I hold very simple, low-level statuses that give me basic access to Oneworld and Star Alliance (AA Gold and A3 Gold). That is, borderline humane treatment (usually) and one checked bag. Throw in non-alliance airlines that seem to treat fliers humanely (usually) - Southwest, Aer Lingus, Jet Airways have all been fine for me in the past couple years - and I usually have a lot of options. (If I felt like I needed Skyteam, there's probably a credit card I could get that would make it semi-tolerable.)

If I was really doing 100,000 miles BIS, then maybe I'd still care about loyalty. But at the low-tier level...25k-50k miles flown per year I just want more direct routes, less hassle, and decent airfares, and I'm not going to give up those things to get a few more miles.
It's been years since I tried for any sort of status, partly because my flying has gone down from a couple of 100K+ BIS years to 2-3 international flights a year, but also because you don't get much with lower status that you can't get with affinity CCs.

I fly international C or F on points and pay coach for the occasional US flight. The only thing I've lost is the assurance of getting a decent seat on those US flights.
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Old Jan 20, 15, 2:12 pm
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Originally Posted by pinniped View Post
I will say this: as the miles earned from flying have decreased, I've moved back to a very neutral position when it comes to any kind of "loyalty".
Originally Posted by pinniped View Post
But at the low-tier level...25k-50k miles flown per year I just want more direct routes, less hassle, and decent airfares, and I'm not going to give up those things to get a few more miles.
Pretty much. Based in SEA, it's a no brainer to get AS status (direct routes/decent airfares/less hassle/decent coach seating), and then use some combination of AS/DL/AA/WN/VX/US for domestic flights, and have buckets you can put the miles into for redeeming premium longhaul.

Almost all the benefits of status can be replicated some other way. Want a lounge? Get Priority Pass or the right credit card. Checked luggage? Credit card or pay for it. First class? Even NK sells "the big front seat".

The bottom line is the shiny card with the "elite" title is meant to distract and give emotional value to a decision in such a way that it distracts from your best economic interests ("Sure, I have to put up with this 50 seat jet on a 1200 flight, and take many less nonstops, but it's all worth it for that shiny card and the occasional trip I take on a non-junky airline where I get caviar and Krug").
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