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LA Times article on high profitabilty for airlines but devaluation for customers

LA Times article on high profitabilty for airlines but devaluation for customers

Old Sep 15, 17, 9:08 am
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LA Times article on high profitabilty for airlines but devaluation for customers

I hadn't realized that United is increasing basic mileage redemption from 25,000 to 32,500. But the article is not specific to United. The article discusses the lack of award availability on American.

http://www.latimes.com/business/la-f...914-story.html

Sorry if this is already being discussed elsewhere.
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Old Sep 15, 17, 10:12 am
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United is going to dynamic redemption, actually, which is confounding in its own way. You don't know what the "currency" of UA miles is worth until you try to spend it.

So how much energy should you devote to amassing a currency whose value is X?

Would you walk up to a currency exchange kiosk and do a trade deal if all those red-LED rate quote boards read "X", and you learned the value of the acquired currency only when you went to buy a sandwich or a shirt?

Like any currency, miles run on faith. When people stop believing they're worth anything, the currency crashes. That is happening now; it is no longer savvy to hoard miles, or save them toward a goal. They may prove worthless. The consultant in the article who compared the spiraling value of miles to "the hyper-inflation of Zimbabwe or Venezuela" is right on.
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Old Sep 15, 17, 8:39 pm
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Originally Posted by BearX220 View Post
Like any currency, miles run on faith. When people stop believing they're worth anything, the currency crashes. That is happening now; it is no longer savvy to hoard miles, or save them toward a goal. They may prove worthless. The consultant in the article who compared the spiraling value of miles to "the hyper-inflation of Zimbabwe or Venezuela" is right on.
Yep. I've earned around 3 million miles lifetime and am glad I've burned around 2.9 million...all toward free trips that would be a lot more expensive in miles today (if they did 'em at all).

The most immediate root problem is being down to only 3 U.S.-based legacies and those deciding they don't have to compete as vigorously as in the past. If you're of a certain age then maybe you remember CBS/ABC/NBC or GM/Ford/Chrysler in the 1970s. In both those cases you had three companies dividing nearly the entire market and putting out a lot of bad product. The competition was the lazy kind at best.

There's also the backdrop of an impossible number of unredeemed miles vs. available seats, but much of that was and is the airlines' fault, especially with all the non-flying miles minted. Classic case of putting the short term over the long term and taking advantage of lax or missing regulations. Many people will end up with nothing or close to it.

The three big legacies also ignore experiences of not too long ago after 9/11 or SARS when their business just tanked and it was up to the most-loyal customers to help them get back on their feet. The mentality now - with only 3 left - is that they must be "too big to fail" and asking again for a government bailout will be the ultimate backup plan.

As with the TV networks or the car companies, it'll likely take a long game of smaller players chipping away to restore a decent situation for passengers. You can bet the big airlines will use lobbying clout to try to tilt the playing field in their favor, but passengers pretty clearly see the pay-more/get-less trends.
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Old Sep 15, 17, 9:12 pm
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We need a good recession to restore value to FFPs.
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Old Sep 16, 17, 8:03 am
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Originally Posted by RustyC View Post
If you're of a certain age then maybe you remember CBS/ABC/NBC or GM/Ford/Chrysler in the 1970s. In both those cases you had three companies dividing nearly the entire market and putting out a lot of bad product.
The heartening part of your analogy is that as arrogant and complacent as GM/Ford/Chrysler were in the '70s, by the early '80s they were begging for mercy as new Asian competitors flayed them alive. Barriers to entry in the airline business are likewise extremely but not impossibly high. And a prolonged recession that decimates business travel would do the same damage to the Big Three as better competition.

Originally Posted by RustyC
There's also the backdrop of an impossible number of unredeemed miles vs. available seats, but much of that was and is the airlines' fault, especially with all the non-flying miles minted.
Classic -- and stupid -- inflationary currency management. Miles increasingly look like post-Kaiser deutsche marks, hoarded by the wheelbarrow, but with utility too low to take seriously.

The more people realize how silly it is to save 400 or 600 miles at a time toward an aspirational award that costs half a million to a million miles today -- and who knows how much more tomorrow -- the more will say the hell with it.

Originally Posted by RustyC
You can bet the big airlines will use lobbying clout to try to tilt the playing field in their favor, but passengers pretty clearly see the pay-more/get-less trends.
The PR dispatches from Airlines for America in this era are a stone riot. "Customer Satisfaction with US Carriers Hit New Highs," etc. while Dr. Dao is beaten senseless, etc. The industry spins this fictional parallel cloud-castle narrative where air travel is delightful and customers are charmed.
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Old Sep 16, 17, 8:37 am
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Originally Posted by krazykanuck View Post
We need a good recession to restore value to FFPs.
That won't do it in the US or Canada.
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