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-   -   Will Frequent Flyer programs end? (https://www.flyertalk.com/forum/milesbuzz/1976772-will-frequent-flyer-programs-end.html)

Clincher Jul 4, 19 10:07 am

Will Frequent Flyer programs end?
 
A poorly managed rewards program can create a mediocre at best customer experience that won’t stand the test of time. So while frequent flyer programs have brought huge benefit to the airline, it appears that dangling a carrot in front of loyal customers isn’t working as well as it did in the past. Gradually, each year the airlines add more requirements to maintain status and charge more for less perks to status holders. I for one used to maintain a higher-tier status, but after calculating the costs I figured it was not worth it. Maybe I am the only one. I’ve long thought my loyalty to my favorite airline was not reciprocated by my favorite airline. If I dropped off the face of the earth (which I did) they don’t miss me (they don’t). However, now banks see the devaluation of miles they have purchased, and the banks are rethinking the bank/airline relationship. Airlines are paying attention and will and are taking a hit where it matters most to them: money.

Reward programs may not totally end, but they will ever change to a point we may say, what is the point? I could see airlines ending the programs as we know them and replace with the 'big spenders' getting an ‘invitation’ to a rejuvenated program that benefits the two parties involved. Something like United Airlines Global Services. Personally, I’d prefer not have to worry anymore if the mediocre mileage benefits I get today will be worth the same tomorrow.

Reward programs are certainly not in the customer’s control. Airlines have long had these clauses in the rules:

“The Program is offered at the discretion of United and United has the right to terminate the Program…with or without notice”

“Delta reserves the right to terminate the Delta frequent flyer program with six month notice”

“American Airlines may, in its discretion, change the AAdvantage® program rules, regulations, travel awards and special offers at any time with or without notice.”


Do you think airlines might actually consider ending the frequent flyer programs in the near future?

Mwenenzi Jul 4, 19 2:16 pm


Originally Posted by Clincher (Post 31269189)
..Do you think airlines might actually consider ending the frequent flyer programs in the near future?

No

FFP's are a huge profit centre and make more money that selling tickets to people in a thin metal tube for a few hours. FFP's are a better business than an airline.

Warren Buffet on airlines http://www.forbes.com/sites/tedreed/.../#1076bc607dc7

Nevertheless, over the past two decades Buffett has made a series of widely reported repudiations of airline investing, including this statement from a 2002 interview with the London newspaper The Telegraph: “If a capitalist had been present at Kitty Hawk back in the early 1900s, he should have shot Orville Wright. He would have saved his progeny money. But seriously, the airline business has been extraordinary. It has eaten up capital over the past century like almost no other business because people seem to keep coming back to it and putting fresh money in. You’ve got huge fixed costs, you’ve got strong labor unions and you’ve got commodity pricing. That is not a great recipe for success. I have an 800 (free call) number now that I call if I get the urge to buy an airline stock. I call at two in the morning and I say: ‘My name is Warren and I’m an aeroholic.’ And then they talk me down.”

CPRich Jul 4, 19 3:23 pm


Originally Posted by Clincher (Post 31269189)
Will Frequent Flyer programs end?

No.

The supporting "article" (if you can call it that), actually says

building a brand community with a rewards programs is the best solution to many of the retention problems facing today’s brands,
and is focused on improving rewards programs. I don't see how it's indicative of the end of rewards programs.

VegasGambler Jul 4, 19 6:53 pm


Originally Posted by Clincher (Post 31269189)

“The Program is offered at the discretion of United and United has the right to terminate the Program…with or without notice”

“Delta reserves the right to terminate the Delta frequent flyer program with six month notice”

“American Airlines may, in its discretion, change the AAdvantage® program rules, regulations, travel awards and special offers at any time with or without notice.”


Do you think airlines might actually consider ending the frequent flyer programs in the near future?

The airlines also reserve the right to write me a check for several million dollars. I don't see that happening either, even though doing so would cost them a lot less money than ending their FF programs.

mahasamatman Jul 4, 19 7:49 pm


Originally Posted by Mwenenzi (Post 31269890)
Warren Buffet on airlines

That whole article can be summarized by the old adage that the best way to make a small fortune in aviation is to start with a big fortune.

WendysFF Jul 7, 19 12:48 am

I doubt so.

However crap implementation may make the crap businesseses think "is it worthwhile" where the beancounters are in charge of the product who don't understand the beans.

Even Apple showed that you can extract value and margin from a product that before apple ended up being downhill cut-cost game (Hello Nokia)

sdsearch Jul 7, 19 10:50 am


Originally Posted by Clincher (Post 31269189)
Reward programs are certainly not in the customer’s control. Airlines have long had these clauses in the rules:

“The Program is offered at the discretion of United and United has the right to terminate the Program…with or without notice”

“Delta reserves the right to terminate the Delta frequent flyer program with six month notice”

“American Airlines may, in its discretion, change the AAdvantage® program rules, regulations, travel awards and special offers at any time with or without notice.”


Do you think airlines might actually consider ending the frequent flyer programs in the near future?

No, and the reason is that there are way more than 3 airlines that have frequent flyer programs. There are many dozens of them worldwide, and there's even way more than you listed in the USA.

So one reason they won't get rid them anytime soon is because they don't want to drop something that the competition has, and nobody wants to "blink first".

It is so much easier for them to change them than for them to completely get rid of them.

Also, those legal statements are more for mergers and acquisitions reasons than anything else. Northwest Worldperks did end, and while members were moved into Delta Skymiles, it did not work the same, and that clause at Northwest allowed Delta to not have to continue every benefit that Northwest Worldperks had. Same with the similar clause at Continental (which merged with United), and US Airways (which merged with American and kept the American program despite US Airways being the official buyer), and Virgin America most recently (which was bought by Alaska Airlines).

The other reason they exist is in case of an airline going "poof", to not have any legal baggage with the frequent flyer program. But it's not likely that any of the US3 will go "poof" anytime soon, if it's an airline with a frequent flyer program that goes poof in the near future, it's likely to be one outside the USA or one of the smaller USA airlines that might not even be on your radar.

GUWonder Jul 8, 19 8:50 am

Many airlines may go bust and the programs with them.

Many airline programs will end in the manner of Green Stamps, all while providing a lesson that a rebate currency programs may only be worth mass customer participation while the rebate currency is managed well enough to be consistently rewarding and provide a decent store of value for those who have collected the currency over many years. The less long-term storage and transactional value the spend-related rebated currency has (or is suspected to have), the more likely a given rebate currency is going to lose ground to currencies that have way more customer confidence. Which currency generally deserves the most customer confidence? The currency in which you earn your income, buy most of your goods and services and pay your taxes — and that’s not airline miles — or a currency pegged to another currency in which you can do so when relocating or sourcing externally.

Cash-back — even in electronic form — rebate currency as king, queen and princelings is the most likely form of rebated currency to have its store of value way better protected by authorities of various sorts than airline miles, hotel points and the like. The runner-up to cash, in terms of store of value protection at least, would be proprietary bank loyalty program points.

Green Stamps, in one form or another, lasted or came back over many decades, but at some point enough consumers wised up to the gimmicks of such program and moved on by dumping it, ignoring or even joking about it. There is a lesson in there for those who invest(ed) their business in airline loyalty programs.

Clincher Jul 10, 19 7:59 am


Originally Posted by VegasGambler (Post 31270494)
The airlines also reserve the right to write me a check for several million dollars. I don't see that happening either, even though doing so would cost them a lot less money than ending their FF programs.

How do the airlines reserve the right to write you a check?

Clincher Jul 10, 19 9:04 am


Originally Posted by CPRich (Post 31270056)
No.

The supporting "article" (if you can call it that), actually says

and is focused on improving rewards programs. I don't see how it's indicative of the end of rewards programs.

I agree and I don't think anyone should or would use just one articles opinion to establish whether the airline FF programs will end.

The truth is, in just a short time the programs have changed dramatically. Does anyone think they have changed in the flyers favor? I don't. I have a friend that has collected over 1 million FF miles with UA. He is foolish to not use them up. They are worth far less today than a few years ago, so he has already lost. Unfortunately, the way airlines are think tanking these programs I bet my bottom dollar they will continue to lose value.

I also agree with those of you who say the programs may never end. However, the gradual change will spiral downward and continue out of the customers favor. I love the green stamps example. My mom and grandmother collected green stamps and it was a big deal to them. The internet killed greenstamps but they've tried to stay above water with on-line greenpoints. Okay, the analogy may not be perfect but when you include the human emotion/loyalty it is very similar. My mom collected GS because they had value and she felt she was getting something for her effort. It made her feel good that she was helping her family. Because of what I do for work I constantly see travelers choosing a higher priced ticket for a perk or two. It makes them feel good. However, the feel good feeling is walking a tight rope. Even among those loyalist there is some complaint.

Airlines have created their own currency and can value it anyway they want. Time will tell.

Boraxo Jul 10, 19 1:26 pm

FF programs will not disappear as the airlines need to reward their best customers as this can influence purchasing. However the programs have already become less lucrative as the earn rates for cheapo tix have been reduced and the cost of awards has gone up.

That being said I think we are seeing the end of the line soon for the massive sale of airline miles to banks. Customers are not stupid and they will be dumping airline-affiliated credit cards in favor of more lucrative ROI from bank reward programs (i.e Chase, Amex, Citi points) or even just 2% cash back cards. Nobody will take phony airline miles anymore when they are only worth 1 cent. The exception to this trend seems to be Chase-Southwest where the bank and airline have periodically offered enhanced signup bonuses and companion passes for card signups. Obviously they would not keep repeating these promotions if the results were limited to hard core churners. The Southwest program is very straight forward so maybe that is a lesson to the other carriers that use smoke and mirrors to hide the true (crap) value of their award programs.

Steve M Jul 10, 19 8:00 pm


Originally Posted by Clincher (Post 31288880)
How do the airlines reserve the right to write you a check?

It's their money. If a major airline woke up one day and decided that it would be best served by writing Clincher a $1 million check, they could do so. It's completely at their discretion, and is about as unlikely as them unilaterally ending their FF program while continuing to operate the airline. But it is their choice.

radonc1 Jul 11, 19 10:08 am


Originally Posted by Clincher (Post 31289105)
I agree and I don't think anyone should or would use just one articles opinion to establish whether the airline FF programs will end.

The truth is, in just a short time the programs have changed dramatically. Does anyone think they have changed in the flyers favor? I don't. I have a friend that has collected over 1 million FF miles with UA. He is foolish to not use them up. They are worth far less today than a few years ago, so he has already lost. Unfortunately, the way airlines are think tanking these programs I bet my bottom dollar they will continue to lose value.
Airlines have created their own currency and can value it anyway they want. Time will tell.

So I go back to the days before open "loyalty programs". So what do I mean?. My father-in-law worked as a high level exec in the 60's and 70's with Goldman Sachs and when he flew AA, he had an AA lounge that existed for the customers AA wanted to treat well. There was no program to join, no membership card to present. AA knew who he was and when he was flying.
There were no miles being distributed or sold unlike today.
However, if you think about the traveling public back then, they paid for a ticket, were transported to their destination, and received absolutely nothing else (except better service and food but for a price).

Now, I buy a ticket and they give me miles (as long as I am in their program.). I use their CC and they give me miles. If I used some no-name credit card, I wouldn't get anything from the airline. So anything I get from the airline is actually a bonus. The bonus may have value if I use it, or it may be worthless since I may fly that airline only once a year. Like Green Stamps, I could give airline miles away or just not use them.
But to say that they are worth less today than yesterday is fatuous. They were given to you as a bonus and your choice is to use them or not. If you use them, their current value is what the airline determines today, not when you were given them, just as Green Stamps determined how many stamps a toaster cost (and that was dynamic pricing as well ;))

So, are FF programs going away. Not likely unless you get a Bernie Sanders type running the airline (not being political here, just using a well known name to point out an economic philosophy).

VegasGambler Jul 11, 19 2:54 pm


Originally Posted by Steve M (Post 31291071)
It's their money. If a major airline woke up one day and decided that it would be best served by writing Clincher a $1 million check, they could do so. It's completely at their discretion, and is about as unlikely as them unilaterally ending their FF program while continuing to operate the airline. But it is their choice.

Hey! That's my check...

SightseeMC Jul 19, 19 11:00 am

I think anybody who sees an "end" to FF programs is being myopic. Rewards programs across the consumer spectrum are expanding in number, not contracting. Pretty much every retail outlet now has a rewards currency, even if that's a punch card for your 10th smoothie for free. FF programs are just rewards programs on a massive scale and,even ignoring the facts of their profitability, there's no reason to think they would go away.

What is happening is the values for customers (and thus liabilities for airlines) are being reined in. So outsized premium cabin rewards are disappearing, miles are harder to earn BIS-wise, and "dynamic pricing" is sealing redemptions within controllable ranges. Additionally, free upgrades are disappearing and being replaced by last minute buy-ups. Much of the value of the programs is being swiftly eroded in the US and Europe; I am no Asian airlines expert, but it seems a slower process with the major players on that side of the planet. But cutting value doesn't mean the programs will disappear. Once the programs reach a certain "lack of value" threshold they will be upgraded or replaced by better ones that do what they are supposed to: drive incremental revenue. But they won't end as a whole.

To use the GreenStamps example: yes Green Stamps eventually destroyed itself as the economics of the industry and the company's particular financial situation declined. But what you're missing is that grocery loyalty programs have EXPLODED over the past 20 years. Every single grocery chain has a lucrative points currency now, while Green Stamps are dead. Forecasting an entire industry's decline by the example of a single player's collapse doesn't match reality. Programs are replaced by better ones, and the world moves on.


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