Will Frequent Flyer programs end?
 

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

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.

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.

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.

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)

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.

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

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.

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.

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.

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).

Hey! That's my check...

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.

They may have points, but very few are lucrative.

It would be even more foolish to use them just for the sake of using them. It's taking me years to use up my miles because I just don't fly as often as I used to, but I would be foolish to use them just to get some fake value for a trip I don't want or need to take.

Was the question "will frequent flyer programs remain as lucrative as they are today" or was it "will frequent flyer programs end?" My answer, using the example of Green Stamps that was quoted above, is that no they won't as a whole, though individual programs may end. If you'd like to discuss whether they will remain lucrative I'm all for that discussion too.

The original post said, "Reward programs may not totally end, but they will ever change to a point we may say, what is the point?"
So, I like your question better, "will frequent flyer programs remain as lucrative as they are today". Or it could be asked, "will the frequent flyer programs continue to lose their value to a frequent flyer?

But one can also ask (if not believing that the Fed has ended inflation for all time): "will the US dollar remain as highly valued as it is today?" or "will the US Dollar continue to lose its value to its holders"?

Ie, devaluation isn't limited to travel programs. Hopefully it's slow in the case of the US Dollar, and there ways to invest to hopefully offset that rate of inflation, but there are countries in the world where the local currency devalues way faster than the average frequent flyer program. I was just in Argentina recently for the eclipse and noticed how much ARS has devalued since my last visit there just a few years ago. I just looked it up online and it says their inflation rate is expected to slow to 34 percent this year. But how many FFPs lose value at the rate of 34 percent a year?

So perhaps a bit of perspective is needed.

I think what we can expect is the Big 3 US and most of the major world airlines to eventually resemble the SWA model: dynamic pricing with a fixed, very limited ratio to cash. This works for the vast majority of flyers, as they use points for domestic (or equivalent) economy flights; in the short term these flights are dirt cheap and miles go a long way. The DL model of extremely limited premium sales will probably spread to those same carriers as well, and to economy flyers our complaining about loss of access to the front of the plane will be just so much whinging.

Now once domestic fares rise again and those miles don't do much (and, like today, can barely be earned by BIS), it will be much more interesting to see how FFPs adapt. If flying 5x a year earns someone all of 9K miles, and all that does is knock $120 off of a $600 ticket, what do they do to change the program? Do they finally completely abandon the randoms and purely go for frequent and high dollar passengers for any and all perks (a la Marriott)? Or do they start providing a useful floor for redemptions?

https://www.flyertalk.com/forum/30628591-post14.html

2010: https://www.flyertalk.com/forum/mile...-thoughts.html

2009: https://www.flyertalk.com/forum/mile...od-credit.html

2008: https://www.flyertalk.com/forum/mile...-programs.html

2007: https://www.flyertalk.com/forum/mile...-end-near.html

2004: https://www.flyertalk.com/forum/mile...lyer-boom.html

Excellent research. So they're not dead yet

No.

Remember, the entities we know as "airlines" are primarily credit card marketing firms that happen to operate aircraft as a means of connecting customers to credit cards. While the pesky expensive flying machines are a necessary cost, it's really the FFP that holds the whole thing together and makes the primary product, the credit card, so appealing to many. The FFP is a huge profit center, even in years when the airplanes are losing money.

The real question will be whether any FFP will wholly outlast its underlying airline. Some would argue that's already kind of happened with some of the airline mergers. But it's not that farfetched to think that an airline could go Chapter 7, but somebody buys the FFP asset and continues to monetize it because of credit cards, albeit with a new rewards chart.

A potential silver lining here is that the credit cards may be one thing that prevents the programs from all going to the pure-rebate model the way Southwest has. (Perhaps not a coincidence, WN is the one that has made money for decades on the core flying business. Of course WN also has credit cards, but it does not need them to survive.) There is a lot of marketing capital in the elusive aspirational awards, even though the general public often doesn't know how to best redeem them.

The airlines will always offer an incentive for customers to be "loyal". However, the programs will get smarter, stingier, and more focused. It will become increasingly difficult to game the system. Also, the relative value of these programs changes. The upwardly mobile (pardon the pun) who are early in their careers likely get great value out of them. Those who are further along in a successful career receive less perceived value. Those are actually the customers airlines want to attract so they will offer rewards, sometimes lucrative ones.

Joe Cortez’ FlyerTalk article, “No One Cares About Loyalty Programs Anymore?” Illustrates the dying aspect of FFP. No one cares? Or is it that only a few care? if it’s only a few then it’s an older generation. If so, then it will fade with them.

That article misses the point that if you factor out counting cash-back-only credit cards and store-specific programs as loyalty programs, and only count travel-specific loyalty programs, most people in America never cared that much about loyalty programs. Ie, any statistic about loyalty programs done outside the travel industry counts everything from Green Stamps on, and are not specific to travel loyalty programs. They're mostly things like cashback credit cards, store programs for earning store points, etc, etc.

And since when is it news that no one cares about Green Stamps (or attempts to replace them) anymore??? :confused:

Meanwhile, there are many many aspects of FFPs, and some fade as others arise. Many years ago, most people earned airline miles by actually flying. But then airline credit cards proliferated around the same time that airline miles from flying cheap fares were severely cut back, and earning airline miles by actually flying stared "dying", but earning airline miles from on-the-ground sources grew.

So it's difficult to tell whether FFPs are "dying" when the activity within the FFP world keeps moving around so much.

Finally, there are some people who would revel in FFP programs "dying" just enough for most other people to drop out, leaving perhaps more seat availability for those remaining. Ie, if FFP programs are "thriving", is that always a good thing? :confused:

From The Times of London:

Ban air miles and stop frequent flyers, urge climate advisers

Air miles schemes should be banned because they encourage excessive flying, according to a report commissioned by the government’s climate change advisers.

The ban would affect millions of customers of British Airways, Virgin Atlantic and other airlines that have loyalty programmes. The report by Imperial College London for the Committee on Climate Change says that frequent flyers, who earn the most air miles, should be targeted as the government seeks to meet its emissions reduction targets.

It recommends “regulation to ban frequent flyer reward schemes that stimulate demand”. There are more than 220 frequent flyer schemes worldwide, with an estimated membership in excess of 200 million. A survey in 2017 found that 15 per cent of 30 to 59-year-olds in Britain were signed up to at least one frequent flyer programme.

The report says there is evidence that frequent flyer loyalty schemes are particularly damaging because they can result in people taking extra flights to “maintain their privileged traveller status”. It says that some people undertake “mileage runs” or “status runs” for the sole purpose of ensuring that they retain higher-tier membership of a scheme, and that some frequent flyers regard membership as being “related to status and social identity”.

More: https://www.thetimes.co.uk/article/b...sers-522gdkdwn

As I noted elsewhere, without this on a broad scale, unless there's a coordinated arrangement the main achievement of such a ban would be to either put a bullet in the heads of VS and BA [1] or significantly damage the status of LHR as a major connecting airport (and indeed potentially push some airlines to not directly operate to/from the UK) [2].

[1] If applied to UK airlines but not international carriers)
[2] If applied to flights to/from the UK regardless of carrier and not joined in on by other countries; ironically, this might save VS/BA from some of the damage from the first situation if the UK tries a "US smoking ban" approach: The odds of AA/DL/UA ditching their programs in the face of AA not generally being profitable without theirs and with WN utterly unaffected are basically zero; DL and AA could just pull out of London in favor of letting VS/BA deal with the whole mess (who knows what UA/*A would do).

Already being discussed ad nauseum in another thread: https://www.flyertalk.com/forum/mile...air-miles.html

....and this news item is being discussed on CNN, The Sun, DailyMail, The Independent, The Guardian, etc.

What incredible elitist stupidity! If anything the abolition of programmes would result in higher fares because most of the airlines make a hefty profit on their miles.
Higher fares might reduce travel by making air travel less accessible to the masses, but the same logic would apply to virtually every product. The miles do not drive additional consumption of the product.

Banning frequent flyer programs may actually result in the targeted population having more money to fly than would otherwise be the case.

I remember those from when I was a kid! The grocery store gave them out at the register. I just went down the Internet rabbit hole, only to discover that the final deadline for redeeming the actual stamps (not the replacement "greenpoints") was just LAST WEEK: October 15, 2019!

I posted some years ago that if the U.S. carriers ever merged down to one, that one would feel no need to have a FF program.

Well, it's 3 major domestic legacies and they're acting more like they're colluding vs. competing.

DL's let's-not-have-a-chart bit in particular is looking like a huge stealth devaluation in many places, way out of line with what they had previously. I'm really glad I burned all but about 75K of miles earned there from 1990-2016. Given how expensive some of the free-ticket awards are (can't comment on the upgrades), it's hard to see why anyone would buy miles pro-actively.

You can say the DL approach is one way of trying to deal with the well-known problem of too many unredeemed miles out there and fundamentally too few seats. But saving miles is like saving Argentine pesos or Lao kip.

Of course, with so many blogs out there and so many computer tools, any kind of good deal gets pounced on and burned out faster these days. Am glad I beat the bloggers by about 25 years even though online booking in the early 90s was a lot more labor intensive (command lines and green screens).

I never bothered. The telephone was the best award booking tool.

I should have been more precise. The online booking was for paid tickets with wacky itineraries that spun off the miles that led to the awards/status. Something they'd never have patience to do over the phone and would say violated their rules. Award tickets were usually more straightforward, though later on I got better at maximizing stopovers, etc.

During the great fare war of 1992 the hour-long hold times with the airlines even made the national news.

If there's one thing I'm glad to see (mostly) out of the process now, it's the telephone. Though sometimes there's still no other way with award bookings on partner airlines (e.g. AA flights using EY miles)

Quote:

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Originally Posted by SightseeMC (Post 31329808)

Was the question "will frequent flyer programs remain as lucrative as they are today" or was it "will frequent flyer programs end?" My answer, using the example of Green Stamps that was quoted above, is that no they won't as a whole, though individual programs may end. If you'd like to discuss whether they will remain lucrative I'm all for that discussion too.

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Not that long ago FFP’s , accumulating miles and earning status was my hobby. I was never as knowledgeable as many of you; for which I very much admire. But I did pretty good in working it all to my advantage. Personally, not that it matters much to anyone, but I’ve not flown since February. I don’t really desire to fly anytime in the future. Part the pandemic, part I don’t have to fly for work, part the programs have changed. I have now shifted to photography and carpentry. 🙂
So much has happened in the last year that these questions may not be as relevant. However, I am curious how the frequent flier community feels about the FFP’s now.

But photography of what?

My hobby is travel outdoor photography (ie, photography of interesting looking outdoor places wherever they may be).

So since a number of such places I want to photograph are far across the world (even though there are plenty of such places nearby to keep me busy during this Covid era), FFPs and accumulating miles and hotel points was crucial to being able to afford as much world travel as I have done.

So FFPs and accumulating miles and points for me was only a secondary hobby, to allow for my primary hobby of travel outdoor photography.

Even though I’m not that good a travel/photography job has always been a dream.
I have about a terabyte of travel photography for places I’ve been. I also, could have not travelled as I did without the FFP’s. There are many places yet I would still like to see but not sure that will happen anytime soon. #1 is Antarctica completing the ‘step foot on all continents’ goal.
I live int NE and have enjoyed a few staycations and discovered some local wildlife I had not seen preCOVID. I now have shots of the local Bald Eagle, Black Bear, white tail deer, red tailed Hawk to name a few. 😀