FFP and Antitrust Law
Mar 29, 2001 | 9:00 am
#2
Original Member
Join Date: May 1998
Location: PDX
Programs: TSA Refusenik charter member
Posts: 16,127
michilo,
I'd be happy to add my post to your thread if you repost it the General TravelTalk forum. Otherwise I'd have to flame myself for posting in the wrong forum.
I'd be happy to add my post to your thread if you repost it the General TravelTalk forum. Otherwise I'd have to flame myself for posting in the wrong forum.
Mar 29, 2001 | 1:39 pm
#3
Join Date: Nov 1999
Posts: 3,511
I sincerely appreciate your efforts to clean up the boards, essxjay. But I do think that this topic is in the appropriate forum. While the board descriptions and be vague, I have interprited them as Buzz is for general Frequent Flyer related topics, while General TravelTalk is for general travel topics not related to FFPs. Airline/Hotel/Credit card/Alliance/Car rental specific topics go in the repective forums. Isn't this discussion about Frequent Flyer programs (thus the Buzz) rather than general travel talk?
Mar 29, 2001 | 4:27 pm
#5
Join Date: Jul 2000
Location: ORD
Posts: 642
Okay, since this might arguably be in the right forum (and I definitely support putting threads in the right forums), what is there to talk about? I'm always happy to talk about either FFP or Antitrust Law, but I'm not sure what issues of interest lie in the intersection.
As a first approximation, most FFPs are offered by individual airlines, so their status is no more subject to antitrust scrutiny than their individual pricing decisions. But I can think of a couple of issues:
1. The worldwide alliances (Star, Oneworld) include airlines that are competitors on some/many routes. Were there any issues in allowing them to form an alliance? There are obvious benefits in the scope of these programs that could not have been obtained by individual airlines, but were there any concerns about effect on competition? (The code share agreements, albeit not directly FFP-related, seem even more debatable.)
2. What about U.S. domestic agreements between airlines. E.g., United and Delta have an agreement that provides certain options for earning and redeeming miles on the other airline. Was there any antitrust scrutiny of that or similar agreements? Obviously, there were benefits for United/Delta passengers in being able to get credit/awards on the other airline. Was there any concern that it would limit the incentive of each airline to compete against the other? (The exact mechanics of competition wrt FFP is not obvious to me, and may be interesting to study.)
As a first approximation, most FFPs are offered by individual airlines, so their status is no more subject to antitrust scrutiny than their individual pricing decisions. But I can think of a couple of issues:
1. The worldwide alliances (Star, Oneworld) include airlines that are competitors on some/many routes. Were there any issues in allowing them to form an alliance? There are obvious benefits in the scope of these programs that could not have been obtained by individual airlines, but were there any concerns about effect on competition? (The code share agreements, albeit not directly FFP-related, seem even more debatable.)
2. What about U.S. domestic agreements between airlines. E.g., United and Delta have an agreement that provides certain options for earning and redeeming miles on the other airline. Was there any antitrust scrutiny of that or similar agreements? Obviously, there were benefits for United/Delta passengers in being able to get credit/awards on the other airline. Was there any concern that it would limit the incentive of each airline to compete against the other? (The exact mechanics of competition wrt FFP is not obvious to me, and may be interesting to study.)
Mar 29, 2001 | 10:46 pm
#6
Join Date: Feb 2001
Programs: UA 1k, AA Plt, MR Lifetime Plat & Amb
Posts: 1,829
MagMile, I believe the first place to start is at the design of the program as a business. The FFPs appear to be independently managed and operated. I could only speculate on the true degree of seperateness from the actual airlines but it wouldn't surprise me if it were large and measurable. The recent use of miles/pts as currency also lead to some interesting questions (as for the lack of taxation and market opportunities that are unavailable to retail sales).
If the new currency became strong enough (what that is I don't know) then the lack of some to have full access to it would bring up more questions.
Ultimately these FFPs are heading towards a free exchange system which is what points.com appears to be. Once that happens the true value of the miles/points will be reduced to their marginal value, which is something like $0.013/mile and there will be no incentive to collect them because we would all rather have US$. Thus, the only thing the programs will be good for is verifying your status. No need to worry about Trust problems then.
And, if anyone doubts me, look at the thread of the mile/pts broker by PaulPalmer. That is just a black or grey market, the first step.
If the new currency became strong enough (what that is I don't know) then the lack of some to have full access to it would bring up more questions.
Ultimately these FFPs are heading towards a free exchange system which is what points.com appears to be. Once that happens the true value of the miles/points will be reduced to their marginal value, which is something like $0.013/mile and there will be no incentive to collect them because we would all rather have US$. Thus, the only thing the programs will be good for is verifying your status. No need to worry about Trust problems then.
And, if anyone doubts me, look at the thread of the mile/pts broker by PaulPalmer. That is just a black or grey market, the first step.