Globaliser, I am sorry that you believe a debate here is not possible. Maybe you 're right - after all this website is focused on gaining maximum benefit from miles & points.

But, I would like to point out that the large scale use of FF benefits and programs is primarily in the US. The ONLY place where unlimited free upgrades is available = US domestic premium class travel (and even then - not all airlines).

We have to separate domestic and intl operations - eg CO offers free unlimited upgrades in domestic, but try upgrading on a CO intl flight - I submit that its harder/costlier than upgrading on BA. The US domestic situation is peculiar due to pricing and stage lengths that are very different than say - Europe short-haul.

Intl - I don't believe FF programs have led to the lack of competitiveness of US premium classes. Its got a lot to do with corporate contracts.

US airlines have certainly relied on FF programs to gain loyalty/revenue but we must remember - US airlines primarily compete with each other domestically AND internationally. I really don't think AA/UA try to compete with BA/LH/AF/CX etc for premium class pax "in the general market" but rather fight each other to get corporate contracts.

sounds like you are writing the same book I am.

But right now, I am a recruiter now who works exclusively for the creative and marketing businesses.

I find that lately, companies who slashed their marketing budgets a year or two ago, are finally starting to realize they need to hire back marketers. They figured out that these people will generate new biz and this will bring in money desperately needed to keep investors and banks happy. this in turn, gives the percetion off that the airline is doing fine and customers will therefore get on their planes.

Though the money is tight, marketing is actually the area is where it is going stronger than not. Hence, good marketing, promotions, partnership deals, reaching out to new biz development, sales, and graphic and web design are the order of the day.

Take a look, for example, at United's rather agressive ad and marketing campaigns, and how nice their emailand web stuff looks from an art standpoint. (Beware, of course, that most of their partnerships take way too long to actually POST some of your miles! I hate the UAL Mall and other partnership campaigns that airline puts forth, because they do NOT post credits in the standard promoissed 6-8 weeks out, but instead they often make you wait several months. But at least it looks nice and so do all the ads and e-blasts that come my way.

Their (UAL's) web booking engine sucks, but the way it is designed and how well it was promoted are actually pretty nicely done from a creative look and feel standpoint--at least, in terms of comparing them to the rest of the industry. AA's is nice too. In fact, all the airlines and hotels have put forth great graphics and great web and print campaigns in the past couple of years. This area, due to all the new partnerships and hype they put out about getting miles, has brought them tons of money in return. You can bank on it!

Therefore, if I am someone in the creative side of marketing, I would almost want to work for the airlines I this capacity. That part of the biz is flying high!

I mean, take a look yourself:
These days you can get so many cool deals on miles and how to earn them and how to try to use them and where you can earn and burn them... This is because all the airlines, realizing they can survive by letting its marketing departments try to get more biz and more customers, have remained alive... It has remained alive because of this marketing. Thus, FF programs and the directions they continue to head, are keeping them going.

that's just part of my 2 cents...

MM

Another thing to consider is that when FFP's were invented, they were probably considered to be a niche marketing promotion directly at business travelers. That is, they were targeted at a luxury demographic and intended for business development, not to drive their own profits within the program itself. Air travel in 1980 was still primarily a luxury. I remember saving money for two years to afford 1 trip to Europe. We were (and still are) middle class, and the idea of getting on a large jet to fly to Rome was considered a once-in-a-lifetime thing in the 70's or early 80's. We didn't enroll in the FFP - didn't even know what it was!

Then the airline industry changed, and now anybody of middle-class means can take a long weekend in Europe if they choose - spending about 1/5th in terms of real dollars to get there. Air travel 25 years ago was luxury: now it's mass-transit, much like riding a train. At some point the airlines figured out that the FFP's had to go mass-market as well, and they began to evolve into the currency that they are today. Now, instead of being a little arm of the marketing department, the FFP's are profit centers in and of themselves. Not that it would ever happen, but if they spun it off, I'd be a lot more apt to buy stock in AAdvantage than I would in AMR!

I would have to agree with everything you say here. And if stock were avail, maybe--just maybe--these FFPs would be better managed, regulated and more fair!

Hey the other news is, though I wont be doing any half marathons, I DID get tix to the June 11 cubs red sox game and am using FF miles to go there for a long weekend!

Now, if AA's marketing and flight availability had nothing to do with that, then I do not know what did. Got SPG points for hotel too, and so now guys like me with middle class lifestyles can do a long weekend in Chicago to see a baseball game! The results of FFPs being so heavily entrenched into our lifestyles has been to have this kind ofthing actually be doable. As much as we may complain about awards, etc, this biz makes money for everyone. Cities who wanted people from other places to come visit can benefit, so the airlines make that happen. Hence, more advertizing to go to places like Chicago, or Europe or here or there...

MM

Annual and quarterly reports are a good source of data. So are bankruptcy filings

From the VFF anecdotal side of things my behavior has been influenced in the following ways:

1) I concentrate my travel on airlines that I have, or want to have, elite status on.

2) I buy tickets when I could be cashing in miles. I do this in order to earn status miles. (Miles are to burned on behalf of other people -- family & friends.)

3) I take connections and out of the way routings in order to maximize status miles (or segments).

4) I might even make a mileage run from time to time

5) I go out of my way to book flights off peak in order to maximize the chances of an upgrade.

6) I use an affiliated CC for just about everything.

7) I fly when I could, perhaps, drive.

In my view all of this behavior is a win/win. My goals are met and the airline gets more money and lower costs. A lot of what I'm doing puts me in seats that would otherwise be empty and frees up seats that can then be sold for more money. For instance -- in spite of airlines reporting load factors at or near 90% I hardly ever find myself on a flight that needs volunteers.

I can't resist chiming in just to say that actually there is one item of behaviour in that list which very probably results in the airline getting less money and incurring higher costs, but which you've adopted because the FF scheme gives you an incentive to do it while probably simultaneously benefiting your own pocket.

That's not a criticism, and it's completely understandable, but it does illustrate the sort of thing one would have to look at.

I'd be curious to know which one you think that is...

I assume he's talking about the act of taking a Mileage Run, which FT'ers define as a trip for the purposes of earning miles that yields more value to the traveler than its cost in terms of money and time - and therefore less revenue for the airline on the subsequent award trips.

Hard to say whether that's true or not. In a world without miles, the Mileage Runner probably takes neither trip (neither the MR or the award trip that it spawns). So the question becomes whether the traveler found an MR that was so good that the airline actually lost money by transporting the traveler and his luggage all over God's creation. And that I don't know...

(Obviously I'm oversimplifying things a bit by saying that someone takes an MR and then uses those miles to redeem 1 award trip.)

Think marginal cost......

Affinity programs are probably the single best idea the airlines have come up with in many years. What will be interesting to see is how consumer behaviour will change should one of the big programs close (ie airline closes down- not that unrealistic in the current enviornment).

More value to the traveler than cost to the traveler pretty much defines every transaction we make. If it didn't then we wouldn't do it... Actually that defines business in general.

The question should be whether or not the cost to the airline exceeds the revenues. Mileage runs are only sensible when there is plentiful inventory of inexpensive fares. I'm pretty sure nobody pays full Y for a MR

So it then boils down the what you believe WRT to "profitable" tickets -- are you in the camp that thinks every ticket must be sold for more than CASM in order to be considered profitable or are you in the "marginal cost plus" camp? (Hint: I'm a marginal cost kind of guy...)

The plane is going to fly whether I'm on it or not. If the MR doesn't take place that seat is going to go out empty and $0 will be generated. If I'm on it then the airline gets $X that it would not have got without me. If $X exceeds the cost of fuel, a bag of pretzels, a drink and the ticketing costs then they profited from my traffic just as the corner store profits ever so slightly when I stop in and buy a candy bar.

No, it wasn't mileage runs that I was thinking of, although both of you have identified cost/benefit arguments there. Many of the items on the list have arguable cost/benefit balances, both ways.

But there's one item of behaviour on TomBascom's list which tends to depress the revenue earned by the airline from the passenger, while clearly adding to the airline's operational costs in relation to that passenger as well as the contingent frequent flyer liability costs.

The fact that it doesn't stand out like a sore thumb here demonstrates, if I may say so, my point that this forum is not really a good place to debate this issue. Collectively, our focus is on what we can get out of frequent flyer schemes and we're very good at it. But collectively, we have relatively little real understanding of how airlines work as businesses and of how the schemes relate to the operational business - particularly in numerical and financial terms.

Except when Randy chimes in.

You're obviously referring to extra segments etc.
But airlines have a way around this: where do you reckon the PER SEGMENT fuel surcharges end up?

Why don't you simply make your point instead of acting like you understand the airline business and no one else does?

I can see where behavior (3) - taking suboptimal connections - fits some of the criteria. That is, it raises the cost to carry the passenger and his luggage without increasing revenue to the airline. But...the airlines built their convoluted pricing system that way, so I don't have much sympathy. Sometimes they purposefully direct me onto a long routing with their fares when I'd really rather have the nonstop. Airlines that use more fair, logical pricing systems (e.g., WN) leave a much smaller loophole for travelers to exploit by intentionally flying out-of-the-way.

Because I said that I don't want to debate the substantive issues here.

The only point I want to make is that the question of whether FF schemes are an unalloyed benefit to airlines is infinitely more subtle and controversial than can be debated on a message board whose membership is unrivalled at extracting value from the schemes, and who have a vested interest in believing that FF schemes are good and should continue.

And the only point of pointing out that one item in TomBascom's list is that some of the business arguments about FF schemes are far from obvious to those of us who are passengers first and foremost. I certainly don't claim to understand the airline business, let alone be the only one who does. But the real arguments that the OP wants to read are unlikely to be found on FT. He'd probably do better to take out subscriptions to Airline Business and Air Transport World.