Brancatelli says: FF programs in peril

This is "sort of" true. It may be cash-flow positive, but to consider it as a standalone entity is difficult as its product, and hence its revenues, are dependent on the loss-making airline--viewed another way, it is a profit center, but its fortunes are directly tied to the parent (e.g., no way to spin it off from the airline).

Captive finance units of auto companies are in an analogous situation in some ways--although many have diversified significantly, the profits derived from their leasing/lending for cars are dependent on their loss-making US manufacturer parent. Spinning these guys off could be difficult since their value is in large part dependent on the relationships they have with the auto maker.

Actually, the universe is expanding! (at an accelerating rate, no less). For better or worse, though, the rate of inflation in the economy is a whole lot greater than the rate of physical expansion between SFO and JFK...

Sorry -- I couldn't resist pointing that out...

Dan

Re: OP. I think the problem is real and is probably one of those "tipping point" things where people will lose confidence at some point, the on-the-ground promotional tie-ins won't be as effective anymore, and mainstream media columnists will put out the word that you'll either pay a lot more miles than expected or won't get an award.

But, for now, many of the contrary points are valid. Most people don't strategize and there are a lot of non-redeemable small blocks. OTOH, I think that part is already "priced into the shares," as it were.

I think what'll really put the pressure on is baby boom retirements. Lots of mile-savvy people with huge balances who were short on time for award trips while working and want to travel in retirement. The first boomers will hit 62 in 2008 and 65 in 2011.

Not on most international partners, unfortunately.

Southwest Rapid Rewards and similarly structured programs do not have this large overhang of unredeemed awards. Their account holders need not worry too much about devaluation of existing earnings. The downside is that you can't save up for anything more than a domestic coach award. It's a reasonable trade.

My strategy is to focus my flight earnings on Southwest and focus my Miles Buzz promo earnings on other airlines. This way I can burn both domestic and international awards.

Joe is one of my favorite reporters.
He is often factual on a number of topics and not afraid to speak his mind right or wrong.
So many reporters are fearful of what they say.
Joe doesn't hold back ^
While I don't always agree with what he has to say I have enormous admiration for him and his contributions to Inside Flyer over the years.
Love em or hate em Joe has much to say and I certainly like to read whatever he writes.
Even when I don't agree I find him to be one of the most entertaining guys out there like Alan Richman the food critic.

If Virgin America launches here in the US as planned programs may have a reason to be more generous to their customers.
They will need them more then ever before as they flock to Jet Blue and the new guy on the block.Joe brings up something that many of us already know which is the migration from earning in primarily airline programs and shifting much of that over to the hotel programs.
I have been actively seeking this course over the past year or two and will continue to do so until I see an improvement in airline programs seat redemption and more financial stability.
I have millions parked in a variety of global airlines and while I still add on a daily basis the shift is already in place as I pursue hotel programs primarily.
In fact this year I plan to put the largest effort effort to avoiding the airline programs except where it makes obvious sense.

I dumped Continental in the mid 90s long before it became fashionable to beat on them and wisely left the program.I used to chuckle as it won Freddies for some time.I was convinced those that voted one day would wake up and smell the roses and eventually they did.
If there was an award for stinginess IMO they would be a top contender each and every year.
Happy Holidays all
Cheers

This may be true today, but won't be true in a year or so when capacity controls will be implemented.

If the host airline offers the same routing as partners, what's the difference?

Most international partner relationships are valuable because they fly places the host airline doesn't, and the host FF program is marketed in part as a springboard onto exotic partner routes, e.g. fly to Spokane often enough and you'll get to go to Bali on our partner. When partner award access turns out to be limited or impossible it raises the specter of fraud.

The issue for partners in many instances is 'the last mile'.

For example, United, Delta, Northwest,American, Continental can get pax to key gateways in Asia, Europe and South America; their alliance partners are responsible for the domestic or regional segments, which typically don't have the limited availability like partner international segments.

Clearly, airlines like Alaska, Midwest, Frontier are much more dependent on intl. partners since they lack such service. Those airlines are in a far more precarious situation in delivering on their promises for intl. destinations.

Umm. America West is now USAir. So you can take them out of the list.

Ken in Phx

Actually, Northwest has subtly modified its program so that their 'RuleBuster' awards are not unrestricted. They've moved their 'RuleBuster' to pull from C instead of J inventory as of 2005.

Even on FT, there hasn't been much hue and cry over this, so I expect it to pretty much creep in everywhere.

Steve

Wow, that 'subtle' change would motivate me to ditch that program real quick.

Air Canada is slowly moving to distance itself from its FF program, Aeroplan Inc. Aeroplan has gone public through an income trust IPO and ACE the parent will slowly get rid of the whole company IMO. The airline has taken back control of the program from Aeroplan and the signals are that Aeroplan will become a "distributor" for AC seats with different points levels for different services provided by Air Canada. By next year they, Aeroplan, will be selling seats on AC having many points levels for seats. And, the more points you are willing to pay the better class seat you will get. Closer in to flight time will also cost many more points,etc.
The relationship between AC and Aeroplan is now one where AC buys the points it gives out just like a bank does and Aeroplan buys its seats for cash from AC. So, in the future if someone wants to redeem points for a J class seat on short notice they will have to pay a serious premium in points but will be able to redeem them.
Aeroplan has also put out a catalogue of other items one can buy with points and this will continue to increase.
AEroplan will continue to loan its name to AC as a FF program for now, but I see, in the next few years AC reclaiming the program in its name and reconstituting FF benefits and points redemption in airline terms only.

Joe is NOT A REPORTER, HE IS A COLUMNIST! Reporters report facts/events (perhaps distorted by virtue of their own backgrounds) and are not supposed to opinionate. Columnists opinionate and only ocassionally rely on facts to do so. If you consider him to be a REPORTER then you had better reassess how you look at journalism and I dare say life. Reporters are supposed to be impassionate observers and recorders of events, not editorialists! This is a basic tennat of journalism. However, in today's world of Fox "journalism" and CNN dominance, the craft has sunk to new lows and as exemplified by the FTer quoted, now misrepresents to readers something that it never was intended to.

I repeat JOE IS NOT A REPORTER!!!!!!!