KCFORREAL

Note - only playing the Devil's advocate role here because I'd like to see if anyone has good ideas about how to change the current program for the better. I posted most of this in another thread ...

I agree with the last 2 opinions - I used to fly CO and scrambled for upgrades but when I found out that Midwest flew non-stop instead of a connection like CO did to Reagan, I tried them and won't ever go back except to destinations Midwest doesn't serve. They may be more expensive, but I'm not chasing upgradeable fares, worrying about elites ahead of me on the waitlist, etc - and the seat room is terrific. Another thing - I don't miss that Pavlovian response I used to get when I got an upgrade - the airlines call it a 'reward' but it began to feel like more of a doggy biscuit I 'earned' by jumping through their hoops. But since I wasn't guaranteed my biscuit, I wasn't always a happy puppy.
But no stress now in that regards, which is good, since I need to reserve that for the 9/11 worries, A300 concerns, reclining seats, cancelled flights, etc - and I even have some left over for worrying whether I'm doing my part for this country by spending enough money on stuff I don't need!

Here's a wild and probably ignorant idea - why not gradually eliminate the frequent flyer program rewards as they are now, in the sense of honoring them until the miles are used up, then switching the programs to a price discount tier and still keep the upgrades. After all, a lot of elites get there by travelling on business. For a crude example, as soon as an elite level is reached, give some fixed percentage off all future purchases of tickets for that person as long as their elite level is current, something applicable to either business or personal travel. You could even offer the discounts based on class of travel. Say 5% for silvers coach, 10% for silvers business, 10% for gold coach, 15% for gold business, and 20% for platinum coach, 20-25% for platinum business.

These are just examples to make my point, but I think this whole frequent fliers miles concept has gone way overboard and rewards people for buying merchandise, flowers, phone service, you name it! And it leads to tons of rewards that cannot be claimed due to lack of reward seats held back by the airlines. Add the administrative costs in administering this program and it ain't cheap!

Yeah, I do those other things to get miles because the program exists, it's easy and you're nuts not to take advantage of it. But it doesn't mean it's the best system in light of the current troubles. Reducing costs for fliers and airlines while making airlines fill more seats and earn more revenue seems to be a goal worth achieving - I don't want all airlines to adopt the Southwest model (no offense!), just as I don't want only one make and model of a car sold in the U.S.

fscher

Yes, there are limited rewards, but remember that the florist and the Long Distance service are paying for those miles. The airlines MAKE money from those. It just breaks down to the merchants buying our ticket.


I wanted to add this: Most of the time when I use a reward certificate, I am also inclined to buy a ticket that they may not have sold otherwise. (By taking the kids or husband with me on that trip).


[This message has been edited by fscher (edited 11-14-2001).]

KCFORREAL

fscher: good point! But I'd think that those same merchants who pay the airlines to offer those miles must incorporate that charge into the price of the items you buy - so we're the ones paying for those miles, not the merchant.

Djlawman

As to the concept of replacing FF programs with graduated discounts, the airlines don't want to do this. The FF program is far cheaper for them as a method of maintaining loyalty. If you look on one airline's SEC filings, which disclosed that its actual cost of providing a future FF ticket seat was approximately $20 in actual cost (a little extra fuel perhaps plus the meal I think), and that that is the reward for 25,000 miles, I think it is easy to see that the actual discount one would "earn" would be on the order of a few dollars off a ticket.

The reason that the FF program works so well is that the airline can provide an incentive to us (FF tickets or upgrades) that is worth far more to us than it actually costs them to provide it(given less than 100% loads on their planes). Thus, we may value the seat that we get for a FF ticket at $400-500, whereas the cost to the airline is about $20. Last Feb. I used 4 FF seats to the Caribbean. Cheapest fare I could get was $750 each. I used 30,000 miles each ticket. I consider that I got about $3000 in value for the 120,000 miles.

So, in some aspects it is a win-win situation for both sides of the equation.

Djlawman

mlawless

"Topic: Why not eliminate frequent flyer miles? "

Them there is fightin' words!

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EWR CO Gold

KCFORREAL

Djlawman: yeah, I've used 40K miles on 2 different occasions to but 2 tickets on short notice that would otherwise have cost $3,000K, so in that sense I like the miles for short-notice travel or under-sold flights. I think perhaps the point has to do with their overall ticket pricing structure that makes those seats so much more expensive if you were to buy them but only cost $20 for a reward traveller. Maybe the question is, are frequent flyer programs are money-generators and if so, why can't they consistently make profits? Maybe it's just that question that leads me to wonder about the miles ... but then this question is nothing new ...

mdtony

Well, let's think this through. A reward for a economy class ticket will cost you 25,000 miles for travel in the continental US, correct?

Now, if you value the miles at $0.02, like I read you're supposed to, that's $500 for a ticket, and you have to give them at two weeks notice. Raise your hands if you pay $500 for a ticket for travel within the continental US booked two weeks in advance.

If you do, may I be your travel agent and pocket the savings?

swag

Don't forget that many of those business travellers aren't paying for the ticket themselves. Saving the company $70 on a $700 ticket isn't much incentive. Earning miles that can be used for personal travel or upgrades is.

Shareholder

What elite status FFer in their right mind would even consider a domestic award other than when it has been discounted to the 15K level? Use of such amounts of miles/points are better made as upgrades on long-haul, discounted coach paid trips, never for a flight that could otherwise be purchased for under $300 with similar restrictions. As will all programs, the real rewards are found at the top end: 75K or so for a $5K+ business class ticket to Europe, Asia or SAmerica from NAmerica is certainly a better deal, and use of one's earnings. Afterall, this is just 3x the silly domestic award, but worth 15x as much.

As for the original proposition of this post: FF programs are here to stay. The airlines have dug themselves too deep to bail out now. Whether they do build loyalty or are competitive factors has become a mute point. And we too are hooked as end users: FF programs are the crack cocaine of the business travel world! Free trips, upgrades and other elite status perks. Just try to take them away from us...

TrojanHorse

My personal value for my ff miles are 1 cent each as stated by mdtony, I wouldn't pay $500 beans for a continental us ticket. I figure the most I will ever have to pay to fly say IAD-LAX for example with advance purchase should be about $250. My personal rule for using FF miles for ticket purchase is not to use them unless the ticket is $300 or greater for Y. I won't think twice on spending miles for Int'l upgrades though.

However I have had last minute personal biz that would have cost me close to $2k for a ticket where my 25000 FF miles were worth just that. So it really depends how you use the miles that you have (and probably how many miles you have in the bank) as to how you value the miles.

My valuations are for my usage, I'm sure the rest of you have different valuations and use patterns as well as a wide disparity in mileage balances.

jamiel

Interesting points all. It is truly a pleasure to fly YX and not have to spend precious brainpower worrying about "will I get the upgrade...did I call in time...etc etc"

If you recall (I'm not old enough--born 1963-- to remember anything but the tail end) there was a frenzy about trading stamps (S&H, Top Value, Eagle, etc) from approximately 1956 through 1970. Growing up in St. Louis the last supermarket chain stopped giving them in 1981 (National), but Famous-Barr (the big department store) gave them until 1988 or so (Eagle Stamps, actually the program was owned by May Department Stores).
Publix (big Florida supermarket chain) gave S&H until about 1990.

The craze ended with the recessions of the early 70s. Frequent flyer points are the same thing, 25 years later. In the 60s, the aspirational goods which were "sold" by the stamp companies were household things (my parents still have the picnic basket which I remember getting with them). There was a statistic that 40% of the small electric goods sold in the early 60s were distributed through trading stamp companies.

(Interestingly, Eagle Stamps, mentioned above, were a bit different--you filled a book of them and then took them to the department store (Famous-Barr) to get $3 in merchandise from them. A friend my age grew up near Cleveland where Eagle Stamps were used--the big department store (May Co) was owned by May (duh) and the redemption process was the same.

Now, with greater cultural sophistication (as well as personal income, leisure, etc) we look for travel for our "redemptions".

FF miles aren't going away unless we have a bad recession verging on depression. You can have too many toasters. I don't think you can have too much leisure travel.

JL

SST

The first airline that tries to even DEVALUE my FF miles will lose my entire loyalty on principle; eliminating the program would result in me shifting my 150,000 miles/year to ANY OTHER airline but the one that did it to me. And since I'm in control of my firm's other employees' travel, I'll take a lot more than that.

No, the game is set. Forget about it, BBS lawyers/airline apologists; Changing the rules, regardless of their "notices" saying they can, will be a declaration of war by THEM against US. There *will* be a significant loyalty penalty paid by the airline that messes with the reward structure, regardless of legalities. My money's on shorting the stock of whichever company starts to dilute the ff benefits, as I'd predict it will be the next corporate casualty, once those who actually are buying the high margin tickets quit flying for their competitors. And collusion between them will bring down a rain of state Attorneys General, making the Microsoft antitrust case look tame. (there's just too many headlines in jumping on airlines, if they endanger a million folks' imagined or planned vacations).

mdtony

Except they already did this. It used to be 20,000 miles for a ticket in the continental US and now it's 25,000. And they all did it right around the same time, so jumping from one airline to another didn't do any good.

They have the legal right to change the terms of their frequent flyer programs whenever they want, up to and including termination of those programs.

And all the collusion lawsuits in the world won't do jack about that.

LAJim

Here is a lesson in Marketing:

Airline Mileage Programs were created because they were an ingenius way to create brand loyalty in a market where the product is essentially the same from all of the competitors. Otherwise the ONLY incentive for the consumer would be to buy the least expensive or most convenient.

Mileage Reward programs cost very little to run because they utilize seats on planes that would otherwise go empty (for the most part). Only a fraction of the miles are ever redeemed.

Airlines have quickly learned that loyal customers are their best customers. I can't tell you how many times I have flown on American Airlines because I wanted the Aadvantage miles even if the schedule was less convenient or the rate slightly higher than competitors. Most business travelers are not that price sensitive, they care more about upgrades and personal mileage.

Mikey likes it

A heretic in our midst!

Seriously, I use my FF miles almost exclusively for upgrades. I'm happy that by using a combination of $ and miles that I can sit in First.

A recent example: ORD-HNL on UA. I paid $390 plus 30M miles for a $4200 First Class fare. Value per mile of 8c. Miles cost me about 1.5c apiece to earn.

Now for the good part: I earned about 25M of those miles back because of earning/bonuses (the 2x post-disaster bonus is an anomaly). Net cost in miles? About 5M.
I don't want to give up on this ROI.

[This message has been edited by Mikey likes it (edited 11-14-2001).]