Good catch, I wish there was a spell check, but OTH, even a spell check won't help me here.

FFPs are one area where I can say America still reigns supreme. Maybe the manufacturing is moving to China and the trade deficit is a wreck, but nobody does the FFP like the U.S. carriers.

Most airlines worldwide would look at it and see mostly added costs to administer the program, plus the possibility of giving away "free" tickets that might have been sold.

More to the point, the airlines probably don't have enough competition, at least in their hub, to think they have to offer a loyalty program.

As has been mentioned, though, the reality can be much more complex. You can make money from selling miles for non-flight activity. You can make money from your mailing list or e-mail list and advertising on behalf of partners. You can get people to take flights they wouldn't otherwise take, usually in seats that would go unfilled anyway, to get awards in seats that you control and also might well go unfilled otherwise. The FFP not only has the ability to take business from others, but also the ability to get new business under some circumstances.

There are also major potential secondary effects of wise SPENDING of miles for tourism. Many places I've been on awards (Majuro, Kosrae, Pohnpei, Yap, Cook Islands, even South Dakota) might well be prohibitively priced as paid tickets. I have also done many places as stopovers on big awards (such as ROR on a recent Manila itin) that didn't have enough draw to be standalones. All those places got revenue that they wouldn't otherwise have gotten.

To the airline, the administering of the program is also marketing. I guess one could argue that marketing is "useless" because one the product is no better no matter how much it is marketed. But there is value in gaining a reputation which will drive people to their product. The same could be said for TV commercials, except that they bring us the Super Bowl and they are paying the $2 million per 30 second ad in the most extreme of examples.

Just as a theme park makes money from people who pay for the experience of the rides and then spend most of their time standing in line, the airlines have people with mileage balances that leave most of them "standing in line" for their rides. And at the end of the day when the park closes, everyone standing in line has to simply leave.

The difference is, this park (FFP) does not "close", however, the line just becomes longer and longer for those already in it because there are people (flyer talker) constantly jumping to the front of the line.

Infomation is POWER!

Don't make the mistake of assuming that the middlemen aren't making profits too. When banks, florists, hotels, rental car agencies, and other partners resell miles to you, their markup is built in as well.

Look at the cost of a dozen roses without miles. Look at the cost with miles. You're paying double if not triple the total cost - just to get those miles. Now, that still might make sense for people like us who pay close attention to how we use miles. I recently bought about 5000 miles (using the UA 30 miles/$ code) along with various Valentine's Day flowers - grossly overpaying what I would have paid in cash to a streetcorner florist - because I already know I have a strong, near-term use of those miles.

Same with credit cards. There are 1.5% rebate cards out there. Every time I don't use one of these cards, I'm buying points. But again, I think I can get a lot more than 1.5 cents out of a Starpoint, because I know that, in general, I redeem them quickly for hotel stays at a decent rate.

Yeah, I'd probably sign up, but they'd have to tease up that rebate rate a bit to get me to stop using my SPG Amex.

It doesn't have to generate value for the society. It merely has to generate profit for the house, attract enough players to fuel the system, and reward enough of the experienced players to inspire the next generation to join the game. It's no different than a poker table.

Apparently some theme park visitors do not need to bake in the sun for hours...
The Disney World equivalent of F class

http://www.theglobeandmail.com/servl...ageRequested=1

gemac-

Ever hear of yield management?

Only in the same way that supermodels cause increases in the price of shampoo, or sports stars cause increases in the price of cars. You can still by Brand X shampoo from KMart, or a Lada off the internet, but if you're not 100% influenced by price alone you'll make your purchasing decisions using a wide variety of other factors.

That's a theory I hadn't heard before, but not one I think I subscribe too. And the reason I don't? It assumes all buyers are equal and know that theory, and that you, as a FFer, pay a premium for your travel because you're aware of the future travel benefit. But the reality is much more likely to be the opposite - as a FFer you're probably a much smarter buyer of air travel, and you'll get better airfares than Joe Public precisely because you 'know the game'. Your decision making might be about the future travel benefit but for others it might be the present benefit - like lounge access. Or some combination. Or other factors.

All FFP's really do is aim to engender (profitable) loyalty. Is it done by bribery? Harsh word, but arguably describes the concept pretty well . . .

If yield management were perfect, why was I on a LAX-HNL in January (award tix) that offered bumps? How can you possibly take the position that my award cost AA nothing?

I have often seen the statement that selling miles is the most profitable business sector for airlines. While it is pretty easy to track revenues of these programs, I can tell you that 6 skilled and dedicated accountants would come up with 6 different answers on what the costs were. Probably true with 60 accountants.

Thee ae dozens of potential explanations as to why, no software is perfect, but take a look at load factors, I don't see AA with 98% loads, more like in the 80% area, take away the award tickets and you'll find it in the mid-70's, not far off from where it was when the programmes started. Try again.

The FFPs do cost money to operate. Like any promotion or advertisement, the only question is, do they generate more revenue than they cost? Obviously, virtually all of the airlines think they do.

You could argue that United fares would be lower if they didn't have to pay for those "Rhapsody in Blue" commercials.

Well, I didn't really mean that I pay a premium for air miles: I don't really have a choice but to "buy" the miles. I rarely if ever fly routes where a seamless, reliable process for booking flights without miles. I don't think I can get my frequent MCI-ORD tickets at 20% off by going through a bucket shop. I guess I could do it on my MCI-LHR and MCI-CDG tickets, but what little research I've done there (and it's been a while since I've looked) hasn't yielded very attractive wholesale deals.

With hotels, yeah, every time I book a room at Marriott.com or SPG.com, I'm consciously making the decision to pay a premium for points, lounge access, and other perks that go with Gold status. There are plenty of easy-to-book, lower-cost hotel options that give me the base product (a room in whatever neighborhood/quality level I want) without all the extras, but most of the time I pass on them in favor of the more expensive direct-booking. So you're right...in the case of hotels, I do it for both the present and future benefits.

DOn't fprget the part the Airlines like the best: Most FF miles are not redeemed.

It the best deal going for the airlines. They are prepaid for a product the most customers don't use it.

I will pay a premium for air miles. I have made a decision to concentrate all my air miles in one account (American, for its superior award availability). I use the miles as I earn them, to keep my balance below two years earnings. I value those miles at one cent per mile. Miles in other programs I value at zero, unless I am earning a lot of them, as I don't fly them often enough to be able to use them promptly, and miles devaluation has eroded my confidence in their value in ten years.

So, for example, for an upcoming trip to Japan, I will earn 30,000 miles on AA, vs. 15,000 on UA. In this case, I would value the miles on both carriers at one cent. I would pay up to $150 more for an AA ticket than a UA ticket, because I get more miles. Also, AA would win a tie, because if I fly them I will get lounge access, exit row seating, business/first checkin, and preboarding.

For a trip STL-MIA, I have a choice of AA or WN. This trip won't get me enough in WN's program to do anything with. An AA ticket will get me 6500 miles, and so I will pay up to $65 more for it. In addition, on AA I can book the DFW-MIA and MIA-DFW legs in the business-as-coach seats on the 777, so AA would win that tie. Since the ticket on AA will be about $140 all-in, it is pretty hard for WN to get my business for this flight.

So I am willing to pay more for tickets on AA than on other carriers, because of the benefits that AA's FFP gives me. Perhaps I'm being foolish, but it makes sense to me.