At least that's what EasyJet founder Stelios Haji-Ioannou claims:More in this IHT report from the FF conference in BKK.

I know myself that I have chosen UA many times when there is a cheaper option simply because I know I'll have the ability to upgrade, double miles, lounge access.

If everybody bought without regard to FFP's then fares would definitely be lower.

Is it worth it to pay the higher fares to fly on UA...for me it is, so I do!

I just bought a transcon round trip for about $475. (I could have paid less, but I have to squeeze a day's work in San Jose in between teaching Wednesday afternoon and Friday morning classes south of Boston. I got the only flights that worked.)

If this logic is correct, it could have cost about $430 if AA had no FFP.

However, thanks to their FFP, I'll fly in front. To me, that's worth a heck of a lot more than $45. F fare, even F fare less 10 percent, would be out of my financial reach (or, more to the point, not reimbursable by my client).

So eliminating FFPs, at least for me on this upcoming trip, would mean either a huge price increase or an equally huge drop in comfort level.

The statement may be true on the average, but not for FTers who know how to use the system.

I think that the OP was more asking if AA and/or UA didn't have FFP, then lower fares would be the direct result.

I agree with that, ant it's not because people are choosing higher airfares when lower ones are available.

In the end the airline knows that the miles will be redeemed for free tickets so they tack on $20 - $40 per itin to recoup that loss. Not only that but administrative costs and all that junk. If UA didn't have to offer a FF program it would make their fares cheaper.

FFP programs were created at a time when passenger loads were a lot lighter than today. There were empty seats on most flights. The idea was to fill those seats with their best customers, a reward to the customer that didn't cost the airline much, if anything.

Today, load factors are much heavier. The frequent flyer is taking a seat that a paying customer can't have. There are a lot more frequent flyers, and award seats, than were originally anticipated. Tickets do cost more because of it.

A glance at the article cited by the OP would contradict this (and would contradict what Stelios says)Since Stelios does not have a FFP, it is in Stelios' economic self-interest to badmouth FFPs. I don't fault Stelios for saying something to further his economic self-interest.

UA may be generating more PROFIT from MileagePlus than it does selling airline seats directly, but I'd be shocked if the REVENUE from MileagePlus exceeds that from UA selling airline seats. Am I to be shocked?

Okay, so the title of this post is a little harsh, but ...

One idea behind FFP programs is to get folks whose tickets are paid for by others (corporations) to favor certain carriers even though they charge more for essentially the same product. They are kind of like the "free" desk TV or luggage offers prominently featured on the cover of office supply catalogs sent to "office supplly buyer" at my office. The secretary who buys the supplies is believed to be swayed to use one supplier over another by the "free gift" which doesn't end up with the company.

FFP progams give a reward to the passenger, not the company which ultimately pays the bill, so that the passenger will pick one airline over another. They are (a pretty successful) effort to keep market pricing from working.

For some reason, I doubt the author lives in a city that's a major hub.....

I also wonder whether he understands advertising and treating your regular customers well -- but then he's not in that business.

Bob H

FFPs are a loyalty program.

I have paid higher fares to flight on UA in order to accrue miles, but also because it is likely that I will get an upgrade.

On the surface, it appears that YES, the existence of the FFP causes higher airfares. If I pay $X dollars to buy a round-trip ticket plus some nonzero portion of a future round-trip ticket, then it seems on the surface that the airline should be able to deliver one round-trip ticket by itself for less than $X.

But...the complication arises because the very existence of this model - the fact that I'm willing to prepay future travel that I might or might not use in small portions - is quite profitable for the airlines. Plus, it gives them an auxiliary revenue/profit stream - selling the potential future travel on a standalone basis to banks, florists, hotels, rental car agencies, etc. at a massive markup - that they wouldn't have without the underlying model: that is, my willingness to buy a portion of future travel when I pay for today's flight.

Therefore, one could argue that the bottom line of an airline would be much worse off without FFP's, thus requiring them to change somehow, perhaps including raising airfares.

So I'll flip it around: FFP's, combined with the high "breakage" factor and the general public's suboptimal use of their miles, help keep overall travel expenditures down for educated users like us.

Sleazy Jet's entire business model is predicated on serving the portion of a population that is completely and utterly price concious at the expense of every concievable amenity. For his population, FFP are utterly worthless.

This is not the only population of air travellers.

Agree 100% with pinniped. Actually the FFP's are probably the most profitable part of the airlines today, at least the big six that have been drowning in debt as of late. They sell so many miles and get the money right away, they regulate the use of the miles with capacity controls, and I would not doubt that many miles never get used or get used in a fashion that does not give them much value. Some people actually burn 50k for a domestic ticket worth under $300, can you believe that?

The FFP program may be very profitable for the airlines, but where are those profit come from? Certainly not from the travellers. It's from those banks/shops who buy miles and give them out. Someone here had mentioned that the banks buy the them between $0.01 to $0.02 per mile, let's say on average of $0.015 per mile. Nowadays, 15,000 mile signing bonus is not uncommon for credit cards, which is >$200, with 1 mile per $1 spend, the banks also give out the equivelant of 1.5% rebate. What the banks are doing this? Maybe for marketing, but I bet if any bank offers a $200 signing bonus with a 1.5% cash rebate, even with an annual fee, will be able to sign up new customers like crazy.

On the grand economy, the administering of the FF program is wasted resource that does not generate value for the society, which makes everything more expansive than it should.

Well, it's more like a tax on the general economy which benefits a small segment of the flying population (i.e. FlyerTalkers)....

Also, was "expansive" a Freudian slip? I know that the FF programs have led to more expansive seats for me, at least

Dan