After reading through a number of airline message boards, one can't help but notice the trend that almost everyone feels that their airline is decreasing the "free" FF benefits (ok CO more than AA) and/or degrading service unless you pay big fares.

A letter I got from CO hinted that what CO is doing now in terms of policy is the right thing to do to stay solvent and that any other airline which doesn't do this is going to be in big trouble. CO is clearly betting on high-fare ticket fares (low volume high margin) than lower fare higher volume traffic (which I suspect is a majority of the FF population). Is this greed as some have hinted or really the sane thing to do in this environment?

I guess my main question is are we in a phase where the frequent fliers are making decisions based more on value than on loyalty? If frequent switches and flying multiple airlines at a relatively cheap price becomes the norm than it makes sense for airlines to cater to those that provide them high fare margins than those that do cheap mileage runs.

Is the prevalence of cheap mileage runs doing a disservice to those that must fly regularly but cannot pay premium prices? Would it make sense for the airlines to differentiate between those two types of travellers or just ignore both and concentrate on the "high-end" crowd as CO has clearly set out to do?

I think (although many who do inexpensive multi-sector runs would disagree) that Qantas has a very good way of rewarding its top $ earning FF's and not its most frequent flyers.

Basically they have a system whereby you get Teir credits for each flight. They are basically:

0-1000 miles 10 point in Discount Economy, 20 points in Full Economy, 30 Points in Business etc.

You then need 350 credit to get to level one, 700 to level two and 1400 to level three.

The good side is a return first class flight from USA to Europe will net level one with ONE RETURN FLIGHT (bare in mind this makes the airline over $8,000 in revenue).

They have worked it out that you need to spend about $10 - $15 per status credit so Level One earns them about $3500 - $5250, level two earns them $7000 - $10500, level three $14,000 plus.

This allows them to really offer a great level of service based on your spend with the airline. Also when you get 7000 or 14000 credits ($70,000 - $95,000 or $140,000 above) in spend they give you Lv 1 or Lv 2 status for life.

I think this is the way that airlines need to go in order to gauge who are the "real spenders". While some loopholes are in the system generally you need to spend over $7 to get a status credit and as such any Qantas staff know that a level 3 (or Platinum) FF earns at least $14,000 per year for the airline and can be treated as such.

The end result is that a Platinum FF does get better service from the airline as the agents dont have to worry if this FF got his status by making deeply discounted trips or full F, C and Y flights.

Anyway just my 2c worth

NB: All amounts are in AUD but it gives you the idea!

Viewed another way, I've been on about two dozen flights since 9/11, and NONE of them has been full. Revenue per empty seat: $0. Revenue from me: Typically one or two hundred dollars per segment. Incremental cost to carry me: maybe $10.

By selling discount tickets on flights projected to have empty seats, the airline can push nearly all the revenue from me to the bottom line as profit. A good deal for all of us. I don't need to fly on high-demand flights, since I'm retired and traveling for pleasure. In fact, I PREFER the more lightly-booked flights.

My airline, American, seems to understand this, and has made me feel very welcome. Not out of charity, but because it's good for business.

What makes CO think that the pressures of "this environment" which has led them to institute such customer-unfriendly policies as HoKY fares are any different from the pressures faced by even (or especially) their largest corporate accounts?

What makes CO think that the very same market factors which have caused itself to re-think its methods of generating revenue and, particularly, of controlling costs are only applicable to them?

Peddling higher fares in a market that is characterized by recession and cost-cutting is a strategy that would suggest a denial of reality exactly at a time when reality needs a good hard look in the face.

Rather than blindly applying the "80/20" principle to justify their actions promulgating widespread alienation and accusations of arrogrance, CO would be well advised to consider the converse of this theoretical standard, which would call for greater attention to be paid to increasing low-yield/high-volume ridership.

While the sale of one premium-fare seat can make up for the revenue of even five or six discount fares, just how many more premium fares does CO actually expect to sell in this economy? After all, it's not just making numbers for the next quarter that CO must be concerned about... their bean-counters also need to remember that this year's numbers are only as good as next year's make them. And it is with respect to the apparent disrespect with which CO is regarding its non-premium fare ridership by way of said HoKY policy that could very well come back to irrevocably harm CO when it comes time to comp next years numbers. The mass of loyal, albeit excursion-fare paying, customers whill have defected in droves to CO's competitors.

Moreover, CO's strategy of luring ridership by gratuitously matching or outright granting even its highest Platinum Elite tier is another penny-wise, pound-foolish gem that ultimately erodes CO's sustainability of popularity which CO hopes translates into profitability. This use-you-and-lose-you paradigm, experienced by the very writer of this diatribe (and I know it's getting longer), will create resentment in its once-ecstatic Elites who are now as frequently and aggressively communicating with the elite-status comp hotlines of other airlines as they once were with CO reservations.

CO will not achieve distinction as a premium airline by charging fares that are higher in absolute terms and, more insidiously, vis-a-vis misleading techniques such as HoKY (in its original and its "enhanced - more flexible!" incarnations). Moreover, CO certainly will not aid itself any further by continuing to *******ize the intent of the Freddies (i.e., to recognize and encourage fair and high standards in travel loyalty-marketing programs) to suit its aims to this end. With all due respect to Randy Petersen, et al., those who aren't winning the Freddies may very well be discounting its validity, particularly with CO nowadays hysterically running around and touting its winning streak as justification for their patently misleading marketing and customer un-friendly moves.

I don't know which is more ironic - that CO's means to achieving its lofty ends are as contradictory as they are, or that CO is so blinded by its own brilliant press that they can not see it.

In order for an airline to be really successful, it needs to build loyalty among BOTH business and leisure travelers.

Aside of Bob's reason posted above, the airlines must realize that their most frequent business travelers also take vacations. If you make leisure travel unbearable (or un-upgradable, or non-rewarding, etc.), then that high-margin traveler might take ALL of his business elsewhere, assuming he has a choice on his business routes (and unless he's flying an obscure route, he does).

I think AA strikes a good balance between rewarding their EXPs *really* well, but making the lower levels worthwhile at the same time. I always have a choice between UA and AA. In 2000, I flew about 65 segments on UA, most of them business-related (on a mix of fares, some full-Y, some not). It was the treatment I received on one leisure trip that caused me to move all 65-70 segments to AA in 2001. (And I've been happy ever since.)

This is a big problem for the "full service" (e.g. not the lowfare) airlines. Yield management has resulted in increased profits for a while but now the gap between business and leisure fares is so great that with pressures from the down economy, many business travelers are using leisure fares to travel on business. So the airline's pricing models are not working anymore. Nothing to do with 9/11, just something that was building for years, but took the recession to bring into focus.

There are solutions to this but one thing is for sure: the airlines are going to begin focusing much more on profitability by customer instead of miles flown by customer. This is a major change for the airlines and will make many people unhappy, but it will make other people happy because they can expect to travel on higher fares than cheap leisure fares, but lower fares than today's business fares, with few or no restrictions.

IMHO, FF programs that are based on the total revenue that an airline receives make sense. The fact that they don't makes for FT.