mileage inflation
May 2, 2002 | 6:20 pm
#16
Join Date: Aug 1999
Location: HHQ
Programs: AA-2MM Lifetime Platinum
Posts: 772
The problem of not having any elite status when you retire and are using the miles is eliminated by American AAdvantage. If you accumulate 1 million miles you get lifetime Gold, and 2 million gets you lifetime Platinum.
May 2, 2002 | 6:43 pm
#17
Join Date: Apr 2001
Location: TPE, SF, DC
Programs: UA Lifetime GS 4mm
Posts: 937
Well, from what I remember from mind-numbing number of classes that economics is about:
(1)LIMITED resources to meet UNLIMITED demand
(2)Expectation value drives behavior
(3)Incentive structure can change behavior
Rule (1)
Airline industry and the internet's efficiency have created a monster out of many of us in seeking low(est) price and turning us onto mileage addiction (me included
)
Even Robert Crandall, the ex-ceo of AA, who started the whole mileage fever, was quoted in NY Times article (April 30, B1 section on "Need for New Airline Model) acknowledge SYSTEMIC PROBLEM with current airline problems (rather than just bad business cycle affecting the industry) --and that there needs to be BOLD REFORM to change the bad financial equation.
Rule (2)
All the current hoarding is indicative of majority expectation that mileage will be honored regardless of bankruptcy, buyout, etc. -- but the danger is mileage inflation
Rule (3)
To remove mileage liability off their financial books, airlines have been using more creative ways for mileage redemption --
but at least for non-travel mileage redemption, I find most of the exchange ratio is prohibitive, so no incentive !!
-Nick
(1)LIMITED resources to meet UNLIMITED demand
(2)Expectation value drives behavior
(3)Incentive structure can change behavior
Rule (1)
Airline industry and the internet's efficiency have created a monster out of many of us in seeking low(est) price and turning us onto mileage addiction (me included
) Even Robert Crandall, the ex-ceo of AA, who started the whole mileage fever, was quoted in NY Times article (April 30, B1 section on "Need for New Airline Model) acknowledge SYSTEMIC PROBLEM with current airline problems (rather than just bad business cycle affecting the industry) --and that there needs to be BOLD REFORM to change the bad financial equation.
Rule (2)
All the current hoarding is indicative of majority expectation that mileage will be honored regardless of bankruptcy, buyout, etc. -- but the danger is mileage inflation
Rule (3)
To remove mileage liability off their financial books, airlines have been using more creative ways for mileage redemption --
but at least for non-travel mileage redemption, I find most of the exchange ratio is prohibitive, so no incentive !!
-Nick
May 2, 2002 | 6:43 pm
#18
Join Date: May 2001
Location: NWA Platinum, PC Platinum, HH Gold, Radisson elite, Hertz #1 Gold; National Emerald, Wausau, WI
Posts: 1,482
The fact that FF miles don't earn interest and are subject to devaluation as what led me to adopt a "policy" about how large to allow my balance to grow several years ago. I've taken many, many free tickets from my account since then -- much to the delight of family and friends! Rather than hoarding miles, it encourages a little more aggressive account management and assures that value is constantly being received. Life itself is temporary! Banking on things to remain the same in something like frequent flyer programs is a recipe for disappointment, IMHO. As a previous poster alluded to, you may be dealing with a more perishable commodity than you realize.
May 2, 2002 | 8:47 pm
#20
Join Date: Apr 2001
Location: Los Angeles, CA
Posts: 282
<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by Standby4321:
Life itself is temporary! Banking on things to remain the same in something like frequent flyer programs is a recipe for disappointment, IMHO. As a previous poster alluded to, you may be dealing with a more perishable commodity than you realize.</font>
Life itself is temporary! Banking on things to remain the same in something like frequent flyer programs is a recipe for disappointment, IMHO. As a previous poster alluded to, you may be dealing with a more perishable commodity than you realize.</font>
As we have seen, Goldpoints have just depreciated their point-to-mile redemption by half. So many of us were expecting the 4:1 ratio to remain, and now many of us are disappointed, and will only reap half the value. Let's hope that for now, this will not be a common occurence.
May 2, 2002 | 11:17 pm
#21
FlyerTalk Evangelist
Join Date: May 1998
Location: Massachusetts, USA; AA 2.996MM & Plat Pro, DL 1MM, GM & Flying Colonel
Posts: 25,036
<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by married 2 miles:
why not use the depreciating asset (miles) now, and save your cash (which should appreciate) for retirement - then use the cash to buy tickets?</font>
why not use the depreciating asset (miles) now, and save your cash (which should appreciate) for retirement - then use the cash to buy tickets?</font>
2. Because, prior to retirement, many of us can have some of our travel paid for by a business or (if self-employed) partially subsidized as a tax deduction.
These are related: if one has sufficient business travel to approach an elite level, it makes sense (IMHO) to pay for enough travel to make it the rest of the way rather than using award tickets. How closely one has to approach the next level for this factor to come into play is a personal decision, but for many here the answer is "not very."
May 2, 2002 | 11:23 pm
#22
Join Date: Jun 2000
Location: Chicago
Programs: United 1K, American EXP & 3 Million Miler, Hyatt Globalist & Marriott Ambassador Elite
Posts: 2,387
This has been happening, particularly for American programs, for some time and I expect it to continue. But collecting still is good because miles have an accretive value. FOr example, 100K miles for FC ticket to Europe or 125K to Asia on UA and much better values on BA.
Redeeming on domestic awards is not worth it unless done at the last minute.
Redeeming on domestic awards is not worth it unless done at the last minute.
May 3, 2002 | 9:06 am
#23
Join Date: Apr 2001
Location: Bethesda, MD USA
Posts: 2,802
<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by Shinkansen:
mdtony - some are raising "prices".
NW raised miles needed for awards by 25% this year. For example, domestic coach award went from 20K to 25K. "Rule Buster" US to Europe Coach seat now 100K.</font>
mdtony - some are raising "prices".
NW raised miles needed for awards by 25% this year. For example, domestic coach award went from 20K to 25K. "Rule Buster" US to Europe Coach seat now 100K.</font>
Also, I think you folks are way overestimating what effect raising the miles needed for a free ticket have on most frequent travellers, especially those who do it for business. Those folks do not travel to rack up miles. They travel because they need to get from point a to point b, and the miles are a nice little bonus for them. And these are the folks who the airlines make most of their money on.
May 6, 2002 | 12:10 am
#24
Join Date: Apr 2001
Location: New York, NY
Posts: 468
<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by MileKing:
The government doesn't get revenue in return for issuing money. </font>
The government doesn't get revenue in return for issuing money. </font>
May 6, 2002 | 6:12 am
#25
Join Date: Feb 1999
Location: T82
Programs: AA Gold, HH Gold
Posts: 2,845
On our recent trip on AA to London from LAX, all seats in First Class were full on the way over, and all but two were taken on the way back. Were these people paying for the seats or using miles? We used our miles. I suspect others were, too. So, I'm not hoarding my miles anymore. Seems to me more people would be using their miles for awards this year than at the same time last year.
May 6, 2002 | 6:52 am
#26
Join Date: Jan 2000
Location: Grand Rapids, MI, USA
Programs: Delta DM 1MM, Hyatt Globalist, HH Diamond, Marriott Gold
Posts: 315
Whoa here people! Everyone is talking about miles depreciating, but I think TrojanHorse hit on the real value of miles in his post. The value of a mile is linked intrinsically to the value of the underlying commodity it purchases. For example if a free coach domestic US ticket stays at 25K, then the value of a mile is appreciating at the same rate as the fare for this flight is increasing. For example if the fare for the flight you wish to take is $300 now and years from now at retirement it is $600, haven't the value of your miles appreciated as compared to the nominal dollar?
Now this is not to say that I do not think one incurs significant risk of airlines upping the reward levels, going bankrupt, etc., but if the program would stay the same it seems that the purchasing power of a mile is going up as airfares increase over time.
Now this is not to say that I do not think one incurs significant risk of airlines upping the reward levels, going bankrupt, etc., but if the program would stay the same it seems that the purchasing power of a mile is going up as airfares increase over time.
May 6, 2002 | 7:35 am
#27
Join Date: Jun 2000
Location: Groveland, FL, USA
Programs: Starriot LTP, UA Silver, HHonors Diamond, Hyatt Discoverist
Posts: 1,097
<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by The Mile Dog:
Whoa here people! Everyone is talking about miles depreciating, but I think TrojanHorse hit on the real value of miles in his post. The value of a mile is linked intrinsically to the value of the underlying commodity it purchases. For example if a free coach domestic US ticket stays at 25K, then the value of a mile is appreciating at the same rate as the fare for this flight is increasing. For example if the fare for the flight you wish to take is $300 now and years from now at retirement it is $600, haven't the value of your miles appreciated as compared to the nominal dollar?
Now this is not to say that I do not think one incurs significant risk of airlines upping the reward levels, going bankrupt, etc., but if the program would stay the same it seems that the purchasing power of a mile is going up as airfares increase over time.</font>
Whoa here people! Everyone is talking about miles depreciating, but I think TrojanHorse hit on the real value of miles in his post. The value of a mile is linked intrinsically to the value of the underlying commodity it purchases. For example if a free coach domestic US ticket stays at 25K, then the value of a mile is appreciating at the same rate as the fare for this flight is increasing. For example if the fare for the flight you wish to take is $300 now and years from now at retirement it is $600, haven't the value of your miles appreciated as compared to the nominal dollar?
Now this is not to say that I do not think one incurs significant risk of airlines upping the reward levels, going bankrupt, etc., but if the program would stay the same it seems that the purchasing power of a mile is going up as airfares increase over time.</font>
May 6, 2002 | 9:17 am
#28
Join Date: Apr 2001
Location: Bethesda, MD USA
Posts: 2,802
<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by rtpflyer:
In the mean time, we have seen a shift in frequent traveller programs over time from the standard frequent flyer award being able to purchse a ticket that resembles the "full fare" ticket (in terms of restrictions) to only being able to purchase a ticket that more closely resembles the "leisure" ticket (thanks to capacity controls, Saturday night stay requirements, blackout dates, etc.)</font>
In the mean time, we have seen a shift in frequent traveller programs over time from the standard frequent flyer award being able to purchse a ticket that resembles the "full fare" ticket (in terms of restrictions) to only being able to purchase a ticket that more closely resembles the "leisure" ticket (thanks to capacity controls, Saturday night stay requirements, blackout dates, etc.)</font>
It only seems logical to me that if you are going to have one set of tickets cost more in dollars, those should cost more in terms of miles as well.
Sure, it sucks for those of us who want to use 25K miles for that round trip ticket at the last minute, but it also sucks for those people who have to use $3,000 for that last minute ticket who would like to use $300.
May 6, 2002 | 11:28 am
#29
Join Date: Oct 1999
Posts: 50
I saw the same "depreciation" with Marriott- about a year ago they expanded their hotel classifications from 2 to 4 or 5 and most of the points needed for the more desirable hotels (one I checked was the Bidapest Marriott) were raised.
Life is too short to wait till retirement to
redeem reward travel. I'm 49. My fiance is
63. We're grabbing all the gusto we can while still holding down our jobs.
Life is too short to wait till retirement to
redeem reward travel. I'm 49. My fiance is
63. We're grabbing all the gusto we can while still holding down our jobs.
May 6, 2002 | 7:31 pm
#30
Join Date: Dec 2000
Location: SAN Diego (Hillcrest); formerly LEXington, KY; still like the nym
Programs: DL Platinum; Marriott Lifetime Platinum; married to Hilton Elite
Posts: 3,029
Any of us who paid attention in Freshman economics saw this coming:
(me, about a year ago)
rtp: yeah, I remember in 1978 thinking what a great deal I got on World Airways BWI-LAX for only $300! - and the super discount $479 JFK-MXP I got in 1979! Air fares -- except for very restricted, last-minute tickets -- are down in price. But maybe they have nowhere further down to go....
<font face="Verdana, Arial, Helvetica, sans-serif" size="2">I'm struck that in all this conversation, no one has commented on the huge amount of bonus miles CO has been giving out. You've all been trading info back and forth and racking up huge mileage totals for a long time now.
If you think of miles as a currency, what CO has been doing is printing more milacos", without much increase in goods (redeemable seats) to back up this inflation.
As in any economy, this will eventually cause inflation, or distortions through rationing or price controls. Seats are unavailable due to capacity controls, and milacos go unused, that is distortion; the price (in milacos or dollars for the underlying item on option -- the original seat) goes up, that's inflation.
I would also expect that in the dual system of "value awards" at current milaco levels vs. "choice awards" at inflated levels, less and less inventory will be allocated to the uninflated awards.
Add to this the fact that, at least to Europe, CO offers proportionately fewer premium seats in the first place.
What did everybody expect?
Reading these boards, I see that most airlines are chipping away at their FF programs on the edges, and starting to match the less appealing parts of their competitors' programs rather than the greater. Sigh.</font>
If you think of miles as a currency, what CO has been doing is printing more milacos", without much increase in goods (redeemable seats) to back up this inflation.
As in any economy, this will eventually cause inflation, or distortions through rationing or price controls. Seats are unavailable due to capacity controls, and milacos go unused, that is distortion; the price (in milacos or dollars for the underlying item on option -- the original seat) goes up, that's inflation.
I would also expect that in the dual system of "value awards" at current milaco levels vs. "choice awards" at inflated levels, less and less inventory will be allocated to the uninflated awards.
Add to this the fact that, at least to Europe, CO offers proportionately fewer premium seats in the first place.
What did everybody expect?
Reading these boards, I see that most airlines are chipping away at their FF programs on the edges, and starting to match the less appealing parts of their competitors' programs rather than the greater. Sigh.</font>
rtp: yeah, I remember in 1978 thinking what a great deal I got on World Airways BWI-LAX for only $300! - and the super discount $479 JFK-MXP I got in 1979! Air fares -- except for very restricted, last-minute tickets -- are down in price. But maybe they have nowhere further down to go....