From you, perhaps. Not from me. I fly fully-refundable fares 50% to 75% of the time, typically on 25-cent-per-mile and up domestic fares, and would frankly welcome some acknowledgement of the fact that my 30,000 miles brought United more money than your 100,000 miles (for instance).

And (to quote a little Slim Shady) there's a million of us just like me. Airlines have got to see that catering to people like that are a win-win. The greatest number of benefits go to those providing the airline the greatest amount of money, and these are people who fly less often while spending more, meaning that the total benefits expended on this group will go down.

Let's see ... a system that rewards higher revenues, and lowers costs. And you don't think the majors are headed that way?

Mook

If that happens, then more business will head towards Southwest!

The purpose of Frequent Flyer Miles is not to generate revenue directly, but indirectly by creating flyer loyalty at a low marginal cost to the airline. As pointed out, there is relativly little direct cost; the cost of upgrades is the cost of having a FC section. For most FF tickets, these are trips that would not have been made at all if there were not FF tickets, and the marginal cost is very small.

At present most elite level members are business travelers and spend their miles on upgrades. You only have to read the various posts here on Flyer Talk to realise the importance of upgrade availability to carrier loyalty.

For a simple calculation, assume that a Gold elite (UA) takes 10 cross country trips of 5,000 miles. He will earn 20 x 500 mile coupons and 100,000 FF miles.The coupons will upgrade 2 round trips. The miles will upgrade another 5 round trips. Add in Hilton miles, credit card miles, 1K (Platinum) upgrades and upgrade availability for UA elites is presently close to being limited by seat availability. I know nothing of the current Yield Management model, but suspect this is not a complete coincidence. Giving additional FF miles to elite travelers will not improve the elite upgrade situation. Nor will taking miles away from leisure travellers who use their miles predominently for tickets change the upgrade status for elites.

And, as others have pointed out, there are just so few Mileage Runners to affect anything. Doing whatever to them would have no effect.

My guess is that you may see more non-upgradeable fares, but I doubt that you will see miles vanish even for low fares. You may laugh at the family taking two kids to visit Gradma once a year, but that free ticket every third year is important. They may not fly often, but there are lots of them, and the airlines need their loyalty as much as they need the 100,000 milers.

If any carrier had figured out how to maintain loyalty without miles, or by changing the system, they would have done it long ago.

Just some thoughts,

Bruce

Why would you think SWA's price will beat major airlines' fare? I just pull up the following coast-to-coast fare...

From southwest.com
Sep 11) OAK-BUF (w/ stop @ PHX)
Sep 18) BUF-OAK (w/ stop @ BWI + 1 unspecified stop)
$348

From travelocity.com (UAL)
Sep 11) OAK-BUF (w/ stop @ IAD)
Sep 18) BUF-OAK (w/ stop @ ORD)
$345

If I want direct flight, I can fly SFO-JFK for $356.5 coast-to-coast to save time.

Heck, if I am a FF w/ status, it's a no brainer for me since I would get upgraded from time to time if biz seats are available. And for ~$300 coast-to-coast, the airline should be earning money if they fill the plane.

Very good point! The airlines need pax, any pax, human or cargo. However, airlines should not be selling $150 coast-to-coast fares with miles accural. The loophole is too big for the airline to recover the cost.

Everyone is saying that the difference in cost of operating a biz and a coach seat is marginal to the airline. Maybe. But, if the airline can't generate additional revenue from these biz seats, maybe they should install more coach seats instead. The extra legroom in biz/1st class can mean more coast seats, just like SWA.

If airlines want to fill planes, they should do it with FF program OR ridiculous cheap fares, but not BOTH.

The mileage runners, although small in numbers, are occupying those premium seats at close to - 0 - cost. And they are diluting the quality of service in premium class. That is, diluting the loyalty of other pax paying higher fare for the premium service.

[This message has been edited by FT wannabe (edited 08-21-2002).]

[This message has been edited by FT wannabe (edited 08-21-2002).]

But that's just the point, isn't it?

The pure leisure traveler has little or no loyalty to a specific airline. Only when they're located near "captive" airports will they fly one airline consistently.

Yield management states that you can simultaneously price your product to make it attractive to pure leisure travelers, while also making your product the choice of price-insensitive business travelers through last-minute availability, FF miles and status, availability of upgrades and awards, etc.

But yield management is broken. Clearly, in this climate, you can't do both. Airlines will have to choose one or the other. Those that choose the former will be forced to adopt measures such as those mentioned above -- they'll crunch the numbers and find it's simply not worth it to maintain those benefits for families flying $180 trans-cons.

Those that choose the latter will, if they're brave, maintain or even upgrade those benefits, hoping to pluck the high-margin business traveler away from the increasing Southwesternizing of the others.

My only fear is that there won't be any major airlines in the latter group. As a whole, we're not talking about the most dynamic, stick-out-your-neck industry in the world, you know.

Mook

There is this widespread notion out there that FF award seats cost the airline little because they are 1) seats that would have gone empty anyway amd 2) trips that would not have been taken but fot the award seats.

This notion is wrong... I personally have never taken an award flight that wasn't quite full, and the majority of them have been oversold flights for which volunteers have been sought. FFs earn miles flying between LGA and ATL, ORD and DFW etc., but they do not redeem miles for these kinds of flights.

A couple of points to consider and remember:

1) Once a flight takes off, any revenue lost from an unsold seat is lost forever.

2) Airlines WILL NOT stop giving miles on lower fares such as DL L/U's etc. They will instead increase the mile yield on higher priced fare classes.

3) While not the most scientific of surveys, look at airline capacities. Even at the absolute PEAK of the economy the best airlines were not doing better than 89% of capacity filled or so. That means that 11% of seats were EMPTY, adding in another 6-7% of seats given towards FF programmes and it is appx 82%. There is plenty of room to give "free" seats.

4)Most of the public has very little idea of runs and the like and is very limited idea of how to reap maximum benefits. Look around you! How many people do you know that are really savvy on this stuff?? Personally many of my colleagues travel like hell and have no idea about most stuff and don't care about it.

The plane being full or not is a function of the yeild management software. No airline can wait until the day before the flight to open it up to award flyers. The software, which we all know doesn't do that great of a job anymore, will let them know a year out how many seats till probably go empty, and be used for awards, etc.

While I earn miles from New York to Atlanta, I will also redeem them for New York to Atlanta if it's a connection to get me someplace else, or if the price is too high. We all to often think of New York to Chicago and New York to Los Angeles, without thinking many people on the New York to Chicago may be just on the first leg of a flight to Los Angeles.

In the past 2 weeks or so, all 6 major US airlines announced schedule reduction. The prospect for award availability is only going to get worse, if not so already. There is an article somewhere that I remember saying that it'll take the airlines more than 100 years to redeem all the miles out there. With reduced schedule (even fewer award seats) and generous miles accural on cheap fares, something has to yield, right?

With the proposed beef-up Skyteam and UA-US alliance, I can see the trend of ever increasingly more miles chasing fewer seats. With codeshares, the top status tier is going to be easier to reach than ever. And that means fewer upgrades too...

Maybe not too soon in the future, the only way to redeem miles are cheap razors for 20000 miles. http://www.flyertalk.com/forum/rolleyes.gif

[This message has been edited by FT wannabe (edited 08-23-2002).]

Not "broken" so much as operating on wrong assumptions - the assumption that the number of pax on a flight a year ago is a reasonable approximation of the number that will fly this year that same day (adjusting for weekends and holidays).

The problem is not that airlines are giving away too many seats - it's that they're flying too many empty seats no matter what they do.

Airlines say they're going to cut flights.
Folks, they don't cut flights if the flights are anywhere near full! In that case, they'd start raising prices.

And yield management isn't going to solve the problem. The problem is, to quote Yogi Berra, "If people don't want to show up, you can't stop them." The airlines now see a need to "right-size" the planes to the number of PAX.

The occasional free ticket (what's the average, about 6% to 7% across the board?) isn't adversely affecting the bottom line - it would be, though, if people quit flying "their" airline because of the lack of a frequent flyer program and began basing their decisions solely on matters of convenience and price. The airlines would have to coax each passenger each day instead of having the "cushion" of loyalty to get folks to take their planes even if they cost a bit more, or departed at a less convenient time.

No, frequent flyer programs *make* money for airlines (even when you don't count the miles they sell to their "partners").

FT wannabe, Interesting handle!

I don't see anyone having directly addressed your question "If the fare will be gone unsold since the biz/1st fare is so high, why don't the airlines sell them at, say, $600 fare coast-to-coast with 21 day advance purchase? I'll buy that any day if my other option is to fly coach for $400."

I have not worked in an airline pricing dept/tarrifs/yield mgmt but let me take a stab at answering this.

It is important to understand the goal - you want to preserve the brand and perceived value while providing promotions/spiffs. If you directly cut the price or offer a promotional price, you immediately lower the perceived value. In the future, when the market recovers the price paying pax are willing to pay will be much lower.

If on the the other hand you offer the same product at a lower value (calculated in FF miles) but make it necessary to show loyalty or spend hours in obscure discussion board or subscribe to "insider secrets" - they all increase the halo and the perceived value.

THe airlines have tried discounting F/J broadly but they know it is a dangerous path that can permanently alter the perceived value of their premium products.

If there is a permanent change in market dynamics, the airlines can adjust the premium charged for the premium product. For example, in Asia most local premium travel is at a much lowere premium to coach travel.

Marketing and customer relationships, particularly brand values are not directly reduced to dollars and cents. Hope this answers your questions and sheds light on many FF perks.

There really aren't that many people who are doing the cheap mileage runs and cashing in for first class tickets. I've been doing it and I love it. I work with people who travel frequently (teachers), but I've never talked anyone into doing mileage runs.

I'm known as the weird guy who will fly to Europe or Asia and stay one night, then fly back.

The fact that I am flying a $50 first class ticket to Europe in summer when my colleague is flying a $1000 coach ticket doesn't impress most people as a reasonable trade off. Almost all people plan a trip and want to fly on a particular day and go there directly. The accumulation of extra miles by taking a couple of side trips and a couple of extra days traveling on a plane and sitting in airports is just not worth the extra time involved.

I am happy with my upgrades, miles, and perks. They are happy with their succinct, highly planned trips. To each his or her own idea of what is $ or time-worthy travel.

I never had airline loyalty until I started this mileage accumulation lifestyle. If miles were to go away, then so would my specific airline loyalty.

Isn't this exactly the problem of the airlines are facing? Loyalty is about giving something back to the customers and hoping the customers will return in the future. When bankrupcy is imminent, the future is now. If airlines really are trying to avoid going under, they should try to squeeze every penny possible out of every flight and other operation NOW. When the economy recovers, they sure can raise the price again.

The fact that airlines are giving away potentially revenue away by holding biz class fare high is simply suicidal. Just 2 years ago, my company actually URGED me to fly biz class to Europe for $7000 when I SUGGESTED that I didn't mind flying $1000 coach. This year, the same company is heavily SCRUTINIZING my $400 domestic ticket. What am I trying to say? The vast majority biz class paying pax are real business travelers. And biz travelers' behavior is strongly related to how the economy performs. The fact that airlines are not recognizing our economy is in deep trouble really have me worried. I just pulled out a typical biz class ticket for $3276.50 SFO-JFK on UAL.com. I'll bet that all of the biz class tickets will be unsold and become upgrade baits for mileage runners.

As for retaining brand quality, you think having a whole bunch of mileage runners in business class paying $150 SFO-BNA really help the brand?

Why not trying to sell these tickets at a reasonable level now? Maybe someone will pay a few extra dollars for them?

Just an exercise:
United airlines says they are losing a million dollar a day, and they are flying ~2000 flight daily. That means they are losing ONLY $500 per flight. If 3 coach pax are willing to pay $200 more to secure biz seat, UAL can actually be profitable...

[This message has been edited by FT wannabe (edited 08-24-2002).]

[This message has been edited by FT wannabe (edited 08-24-2002).]

Finally got a real mileage runner on this thread. I am not trying to blame you for airlines' trouble. The problem lies in the imcompetent airline management who fails to recognize the growing exisitence of your clan. They deserve to go under.

So, are you saying my original suggestion of awarding only "direct" flight miles won't work. How about eliminating miles for sub $200 flights?

So much for generating loyalty from frequent flying mileage runners.