Changing loyalty FF programs to award miles or points based on dollars spent makes way more sense for a cost standpoint. Reward your best customers based on profitability. What a novel concept. The 60percent or 80 percent or whatever number of people who buy strictly on price are would likely not object.

As someone suggested, separate out the elite status as a seperate system so as not to annoy elites to much.

This would annoy the mileage runners but they produce little profit to an airline and just use resources.

Short

Point of fact I often do look at the boarding passes of red carpet lice people and I find many of them are simply flying on F and C fares. Shrug.

As has already been pointed out, the airlines earn tremendous revenue selling miles to third parties. Also consider that a substantial percentage of miles aren't ever redeemed. Those two factors equal PROFIT.

Since load factors are up and now with an accompanying decrease in capacity, one has to wonder though about the future. Back in times of lower loads, the cost of flying "free" passengers in otherwise empty seats was minimal. With most load factors up and capacity further declining, FF redemptions are without a doubt going to be replacing revenue seats.

The obvious solution will unfortunately be a reduction in the number of award seat allocations leading to an increase in the number of FF miles required for redemption. Essentially we're going be facing a massive devaluation in my opinion.

Another factor to consider is the trend towards the fare being an ever-shrinking component in terms of percentage of the actual cost of flying. Baggage fees, booking fees, taxes, other stupid fees, fuel surcharges, etc. These serve to make the FF mile less valuable when a "free" flight will be more like a "50% off flight". This actually helps the consumer in the sense that FF programs will cost the airline less, but at the same time it reduces the value of the program itself.

My opinion is that FF programs will have to undergo drastic changes in an industry that's dying in it's present form. Fares are rising and capacity is decreasing. There is simply no way that award seats will continue to exist near current levels, and there is no way airlines will (more like can) allow miles to be redeemed at values far in excess of the cost to obtain them. There are billions of existing miles in existence obtained at minimal cost, and the airlines aren't going to allow the market to revalue them much higher. Just like the US Dollar, deflation in FF miles simply does not occur. Inflation is the name of the game.

Again my opinion is that FF programs will mostly continue to exist, since they are indeed a profitable scheme mostly due to third party miles sales. However I opine that changes will be drastic, and the theme will be massive devaluation.

The problem with this approach is that many frequent flyers are travelling on tickets paid by their employers, and rewarding spending creates an incentive to choose higher fares. I think we will not see redeemable miles linked directly to dollars, but we may see more booking classes earn zero or reduced redeemable miles. The airlines may also prefer this because booking class may be more closely correlated to profitability than gross dollars.

I cannot speak for everyone but I can speak for myself and several others that I know.

I can tell you that I can purchase cheaper tickets on Airtran out of ATL almost all of the time. I have never done so because the savings is usually less than $50.00 and would result in no SM's. Recently AA was cheaper than DL on a flight by $43.00 r/t and I chose DL for the SM's. 2 friends of mine chose DL to LAS even though there was more than a $100 savings on a lcc to get SM's. On the other hand I have some business acquantances that fly AA even though would have a better routing with DL in order to build their AA miles.

I have also flown 2 r/t's to ORD for absolutely no reason but to get SM's on cheap tickets. So that was profit for the airline that they would not have received had it not been for the SM's. I could do other things than sit in a seat.

I make my purchases based on partner programs and use the skymall and pay for everything that I can with the DL AX card.

Take it however you want but the miles do affect my flying and 70% of the people I know.

And you'd be the minority in this opinion.

Or...to be more exact...this board might simply be renamed Omni!

Isn't saying the number of frequent flyers are in the minority the same as saying the number of 1st class flyers are in the minority? :confused: :)

It's not the opinion that matters, it is the fact that matters.

You honestly most people you're with on your flights are purchasing tickets based on FF programs? Why don't you ask your seatmate next time you fly.

Representative sample?
 

I tend to agree. Most leisure travelers look at price and that's the bottom line. Business travelers are different - often they have more flexibility and for some carriers (like Air Canada) this is a core segment of their business.

Keep in mind that everyone on this forum is the minority - who flies enough to talk about it on a forum? Obviously we are the people who want FF programs and know others who want the same :p

I do :)

More to the point, my company has a contracted deal with a major carrier for all corporate flights. It is a different kind of FF program, but an FF program nonetheless. I would be surprised if most companies with a travel department didn't do the same.

What percentage of overall travelers this is I do not know.

Sorry, bad reasoning. The purpose of an FF program is not to reward past behavior. It is to influence future behavior. People who buy less expensive tickets are (at least in the U.S.) far more susceptible to this sort of influence than people who spend more. (People who buy more expensive tickets already get, as part of the package, many FF elite benefits. Also, FTers are not typical; the value we place on elite status is far higher than the general traveling public places on it.)

A well-designed FF program that rewards flying at any fare can therefore be more cost-effective, in terms of impact on future revenue, than one that rewards spending. A program that rewards spending will reward people who, statistically (again, FTers are not typical!) are least likely to change their future behavior as a result. Not a smart move on the airlines' part. They know this. That's why they don't do it.

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Sure, but such contracts would exist without FF programs at all. Those contracts provide kickbacks to firms at the end of the year for sending business their way - it is basically just a negotiated rate situation.

my 2c...
 

From the other side of the pond.

Easyjet and Ryanair, the two biggest EU LCCs, have no FFPs. But they have 100% unnamed customers. Price based. The new AA baggage policy is common pratice plus other ways to save each possible penny. I flew once with each of them but I have 'zero' fidelity over them. I could fly once again but only based on cost. LESS than 50 USD for a R/T inside EU. Can you imagine AA or UA or NW with such a price ? Including tax. No other legacy carrier can compete and they do not. Schedule, service, FFPs... yes; cost... no.

Why BA should cancel BAEC FFP ? They segment their customer base and it's not so useless. Perhaps the T5 is a chaos, but their lounges are a great tool.
And no, someone else paid for my flights in the last five years. And for me FFPs were a major subject in the airline choice.


please have a look before June 19th
Can you imagine an AA from LGA to xxx for free ?

Fine to question why they don't, but I think your assumptions are flawed.

I won't dispute that many flyers book based on price. But I beileve you overestimate this factor, and underestimate the importance of miles. If you properly consider the fact that many flyers DO very seriously consider miles, then factor in the $$ that airlines make selling miles, you will have the answer to your question of why airlines keep the programs.