why don't airlines stop their mileage programs?
 

With US Air's announcement that they're no longer giving out bonus miles to elites, I have to wonder: why not just bite the bullet and take this huge liability off their hands? Stop giving out miles altogether.

Why don't they do this?

Some will say that, in some instances, the mileage programs make money while the other parts of the airline don't, like United. While this might be true miles are still a huge liability of the airline, no?

Some will say that they need miles to keep loyalty. I call BS on that one. Most flyers fly on 1) price and 2) convenience. Very few folks in the scheme of things fly based on miles.

So let's just get on with it. All airlines should get rid of their miles liabilities and stop this gradual bleeding.

I cant see it...
 

...its the main reason I stay loyal to AC, without the FF program I'd fly anyone...from a loyalty standpoint i believe this to be their most effective tool...and lets face it...most of us here are biz travellers and are not flying on the cheap tickets so why piss off the main income generators?

The ff programs obviously bring in more money than they cost. Unfortunately the airline keep morphing their ff programs into Ponzi schemes.

MisterNice

I think the people that fly based on FF program are in the minority.

I am loyal to NWA for the miles. If I didn't get them I would fly whoever.

Except that most customers do already fly whoever, I submit.

Or some people can't. If they have corporate booking engines that dictate who they fly, they don't have a choice.

If you have choice then why would you spread your miles between multiple airlines? If I have 15,000 miles with UA and 20,000 with NWA - I can't book my wife on a trip with me as fast as I could if I had 35,000 with NWA only.

They make a TON of money selling miles to resellers, like credit card companies, etc. Also, the flying public, Ma and Pa Kettle included, are addicted to miles - I can assure you that if a major airline stopped its FFP cold, not only would they lose a tremendous amount of business, but they'd likely be sued like crazy too.

US is going to be hit with Cockroach v.2.0 due to the loss of bonus miles - assuming their FF masses don't just give them the finger this time and leave outright.

In any case, the loss of revenue from mileage sales would be a no-go for airlines. DL avoided a potential liquidation by selling a ton of miles to Amex.

How many people have airline credit cards? I think there are a lot of people who sort of pay attention to airlines frequent flyer programs. Maybe not the extent of paying a significantly higher fare for a ticket but not always the cheapest. Also, some of these people will just go to the airlines site to book tickets and only look around if the fare seems excessive.

On the topic of credit cards - the banks pay a lot of $$$$ to the airlines for those miles, and with restrictive redemptions, the liability isn't anywhere near its book value.

DL won't scrap its FF program since AMEX would have a fit and they are the ones who bailed out DL last time. Air Canada spun off Aeroplan and made a lot of money.

And don't forget alliances - no FF program, No Star Alliance, or OneWorld, or SkyTeam. No alliance means you get no feeder traffic at either end of your routes, no codeshares that allow you to pretend to be bigger than you are, no revenue from other airline FF redemptions for your seats, no round the world tickets (OK I don't imagine that is significant) and reduced ability to have exclusive corporate travel due to reduced destinations etc.

(Yes, Orbitz etc can still stitch you into a booking, as long as you still interline, but that will still be a big drop in bookings vs Orbitz etc + all your airline alliance partners etc).

Oh - and of course, no FF program and therefore no alliance means no reason for every other airline to compete against you on profitable routes forcing you to compete on price which of course doesn't work if you have a higher cost basis than the competition and no ability to run some routes as loss leaders to attack other airlines since you have no safe routes to rely on for income.

No FF programs = no Flyertalk.

Although the majority # of people-wise are lowest-cost no-loyalty people, doesn't the majority of $$ to the airline come from frequent flyers?

I'm sure I've made more revenue for United than ma or pa kettle since I fly on 7 day fares.

Me thinks someone else is the minority. Maybe they are just bitter since they can't pick and choose an alliance, or maybe his/her company steals their miles.

Who knows what their agenda is except maybe just to get us riled up... One of those "I can't have it, so either should you..." type of deals it seems.

Most pax would not change their flying habits for the sake of miles. Most pax do not collect miles, don't fly very often and just look for the cheapest fares possible. To cater for these people, airlines have found ways to make their fares look cheaper than they really are, and adding on extra costs for fuel, baggage, payment, etc. There is little point in thse people collecting miles anyway as they'd probably never have enough miles to make a redemption worthwhile.

But some people are persuadable by miles. I expect these people would typically either be business travellers whose tickets are paid for by somebody else, or who are pretty wealthy. Now, if you can persuade these people to fly on your airline when cheaper choices are available - or to pay more for a ticket on your airline than they had to - then you'd want to help them do that. Miles and status redeem themselves by filling empty seats and by letting people sit in a comfy lounge and have free coffee and free whisky. The marginal cost of having a passenger in an otherwise empty seat - even in F - must be quite small. And the prospect of being able to fly in international first class for free - even if it takes three years of hard slog to get there - is a pretty tempting prize for an average miles-whore. That's the kind of prize that will have people paying extra for tickets, flying when they didn't need to fly, and coming back to your airline.

:confused: Get you "riled up"? Dude, if you're getting riled up over FF miles then the problem isn't me....

Umm no, not me. Your the OP. Your post seems quite "excited" as to why they don't rid of them.

I said that may had been your agenda, I can't figure out why else one would suggest get rid of FF programs, or at the very least, the reward portion of it........ on a frequent flyer board none-the-less.

I'm not saying they should. I'm questioning why they don't. The posting style is Socratic for those that could not figure it out.

I see what you did there... With the exception of your last line, that may have gone to far for your defense here. :D

Shrug, do you have any comments on the topic rather than on me?

FF plans definately assist me in making choices on which carrier to fly on.
If two companies are flying to the same location for the approximately the same price, I will most certainly pick the carrier in which I have a FF plan.

Of course price gets considered as does flight schedule but the lure of a free flight for my loyalty will keep me purchasing tickets from one carrier over the other.

I'll invoke a modified Pareto's principle there and SWAG that about about 60% of travelers make choices based on price alone. The remaining 40% are probably very frequent flyers who value status, folks trying to get their once in a lifetime trip to Hawaii on miles, people that choose non-stops to avoid connections and those who have limited choices due to location/route/corporate agreements, etc.

Re/ FFP's in general, I don't think they will disapear altogether, but I'm sure airlines will tinker with them to the point that mileage acrual and redemption will become very confusing (and therefore reduce the chance that people use their miles). Introducing an award redemption structure that reflects the complexity of existing fare buckets could help kep the ponzi scheme going a little longer

Remember MR's?
 

Q: Why don't airlines stop their mileage programs?

A: For one, it would put a serious dent in the hobby known as "Mileage Running" :D

I would guess that it's probably more like 80/20.
One has to remember that while there may be quite a few people that sign up for the FF programs, just a small minority of those really "work the system" ( doing MRs, picking routings based on miles, etc). I know a lot of people that have signed up with the FFP of their most frequently flown carrier ( like their home carrier) and accumulate miles, but VERY FEW actually try to actively use the system to their benefit or fly exclusively with one airline.

If FF programs really don't have any value to the bottom line, I am sure Southwest, AirTran, JetBlue etc etc would have dropped their programs. Even if only a small percentage of flyers use FF program as a major decision point this is still an incremental increase in rev. If those flyers are higher value then even better - same reason that the majors have First/Business class - % of people who buy those seats is far lower than % of total revenue that they account for.

FF benefits are also an important part of negotiating corporate travel agreements - lounge access, upgrades, and of course access to decent customer service are all things that businesses like as it improves productivity.

Oh, and of course, more business travelers would be unhappy having to travel a lot, or expect more financial incentives from their employer, if they got no FF points to use on vacation or to bring along their spouse etc. Since FF miles are a tax free perk of frequent travel they are another pro-business client feature.

The problem is that one airline can't do it, all the airlines would have to do it.

One airline could do it without all the others that currently have FFPs following -- it would have to be accompanied with a substantial and risky overhaul (i.e., risky especially for management with its short-term time horizons and nearer-term personal financial interests) that would not necessarily serve the cash flow needs of the company in the more immediate time frames.

Of course this also could be sort of like with fare hikes where all it sometimes takes is one hold-out to not follow the fare hike for the fares of a larger group of airlines to trend back toward the pre-hike fares.

mp, you've surely been around long enough and know enough to know that FF programmes are not really that much of a liability. Outstanding trips are accounted for at fractions of centsm and they control all yield in any case.

Please follow this timely discussion in our MilesBuzz forum. Ocn Vw 1K, Moderator, TravelBuzz.

i can't speak for the majority/minority since i don't know which is which, but i was forced to sit in a non exit row the other day and quickly realized the value of being able to select exit row seats on aa.

we have 800k+ aa miles, and we fly aa unless there is a major conflict/problem/fare difference.

that being said, i am becoming increasingly upset at the route aa is taking with their cost cutting. as soon as being an elite on aa is no better than the general public on another airline i would just assume fly someone/anyone else.

i would never pay extra to fly aa absent the preferential treatment elites receive - even though the level of preferential treatment diminishes with time. exp is still in tact afaik, but being PLAT seems less meaningful now.

sam

Elite status was grafted onto frequent flyer programs and is logically distinct. Any airline could easily operate a recognition program which offered preferred booking, lounge access, boarding, seating, upgrades, etc without any type of redeemable miles program. For example, Cathay Pacific has separated its Marco Polo Club elite status program from its Asia Miles Rewards program. The no necessary connection between status and rewards, and I think rewards are the focus of this question.

whatever.

i would also be very reluctant/extremely unlikely to fly AA if i did not receive miles. better?

you say that it is a two part issue, and i say that both are equally important - and in my mind very much intertwined. how did you and i get lifetime platinum status? 2M miles. not b/c of a "recognition" program.

i certainly wouldn't use an AA Citi MC and would opt for a cash rebate card instead. which brings up another point about the the two being intertwined: looking at heavy credit card users, it is possible to become gold or platinum without flying frequently at all.

i chose to focus on one aspect (not realizing that there were two :confused:) - elite status that is conferred on travelers that meet mileage requirements on an annual basis. in my mind there is only one AAdvantage program, and it encompasses miles and elite status based on miles.

i'm really not sure which component of the AAdvantage program is more important to me, but the program would lose tremendous value to me if the miles component was removed.

hopefully this clarifies my position.

If so, a significant minority. Look at the numbers of elites on a typical UA flight: the red carpet lice and seating area 1. I doubt it is different on any other airline, incl. WN.

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