Is this the end of Frequent Flyer Programs?
 

I was listening to the Clark Howard the other day and he was talking about burning up all his ff miles and the devaluing of the mile/point. He mentioned that he used to value miles at 1 cent ea and now he considers them at a .5 value. This was something I was thinking about, and I wonder about thoughts from othere here.

Obviously everyone on flyertalk have seen award costs go higher, especially over the past 5 years. There were some huge loopholes in the past where ftalkers were able to take huge value international flights for a very reasonable point value. Round the world flights etc.

Personally due to the huge problems with fuel costs and airline changes I am starting to agree that mile programs are facing a crisis. I have been an AA frequent flyer and will probably hit 2 million lifetime shortly. Overall I have been able to get flights and upgrades on AA with decent values in the past. I still feel overall that AA is better than most in that as of now you can upgrade the lowest priced tickets and a good variety of intl parners.

1- Reward charts are going up every year. The more miles you save/hoard the more it costs you on the standard point charts.

2- AA and others have made it harder to use standard awards. AA has been better than most for me compared to other programs I have been a part of.

3- The airlines have the ability to charge cash fees for redemption of tickets. they can charge as much as they want for fuel surcharges etc.

4- Less flights/more miles out there. There are alot of ff miles in accounts of travelers and there are less seats/flights. Airlines are losing money on most tickets anyway. How many free seats will they allow with less revenue seats?

Could the airlines under dire situations basically stop the use of the miles points? I know they can make it near impossible or add costs that make it a total waste.

Do we get to a point where the airlines figure that as a commodity more or less they value customer loyalty much less?

Here on flyertalk we have many loyal flyers to their particular airlines. However the game is changing drastically. Unless oil prices drop to 100 or less the bleeding wont stop.

My thinking is use miles for as many premium intl seats as possible. Or take that trip you were putting off. The more you wait, the worse it gets based on availability and costs per ticket in cash and points.

I think the days of mileage runs also might be over due to all the above and more. When you really think about it, what the real value to lifetime plat? Not that much really. Double miles? they charge you double for the flight. They make you take unfavorable routes/times to use the miles.

For business I travel less that I used to, and remember that any plat benefits can be modified or changed at any time. While AA has better financial structure than most fo the other big airlines, what happens if an airline goes out of biz?

Many ftalkers have huge vaults of miles. Imagine if there was a run on using much of these all at once? Most here will agree that the longer you hold miles, the less they are worth. That is without the huge problems airlines have right now which is getting to a crisis level. I can easily see costs of $50-$100.00 per ticket as a fee to use points even on a domestic ticket.

Any comments?

Rob in South Fla.

Clark is absolutely wrong on his valuation. DL miles are worth > .5 cpm using "Pay With Miles", and that's a horrible deal. I value them at 1.6 cpm and have seen no reason to change that valuation.

Platinum (or EXP) status has value beyond the mileage bonus and is IMO still very much worth shooting for, so I think folks will still use MRs to get elite status.

Wrong. With the prices of airline tickets going up the return on using points is that much more appealing even if you have to pay a fee. Some ballpark examples: DCA to CDG/LHR in Y $800-1600 used to be $350-900; BWI to HNL $1000-1300 used to be $500-800; Hawaii YUP $2200+ used to be $1100-1300; WAS to SYD in F $26000 used to be $16000, in J $20000 used to be $12000.

A currency is only good to the extent that it holds its value over time and you are confident you can convert it when you wish to.

Airlines seem to have an increased propensity to fiddle with their schemes - be it the conversion ratios or via other mechanisms which make exchange difficult.

A local coffee shop stamps a card every time I buy a coffee. Buy 10, get 1 free. Its simple. I don't mind hanging onto stamped up cards - I have confidence in their value. I can always get my free coffee. I choose this coffee shop over others that charge similar prices and don't have a card. Thing is, even if coffee doubled in price, the scheme would still work. Yep, they'd take a one off hit in respect of the value of cards in circulation. But no need to undermine the scheme.

I suppose airlines will say they are on lower margins these days. Anyway, my confidence in FF miles is somewhat dented. I don't value them as much when they are given away, and I don't want to be sitting on them once I've got them.

So yes, I agree to some extent with the OP, though its still early days.

Of course that is a good point about rising fares, however the airlines including AA may try to charge more points for the flight or they may give you a tough schedule to fly. With less seats available in general dont you think that using those miles also be tougher. I also feel that devaluing of points is nothing new, but now with airlines in trouble the problems are much worse.

That's also my take on it.

And to the extent capacity controlled "saver" awards are harder to come by, I'm not convinced that "standard" awards are such a bad deal.

Good point but we are talking about point redemption values right now, which with prices where they are is great.

Also an excellent point, which will be mainly due to the reduced capacity on the horizon more so than anything else, which means reduced award availability.

I'm not rushing to burn miles but I'm also not hoarding them for a long-time either. I'm burning at about 1-2 int'l biz seats per year. But I have switched most of my spend from the Citi AA card to a cash-back card that gives 1.5% on all purchases. I figure that I can buy tickets that way

Last week, we "bought" (a total $120.38 in taxes) two DL Business Elites, DFW/JFK/BUD and PRG/ATL/DFW, for 90,000 Skymiles each. That's 180,000 FF miles for tickets which "shopping" priced between $5,500 and $12,000 (Well, obviously, a unlikely purchase!) with DL somewhere in between. Using a $6,000 number, that made my Skymiles worth $.0334 each, obviously "up-valued" by the "Saver" search. Some of my "miles" came from AMEX "Rewards", an immediate and cost-free transfer, and I can't complain.

I suspect that the future holds pretty much what the past hath wrought, airlines hoping to build customer loyalty and patronage by using miles for seats unlikely to be sold (or if sold, at modest revenue levels). I'll be interested to see who flies in the front with me on the DL 367s in both directions.

There's an additional benefit built in, being able to avoid LHR, in my eyes the MIA of the English-speaking world.

Actually, this is totally wrong. It's true that if fares double in price, the miles double in value. But then, you also paid double for the flights on which you accrued those miles. So on net, nothing has changed -- IF the airlines keep the award structures the same. If in addition to this the airlines charge more miles for the same seats, there's been a devaluation -- regardless of the fact that the seats have gone up in value.

Please continue this discussion in the MilesBuzz forum. Thanks for your understanding.

Jouy31
TravelBuzz moderator

Interestingly, the Coffee Bean and Tea Leaf chain dropped its buy ten, get one free card without notice--leaving outstanding, unredeemed cards, worthless. The story I heard was that there had been so much counterfeiting of the cards on color printers and fake sales on the internet that they had to drop redemption.

FFPs are a different story, but, as, IMHO, the present business model of the big carriers is doomed in the near future, unless something dramatic happens to fuel prices, the FFPs are likely to go down along with them. As long as the oil guys run Washington nothing helpful is likely to happen.

Meanwhile, I am using up as many miles as reasonably possible (thanks AA for that free trip to Europe in biz coming up next month! :D). And, I am even looking at converting miles to hotel nights, although I haven't found a good conversion for AA miles, yet (suggestions?).

Now, my Starwood Amex is my main credit card because I hope Amex's and Starwood's business is more likely to survive.

Uh, no. If you have already accumulated the miles over the course of several previous months or years, then you have most definitely not paid double if airline fares double in price.

Agreed about connecting through LHR, but isn't MIA also in the English-speaking world? I know Florida has a lot of support for the Spanish language and all, but the official language of the United States is still English, last I checked.

Not sure where you checked, but the United States of America does not have an official language.

Ongoing attempts to make English official language

A great ride so far
 

Fortunately, I am one of those people who have been in the game since the beginning and have had lots of great "free" trips. In two weeks, we will be traveling in Biz Class to LHR and back from VCE on AF for less than $100 and 90000 miles each.

Which ever way it goes, I find you can still get some good deals with your miles if you are willing to be flexible.

OTOH, if they all FF programs go the way of the dodo bird, at least I had a great ride along the way.:D

Cheers

Robert, I disagree with much of what you say, especially the commodity part. It is absolutely a commodity has been at some time and priced as such, this is not new. The "worse" it gets the more valuable FF programmes are to airlines as it is what differentiates them. Regrading fees and the like, the will reduce as oil goes back between $60-80 over the next two years (see previous thread where some predicted $200 by now, when in fact its fallan under to under $126 in four days). Ultimately if a fare goes up by $400 plus a charge, and the FF fare goes up by miles just the charge, then the FF is still ahead. Also consider that there are a bunch of us very FF transoceanic travellers that almost never use our hordes for tickets, but just for upgrades in any case.

Agree that we've seen the top
 

Well I have no idea of what the future holds, but on a gut feel level I agree with the OP that my miles will bring less benefit in the future.

My reasoning goes along the lines that I believe that we've experienced the high point of air travel over the past 10-12 years. When I say that its from the perspective that the number of flights/airlines were increasing as were their routes. I can easily see a future that is much like when I was a child. Then it was rich people and business people that flew, everyone else took a flight on a "trip of a lifetime" and that was it (at least it was to a 10 year old from a not-so-well-off family in the 70's). And if/when environmental taxes are introduced to air travel that will be the tipping point (IMO).

I think the programs will remain, as the airlines generate a lot of revenue from selling miles. But as with other things they will need to find ways to cut the cost of using those miles and the easiest way to do that is to scale back the number of seats, and raise the price for the remaining seats. Some of this happens naturally as they eliminate routes. They'll try even more to cater to their remaining high-end frequent customers and that will leave fewer reward opportunities for the general public.

Hotel programs on the other hand I see growing, simply because of the increase in the human population and people's desire to "get away" on vacation. I just think that people will travel to fewer far away places than over the past 10-15 years. They'll take more trips via boats, busses, trains, and drives within a 5-6 hour radius of their homes rather than flying.

With less seats and less choices as airlines cut flights and seats various routes lose competition. Therefore your choice of airline is very limited. Most of my comments about devaluing etc have been going on especially the past few years. However the current market situation adds even more issues to the problem. There are a zillion miles out there. While many flyertalkers use miles for intl flights, the majority of people with miles are using them domestically. I jsut priced out some recent AA flights. The normal non stop MIA to LVS is not available. Only flights with lousy schedules and stops are offered. I have seen worse on CO or Delta where may flights are 50K for a domestic ticket. For example CO, I have never seen a domestic flight for 25K R/T. Dont figure that you can get a $500 value ticket for 25K miles.

rob

A. As noted by another, English is not our "official" language.

B. I've spoken fair Spanish - the archaic TexMex "Post Hole" vernacular -most of my life, but the idioms and accents heard at MIA can be a challenge. Meanwhile, even the French would have problems with the Haitian Creole patois. Meanwhile, at MIA, both Spanish and Creole seem to be spoken more loudly or more often than what passes for English among South Floridians and airport transients.

C. MIA, at best, is at worst. I can think of more hospitable penal institutions, and night time connections there are a Dantean prospect during which Hades seems uncomfortably close. While the atmosphere at LHR is different, the resulting depression and aggravated stress levels are comparable.

one of the lucky ones
 

I reckon I must be one of the lucky ones that continually uses the ffmiles for family. My ff stockpile stays pretty low with college kids back and forth from home, sending my daughters to the grandparents in the Big SKy, and taking the wife to overseas on business trip at least once a year. These "family" options may not be always directly beneficial to the ffmiler, but it is the only way to spend the miles in my opinion. Yes, seats are going to be tougher to get an upgrade for, especially on flights that UA currently uses 747-400s on. The new BC configuration is going to kill a number of use 1Kers. But that is the way it goes. Tough to fight, eventhough we all don't think the changes are fair. Use your miles for more then just self, take the entrie extended family on a trip they never thought you would ever spring for.

Another possible end
 

What could end, or at least significantly impact, the industry FF programs would be if a crusading state attorney general (sort of like Elliott Spitzer was before he found bimbos) decided to investigate the system (perhaps it might require a Justice Department federal investigation).

With all the miles now being sold to and, effectively awarded by, credit card companies, florists, restaurants, magazine subscription services... the list goes on ad naseum... do the airlines really provide redemption opportunities commensurate with the rate that they are dispensing miles?

It would be intriguing to see an objective analysis of:

How many miles are awarded each year?

How many miles are redeemed each year?

How many miles expire each year?

Are the redemption seats offered each day sufficient to consume the miles awarded each day (doubling the miles required for ticket certainly, on paper, helps the airline satisfy this one)?

Consider a hypothetical example...

Assume 250 people on a plane (virtually all flights are full these days) Yes, I realize that all PAX will not be FFs... let's assume 100 are (sign up for a credit card and you become a "FF")

Assume 4-leg RT with total of 2500 FF miles awarded to each FF (not unreasonable considering some airlines still award a minimum of 500 miles per segment)

So, up to 250,000 miles FF awarded (does not take into consideration whether the ticket was purchased with an airline credit card... more miles awarded there. I travel a lot, but there are months where my credit card earned miles far exceed my mileage miles).

If an award award ticket requires 25,000 miles, it would take only 10 seats to "consume" all of the FF miles awarded (5 seats at 50,000 miles per seat).

One could do a sensitivity analysis of the different variables, but the point remains... how many award seats are available on a typical large jet? I have no way of knowing, but others must.

Are there enough in aggregate on all flights to "comsume" the miles as fast as they are awarded... or are the airlines counting on most of the people letting their 25,000 mile credit card enrollment bonuses expire before they are used?

Thoughts?

Since the fares you pay for revenue tickets to replace those miles also goes up the same amount, this is a wash. The rip-off fees now charged by some airlines IS a reduction in value, however.

No, it´s not the end of the frequent Flyer Programs. It´s more the end for some people, who make on their own money the status. For them it is getting worser and worser.

For business traveller (like me) it doesn´t matter. I have to fly from A to B regardless of a frequent flyer program.

> 99% of all flights starting in my country are international flights, and I am not aware on one single swiss person ever having spent miles for an internal flight (in Switzerland), except in combination/transit for an international award.

Also I am not aware yet of any decline of flying activities in and out of western Europe - but on the contrary all major hubs over here show air-traffic increase.

Don't judge the future of FrequentFlyer programs (and their ever growing importance as marketing tools for major airlines) solely by the domestic US market.

I used to think that too. But the way things are going now, they might actually be more valuable.

1) With the cost of airline tickets dramatically increasing? The basic cost of tickets obviously cost more. That means there are fewer people flying. True, airlines are cutting back but if you can get a seat using FF miles, the cost of the ticket for those flights has gone up. that means the cost/mile has gone up and the ff miles had more value.

2) I had no problem recently securing 3 tickets to Rome, for family members. I also bought my ticket, for the same flight. My purchased ticket was $1700. And that was the lowest price I could find on my airline choice. My 3 tickets using miles obviously were worth the same amount. That's about 3 cents per FF mile.

3) The higher price the actual cost, the more valuable the ff miles become. Since most only use them for international flights, they still have pretty good value.

4) The other thing that has always been problematic for me is the fact that it's so easy to get FF staus, making it harder to find flights or get upgrades. with the cost of tickets skyrocketing, that means there will be fewer people able to make the higher levels (i.e. I will have fewer platinum to contend with), which again makes my level more valuable.

I think FF program will be around a bit longer. However, the airlines will play more and more games....lots of outrageous fees like those that CO just instituted.....harder to redeem unless you want to travel to the middle of nowhere on a Sat morning at 5am .....etc.

They can't loose them...they just make too much money selling the miles to the CC companies and they are hooked on that revenue.

Several key points for U.S. legacy carriers:

1) The economics of FF miles have significantly changed for the airlines based in the U.S due to the price of oil. The airlines can not continue to add mileage liabilities via FF credit cards in particular without adjusting their reward structure. Whether fees are tacked on as fuel surcharges or called something else, they are necessary (the other option would be to change the mileage requirements but there appears to be more hesitation in going that route on a wholesale basis).

2) The risk of holding massive FF miles in a single legacy airline has gone significantly higher, because a bankruptcy this time around could mean shutdown. But it is very unclear which carrier may be the first to fail.

3) Some airlines seem to continue to provide good value on awards, DL and AA are mentioned frequently, and I have had good luck with UA (US is ok IF you can get a *A award).

4) A FF mile that I plan on redeeming immediately I would value at 2-3 cents minimum on AA, UA, etc.; but a mile I wasn't planning on redeeming for 18 months I would probably value at less than 1 cent due to uncertainty.

5) With less flights and more people trying to burn miles, awards and upgrades will likely be more challenging to obtain. However, is it possible that loads have fallen so much that more awards are currently available for certain routes just to fill seats and remove the liability?

6) You can't ignore the impact WN is having on the legacy carriers in your thinking about the future.

I am not status anywhere, but still have about 100k on both US and UA that I will be burning down when possible over the next 18 months, after just being able to get 2 IAD-Hawaii *A awards on UA metal using US miles. :) I probably will eliminate my airline credit cards in the next year as well.

My 2 cents FWIW.

Use up my miles? Combine Star Alliance and AmEx?
 

Here's one for you - I have 140,000 Membership Reward AmEx miles (we have been saving them for the BIG trip) and we have about 140,000 USAirways miles......Can the Membership Reward be transferred to a Star Alliance ticket - such as Lufthansa and then use the USAirways in a Star Alliance ticket and possibly get two or three tickets from PHL to Greece? Anyone ever do this???? What are my chances to get 2 or 3 out of 4 family tickets on Lufthansa on the same plane next summer 2009?

Missynancy, you should peruse the US threads for answers to this. Theoretically, you should be able to get 2 tix for 100,000 miles on *A with US miles - but you probably will need to book near the 330 day window and there is no guarantee that US will show availability for LH, especially if you are looking for weekend travel. But if you can, be flexible - also look into departing from EWR or IAD if not too inconvenient. I don't know Amex MR very well to comment on.

Missynancy,

I have done this trip.

Yes it is possible.

tasnam