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Is this the end of Frequent Flyer Programs?

Is this the end of Frequent Flyer Programs?

Old Jul 18, 08, 8:18 am
  #1  
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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.
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Old Jul 18, 08, 8:21 am
  #2  
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Originally Posted by robertw477 View Post
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.
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.
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Old Jul 18, 08, 8:25 am
  #3  
 
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Originally Posted by robertw477 View Post
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.
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.
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Old Jul 18, 08, 8:35 am
  #4  
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As this is a general discussion about the longterm viability of airline frequent flyer programs, not really specific to one airline, it has been moved to a Forum where it can receive the wider discussion it may deserve.

JDiver, Moderator
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Old Jul 18, 08, 8:45 am
  #5  
 
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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.
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Old Jul 18, 08, 9:01 am
  #6  
 
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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.
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Old Jul 18, 08, 9:08 am
  #7  
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Originally Posted by aaupgrade View Post
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.

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.
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Old Jul 18, 08, 9:09 am
  #8  
 
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Originally Posted by aaupgrade View Post
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.
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.
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Old Jul 18, 08, 9:15 am
  #9  
 
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Originally Posted by robertw477 View Post
however the airlines including AA may try to charge more points for the flight
Good point but we are talking about point redemption values right now, which with prices where they are is great.

Originally Posted by robertw477 View Post
or they may give you a tough schedule to fly.
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.
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Old Jul 18, 08, 9:24 am
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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
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Old Jul 18, 08, 9:40 am
  #11  
 
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Originally Posted by aaupgrade View Post
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.
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.
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Old Jul 18, 08, 10:15 am
  #12  
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Originally Posted by aaupgrade View Post
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.
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.
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Old Jul 18, 08, 12:48 pm
  #13  
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Please continue this discussion in the MilesBuzz forum. Thanks for your understanding.

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Old Jul 18, 08, 1:27 pm
  #14  
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Originally Posted by jimbo99 View Post
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.
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! ). 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.
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Old Jul 18, 08, 2:34 pm
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Originally Posted by yad View Post
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.
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.
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