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Originally Posted by caribbean sun
(Post 11617969)
geeeeezzzzzz, not very encouraging news.......not that i didn't know this already.
On the other hand there are plenty of other things that are MUCH worse that most of us take for granted. Like gift cards. They are truly corporate currency that has no meaning or real value outside of confidence that your McBucks can be redeemed for things of the same value later. Anyone who thinks gift cards have value are welcome to ask holders of Circuit City giftcards and Sharper Image gift cards how much they're really worth. At least with FF programs you get for doing what you would already do. Oh noes! $160 in effective McUA bucks for spending a week in Japan? I would travel anyways, so really my net entry cost is $0 (or marginal it I choose my preferred airline at a premium). Compare that to handing $10 to some random guy on the promise that your friend will be able to get somethin that that random guy values at $10 in the future if he is able to produce the token of random guy's currency (gift cards). Plus, the exchange only works on way... You give dollars but you'll never get dollars back... |
Originally Posted by Kimberley
(Post 11623231)
2. Lack of transparency. Ponzi schemes are asking for money for a unique purpose (that is, something that you might not otherwise do). FF programs are mainly aimed at business people who might go for the cheapest tickets otherwise - they’re aimed at building brand loyalty. If a member doesn’t quite know what they’re getting, at least they know they’ll be getting something - at negligible cost, too, as they are ‘earning’ their rewards for doing something that they would be doing anyway. The real cost is the difference between the cheaper product they might purchase and the ‘loyal’ one that they do. This is not borne by the person who orders the ticket but by their company so it is passed on to us as consumers.
(The real lack of transparency is to do with who pays for these schemes. Take an example - a food company’s executives are members of an FF program, for the sake of which their expenses budget is say 10% higher than it would be if the competition were for the cheapest fares and not the best FF deals. How much of this extra cost is passed on to the consumers will depend upon the same economic forces as drive the rest of their business. But consumers will be paying for the same proportion of the extra cost associated with travel as they will be for extra advertising or machinery that goes into production. The difference is that for this extra cost, they will get nothing (advertising should drive up the company’s market share, so decrease prices, new machinery should reduce costs, so decrease prices...) With FF programs, the benefit goes to members (who are already high-earning executives) and to the airlines they support, but the cost is split and partly (perhaps mostly) borne by people who do not benefit at all.) |
Originally Posted by biggestbopper
(Post 11623264)
1. I would certainly be crushed if I lost my FF miles. :D However, I plan to continue my "burn, baby, burn" approach to miles 'cause who knows how long they may be around or what they may be worth in the future.
2. I have done lots to get my miles--namely flying and filling out dull credit card apps. Come to think of it, Kimberly may have a point--we have not invested a lot of money in getting miles. Although the rebate lost by using a FF card instead of a cash back card has a quantifiable value. Call it 1.5% of money charged on credit cards. Still, not that much. In any event, I suspect FF programs are about to get way devalued as they relate to credit card bonuses since it looks as though the remarkably excess monoply profits US card companies have been using to cross-subsidize benefits to FTers are about to be hit hard by new consumer protective laws and regulations. Burn, baby, burn! Mike |
Originally Posted by Kimberley
(Post 11623231)
The airlines, in other words, are effectively issuing a currency they are under no legal obligation to honor.
Originally Posted by mikeef
(Post 11624196)
Miles don't earn interest.
Because their supply is steadily increasing, they are naturally worth less over time, and their precise value on any given day is a sort of a lottery (can you redeem in F to Bali this afternoon? Maybe yes, maybe no)... a crisis of faith in FF miles, and an inevitable currency crash, is practically guaranteed. This is why hoarding is stupid, earning-and-burning smart. You're already seeing people drift away from certain airlines because redemption is difficult and the rate tables are so daunting. Look for that on a grand scale. At some point, when Bali is 500,000 miles, you're earning them @ 50,000 a year, and they expire in three years, you won't care anymore. |
Very thoughtful post, Kimberley!
At one point, you ask:
Originally Posted by Kimberley
(Post 11623231)
4. Lack of legal oversight. As airline companies are offering these programs essentially free (that is, as the costs are not borne by the people who reap the rewards of them - except in those cases where people fly for private rather than business reasons, in which case it’s highly likely that they would be travelling anyway, which once again reduces the personal cost of being a FF member to virtually zero) it’s hard to see what legal controls there could be.
If Frequent Flyer programs had to comply with state Consumer Protection laws, their "we can change anything any time the whim strikes us, and apply it to miles you've already earned, and there's nothing you can do to stop us" might not be so effective against the consumer. |
Tim Winship just lost some of the respect I had for his work.
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Tim Winship wrote an interesting article on five ways in which Frequent Flyer programs are like Ponzi schemes. He didn't say that the programs were Ponzi schemes or that the analogies were exact. Many of the responses here have pointed out many ways that the programs are not the same as Ponzi schemes. Although they may have been intended to disagree with the article, I don't think they do. I agree with many of the points that were raised in both the article and the responses.
The article was provocative and I, for one, appreciate it. |
Originally Posted by biggestbopper
(Post 11623264)
1. I would certainly be crushed if I lost my FF miles. :D However, I plan to continue my "burn, baby, burn" approach to miles 'cause who knows how long they may be around or what they may be worth in the future.
Burn, baby, burn! Also I often say to people who über-optimize their usage of miles (intercontinental upgrades to F seem to be en vogue) and wonder on my intra-European Y redemptions: "1/ plenty more from where these came from and 2/ better to use 60-70k Lufthansa miles ("funny money") than to pay 1000-1200 real euros for the family holiday tix) |
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