I did a little exercise given the exclusion and discounting of AA discount Y fares from mileage earning...

I went to book US west-east coast ticket (with one stop over as non-major cities).

The sectors are 1745 and 717 miles each way.

The two tickets I compared were the same price on Travelocity on AA & US.

On AA (L&N fares) I would earn 1434 miles as no status, 2152 as QF SG. I would also earn either 20 or 60 SCs (depending on whether SC are awarded on discount Y flighs exempt from mileage earning - this is not clear in the T&Cs).

On US I would earn 4924 miles (V fare - only W fares are excluded). No SCs.

In fact when I priced out AA flight it came out much more than US flight. But even assuming the same price, the effects of the change in the FF prog mean that I am more incented to fly US than AA.

And in terms of lounges I have access to both airlines' lounges being QF SG (or QC member).

Aren't AA doing themselves a disservice by exempting or discounting mile earn on most discount Y fares? In the past I would always book AA due to mile earn and SC earn on QF. Now I have no reason too. AA loses that business. I am certain I am not the only one. In the most competitive airlines market in the world (US domestic) AA has just lost a competitive advantage in attracting customers.

Comments?

[This message has been edited by alect (edited 07-09-2003).]

Are you sure that the higher AA price was still for the classes you were originally looking at? It may be that a higher fare was returned when a firm fare quote was calculated because the system could only get seats in higher booking classes.

In that event, you may have been looking at AA fares that all earned miles and SCs, and comparing them to lower US fares that earned only miles (no SCs) - the classic frequent flyer's dilemma, into which changes like this are expressly designed to put you.

The effect of cutting FF benefits will not have been lost on AA. It may not have as dramatic an effect overall as at first appears, because (a) some pax buying the cheaper fares don't much care about earning miles at all and (b) some of those who do care may not have a burning preference as to which scheme they should go into and (c) some of these pax will say "if I can't earn on QF, I will just put these into the AA scheme" - which of course is probably cheaper for AA as it doesn't have to pay money to QF for the QF points.

This is partly true.

IMHO the principle of excluding or discounting some fares is not a problem per se - miles/points are a "perk" and if people are prepared to forego the perk and save a few dollars, that's fine economics.

There are (at least) two problems I see with implementing it. First, if the extra amount that must be paid is out of all proportion to the "perk", e.g. the lowest miles-enabled fare is double the non-miles fare. Second, if it makes one airline a lot more tight-fisted (or even appear to be more so) than the competition, the bad public perception could grow to outweigh the savings. I don't know that either of these pitfalls are too much of a problem for the moment.

What I think is a REALLY BIG problem with the QF/AA arrangement is the way they have applied the discounting to each others fares but not to their own.

Let's take a QF/AA example and compare it to SQ/UA.

Say I fly QF Q fare. I earn AA miles at 0%, or QF points at 100%. Now say I fly an AA V fare. I earn AA miles at 100%, or QF points at 50%. This undeniably means I'm best off earning QF points for my flights on QF. And I should earn AA miles for my AA flights, unless I fly a lot more with QF than AA which is not the case for most US residents. Bottom line is that those who fly routinely with AA will end up with points split between AA and QF.

Now look at SQ/UA. SQ have many fares that don't earn miles full stop. But the point is, they don't earn miles on EITHER UA or SQ. If the fare DOES earn miles, SQ don't discriminate whether those miles are put on UA, SQ or another *A partner.

Speaking personally, alect I think you know I looked at switching from QF to AA about the same time you were making posts about it. I did the switch; I'm AA PLT and will put about 50K mi on AA (mostly for business). I'll put about 30K mi on QF for leisure (Q fares). By excluding QF Q fares, I'm effectively forced to shift 30K mi into QF where it is nearly useless - and worse, it will make it a much more difficult task to requalify for AA PLT.

By contrast, I could put 80K mi on UA. With their current offers, I'd have a good shot at PE1K. If it wasn't for living in DFW and my work having a preference for AA over UA, I'd seriously consider switching from OW entirely due to the new arrangement.

In short, I don't believe that AA discounting fares is bad in itself, but the fact those same fares are not discounted on QF (or vice versa) causes all sorts of problems for flyers who travel regularly on both.

Since you posted about US domestic stuff, I've argued this from the perspective of an AA member. But, the system is nearly symmetric so very similar arguments could be advanced from the perspective of a QF member.

In summary, I certainly think it dilutes OW so its bad news for the alliance. Personally I am having a hard time seeing how OW as an alliance gives me much benefit versus QF/AA being out on their own.

[This message has been edited by jridge (edited 07-09-2003).]

jridge,

Very much agree with you regarding QF/AA. I would have thought one of the benefits of the alliance is that you try to avoid the necessity for members to belong to FF programs of more than one airlines in the alliance. Under the new regime this is actually encouraged (as you pointed out). And in fact the structure encourages membership and or flying with a non-alliance member (US) due to higher benefits.

I also agree with this - if you look at it from the point of view of someone who (like me also) travels on discount economy fares. For this market, fracturing the "seamlessness" of the alliance will mean that pax will once more have to think harder about what each part of the alliance means for them - for me, it's the BA/QF relationship that's important - and choose which basket into which they put their eggs. By definition, it's likely to end up being the basket which is cheaper for the carrying airline to service.

But this may just be economic sense taking priority over the nostalgic "principled" basis of the alliance. It's going to make no difference to the pax who consistently flies premium classes, the profitable end of the market for all alliance carriers. And the discount economy pax who is thinking of jumping ship may think again when they realise that the options will sometimes be between OW in which they have to choose between earning full miles in one scheme and discounted miles in another, and Star in which (like the SQ examples you give) they will earn no miles in any.

I agree with this.

It might be over-simplifying things a bit, but to me there are three different categories of flyers. (1) The "elite elites" who fly on premium fares - none of the changes will negatively impact them, so the airlines have looked after them; (2) Those who only fly say once a year to visit family, or 3 domestics per year, get a lot of points from program partners, and maybe travel on points every few years - for them, the changes also won't make much difference. They don't sit tallying their points each week, have no real EXPECTATION of an upcoming award, and consequently look for the cheapest fares with points or not. IMHO this is the exact group that the airlines had in mind when they reduced points/miles; then (3) The mid-tier who fly say 40-80K mi per year, have some elite status, accumulate points with some speed and maybe use their points on an award yearly - these are the ones who it seems really get burned with the changes, see the example above.

You are correct that a lot of this is driven by "economic reality", and as I mentioned before, I think the principle of reduced (or no) miles does make lots of sense.

Economic reality may also dictate some refinements in the implementation to remove some of the "glitches" identified above - I don't know exactly what percentage of flyers fit into each of my artificial categories, but probably the percentage of revenue airlines derive from the third category is not insignificant.

Maybe, as you pointed out, the marketplace will forgive OW for this problem of non-uniformity if there are LOTS of fares that earn no miles on *A and their relative prices. OTOH, if *A strike the right balance with miles vs non-mile fares, and the percentage of travellers with miles scattered over OW is high, then OW could be in trouble.

Just as a final example, I looked at SQ fares SIN-MEL for without/with miles and the price difference was about 25%. For QF (earning AA miles) it was 40%.

Ultimately the marketplace DOES help sort these things out. I just wish OW could have got a bit closer to the target on their first attempt... *A seems to be a few steps ahead in terms of the FF plans right now.