bloxomo

[QUOTE=texashoser;24390235]With poor planning, yes. Under the new system, 1K on UA would earn 11x miles for a $1000 fare plus 2x for the United Explorer Card for a total of 13,000 miles. Suppose this morning I get up and decide I've had it with the snow and cold. I can go somewhere warm like Portland, OR this weekend for 25,000 miles + $17, or 12,500 + $8 miles one-way + $180 for the return, or $571 round-trip. The second option gets me $572-$180-$8 = $384 of travel for my $1000 fare, with 500 miles left over.

texashoser

Fair enough. ;-). But doesn't UA capacity control their awards seats?

EDIT: And you still had to spend $180 to save that $384. Had you wanted a 'free' trip, you would have had to burn 25,000 points that would have cost you $1,923 in airfare to obtain for a $571 redemption. By my calculation, that's a 29.7% return.

bloxomo

Well, yes to the capacity controls. I guess my point is that for a certain type of traveller (flexible schedule, don't care much where you go), there are some good values to be found in the other programs even before we get into the upgrades/business-class part of the FFP argument. That is, until all the other programs go to fare-based redemption.

And isn't 29.7% "close" to 31.4%? I didn't have to search too hard to find that 29.7% -- I might be able to find higher returns (although I will admit that not having to search hard is an attractive feature of RR).

rsteinmetz70112

The problem with this is that only ocassionally is the premium you pay for an AT fare less than 40%, even at the last minute. You have essentially paid full price (or more) for those points.

The only advantages you get are same day standby and refundability. Both for me very limited advantages. Standby is often not availible or requires making connections, unless you are in a rare market where they have many non stops daily (like DAL - HOU ) . On the rare ocassions I need to cancel a flight I simply use the TTF for the next one. I've never lost a TTF as far as I can recall.

texashoser

Yes, it's close enough. You point out what I've always said: different airlines offer different things to different passengers depending on their business, personal, and reward travel destinations and schedules. Living in Austin with where I need to go means Southwest is the airline for me. If I lived in Dallas perhaps AA would be that airline. If in Houston, perhaps UA...

texashoser

So find me an airline that gives you more points per dollar on both full and restricted-fare tickets AND doesn't capacity control the number of seats on any given flight that can be used for reward redemption.

I fully understand that to many travelers, full-fare tickets don't make sense. But all airlines have them. Southwest is no different. They give you the benefit of flexibility and full refunds, but at a premium price. Been that way for decades.

nsx

You can if you have sufficient elite status to waive the $75 fee for late booking. Without status, late bookings are free only using BA Avios or RR points.

bon95

I think it's fair to compare with the assumption of elite status.

Of course, the enormous problem with late bookings using RR points is the lack of WGA fares...

FWAAA

My assumption is that the banks pay the airlines around a penny each, and later in this post I'll show my work.

I would bet significant sums of money that Amex has never purchased miles from DL for that small a sum. DL (and AA) borrowed a billion dollars from their credit card partners in ~2009 and the loans were structured as an advance purchase of frequent flier miles. But no way did the advance purchase work out to a mere 0.3 cents each.

I'm not familiar with the WN numbers, but I am familiar with the public disclosures of AA, and I doubt that the WN miles are worth significantly less than the AA miles.

New management at AA is less transparent than old management, and discloses much less detail, so my numbers are from 2012, the last year at AA before Parker took over. HP bought AA on Dec 9, 2013, and by doing so, the 2013 10-K was prepared in February 2014 by HP management, using the more opaque America West standards. But we do have numbers for AA during 2012.

In 2012, AA issued about 209 billion AAdvantage miles, and sales to partners accounted for approximately 2/3 of those miles. So we know that AA sold about 138 billion miles, many of them to Citi, the rest to other airlines, hotels, car rental firms and other misc partners. That means just 71 billion were issued for flight activity, which is striking given that AA flew 136.6 billion revenue passenger miles, and all published AA fares earn 1.0 redeemable mile per mile flown. Customers captured just over half of the possible miles, presumably not every customer bothered to sign up for AAdvantage or some neglected to enter their membership # in their reservation.

When AA sells miles to partners, it recognizes some of the revenue right away and defers part of the revenue until the miles are redeemed. In 2012, AA recognized $725 million right away. At 12/31/12, AA had $1.2 billion of deferred revenue from the sale of AA miles on its books, which it recognizes over about 28 months, or about $43 million a month, or about $500 million a year. So for 2012, AA sold about 138 billion miles for about $1.225 billion, or about $0.00888 each.

Based on this rough calculation, my assumption of about a penny each was a little high. And that .888 cents each figure includes some definite high-cost miles, like the consumers who paid AA the retail asking price of 2.5 cents each (the non-sale price shown on the AA website where you can buy AAdvantage miles). But even at 0.8 cents each, the program works at AA only because of blackout dates and large amounts of breakage where the miles expire and are never redeemed.

I agree with nsx that RR 2.0 was a foolish plan that was doomed from the start without some major devaluations. If Chase is paying WN something like 0.75 cents each and WN is redeeming those points at 1.43 cents each, that only works if about half the WN points expire unused.

RR 2.0 looks like the work of a company that was desperate for cash, and AFAIK, WN has had solid finances for a long time and didn't need to borrow from the future at such high rates.

The legacy airline programs like AAdvantage work for me because several times I have parlayed a large number of AAdvantage miles into premium cabin award seats that retail for more money than I would have spent, and thus my redemption did not displace any revenue (I would not have spent $24,000 or $36,000 for those International First Class tickets). But RR 2.0 is a program where every redemption displaces revenue. I thought it was a dumb idea when unveiled, and with the devaluations (and consequent bad feelings among the WN customer base), I continue to think it is a dumb idea.

JL100

I don't necessarily disagree with the analysis, however a couple of points for the FFP. Points are bought now by the banks and potentially used years later. If SWA's cost of capital is something like 10-12%, the delay without redemption is a huge benefit to them. Even if you use 4-5% debt financing, the cost of the redemption years later is less than today's dollars. Also, as pointed out, there is likely large breakage. Some people not on this forum just keeping saving miles and never pull the trigger on a trip. They are too cheap to pay for the hotel, rental car, etc. Others have maybe 5,000 points in an account and aren't even aware of it. Also, the paid trips accrue points so there is some offset to the cash amount there. My feeling is the revenue for the points can be a lot lower than the cash price and still make sense. I would also guess the partners pay for a lot of advertising promoting the brand like when Chase pays for SWA Visa ads (maybe this is split but still effective marketing for SWA).

diver858

I have had good luck finding AS short haul Avios inventory 1 - 2 weeks prior to departure - even on a holiday weekend.

Amicus

Not always true. I booked MCI-MDW two days before departure , and used RR point on a WGA fare. Of course, the flight was only 2/3 fare, so WN opened up WGA fares on a late booking to fill seats.

nsx

I found a 3-class F seat on AA transcon (the new 321T with 1+1 seating in front) about 3 days out for 37.5k Avios plus $2.50. That was pretty sweet, and cheaper than AA miles and fees. I grabbed it because my other option was 25k Anytime coach and the F ticket avoided a checked bag fee. This redemption is changing to 50k Avios soon.

Good deals just don't last. Even though RR2 was a 2/3 devaluation for me, it was STILL too good to last. That's depressing.

bon95

I never said it was always true.

joshua362

Not to hijack but these RR 1.5 rewards I stockpiled just before 11/1 are completely useless to/fro ISP. We are down to 12 flights a day, 8 of those to Florida and have a relatively new 8 gate edifice built to service them from!

I can only imagine what this new devaluation and dynamic pricing is going to do for rewards 4/17, I suspect the very worst...