BearX220

I think there would be huge churn but the volume would end up about the same. The new average elite, though, would spend more, fly less frequently, and be less loyal to UA. You would be expelling thousands of strategists / MR types / bang-for-buck obsessives... and acquiring people who fly overseas in F once or twice a year because their travel planners book UA; they'd become Platinum or Diamond, maybe not even knowing or caring.

Average spend per elite would go up; average loyalty to UA would go down.

Your point is well taken about how it is impossible to build the airline's revenue model around the top-spending 2 or 3 percent and display indifference to anybody else. The BA Executive Club is a relevant case study. In 2003 they cut miles awarded on discount tickets to 25% of actual miles flown -- sending a clear f@&k-off message to the mixed-revenue passenger. They wouldn't even let you enroll in the program unless you bought a full-fare ticket, Y or better.

It's instructive to note that all this was rolled back eventually. Just as the CO 50%EQM-for-discount-fare-buckets was rolled back.

There is this fantasy (shared by some highfalutin FTers) that only the biggest spenders matter and everyone else is barnacles on the fuselage, but real loyalty management means incenting and rewarding almost all customer segments appropriately.

This rumored change repels a lot of loyalists and rewards a lot of people who might not be loyalists. It's BAEC 2.0.

nov11

Multiply that with a few thousands more and you are losing millions in revenue.

Unless you are flying on your company's dimes, these figure will affect a lot of fliers psychologically. I don't know how the exact amount I spent this year, but if I know I need to spend $8k in a year to qualify for 1K/Diamond, I'd probably not even try to begin with. Paying $400 20 times is a lot less painful (psychologically) than $8k in one shot.

The same could be said for 2Ps - 25,000 miles is equivalent to about 5 LAX/SFO-JFK/BOS roundtrips. At an average of $300-350 per roundtrip, he/she couldn't even make 2P!

demkr

Yep.

In some ways it actually might be a good thing. We might end up spending a few less dollars and/or choosing the more convenient routing.

you know, I know this comes as a shock to some-but there's some who do MRs because they absolutely LOVE to fly and they LOVE the benefits that come with it. So when someone who likes status and the perks sees a good fare, they book it.

Obviously, they're all more focused on revenue. But I think loyalty/brand is a very important part of an airline. If this carrier (and its competitors) follow suit and place all these revenue limitations along with mileage limitations, it becomes too much and too complicated. They will lose the $ from the mileage runner that travels for the sake of travel.

AZjohns

Why in the hell does every new project/merger management team think they have to fix what isn't broken??????

Can we just call a timeout and go back to 2 years ago and pretend CO and UA are not merging and just keep things the same for each airline????

Yes, once again I'm PO'ed on these "changes we are going to like"

bocastephen

I see no benefit to UA with this - they won't be acquiring any new people as a result of this change. The non-FF aware people and their travel agents will book according to their current needs/patterns, and such a new program won't factor into their decision-making at all, I guarantee that speaking as a travel agent.

I can tell you that the agency I work with, one that does 1B a year in air revenue alone, is moving considerable business away from UA as a direct result of the arrogance they've shown the TA industry - they're not making any friends in my business, for sure.

The only result of this change is to jettison a big bulk of their Elite rolls and loyal customers who go out of their way to book UA and remain loyal. I see no logic in doing that.

hobo13

How many times did we tell you CO zealots that NOTHING good was going to come of this merger.

FlyerChrisK

Excellent analysis.

I doubt the MR crowd actually represents that much to the airline. While my coworkers are in shock that I'm going to fly 100K domestic mile on UA for less than $5k (I fly to go places and stay there at least a day, so I have yet to do an actual MR), translating to 200K of RDM which coupled with some credit card bonuses, I'll burn for international F. But I doubt they're suddenly going to take their weekends and start hoping on planes to far off places, just for the sake of earning airline miles. The character traits found in the MR crowd are rather peculiar.

If you're flying in paid J/F, the experience will be unlikely to be augmented by the "perks" of being a low-tier elite under this new scheme, so they're unlikely to notice.

Absent a really good hard/soft product which justifies loyalty, this definitely brings paid international J/F closer to a commodity.

Count me in. I'm certainly spending far more than I would otherwise in order to enjoy the simulated hospitality of elite status. If things really get bad, I can crawl back to WN for my domestic travel (although AS might be a last refuge for a bit if I become SEA-based) and then buy paid tickets (although likely in Y) for my international travel. Will it be as nice? No, but it means that I'm spending less money across all airlines.

Driving by DCA

There's an old joke about losing $$ on every unit you sell but making it up on volume...

bsmnsr

The ONLY reason I fly UA is the fact they have a better Frequent Flier Program than the rest of the US Carriers.

If these changes are implemented, I would almost certainly fly Emirates outside the US and switch to a US Carrier for domestic flights. The service by the FAs in Emirates Economy is generally far superior to anything offered on UA/CO even in Business or First. Hell with the exception of the seat, the Emirates economy product has better food, better entertainment options and a cleaner airplane. Come to think of it, why do I fly United? Oh yeah, because they have a program that makes me want to be loyal.

UA/CO needs to give us reasons to fly the new airline, not reasons to leave. UA/CO needs to build a better airline and a better brand. The current product is about average and who likes to pay for average?

I hope this is a trial balloon rumor and not the actual plan that will be implemented. I certainly had higher expectations for the merger.

Of course, given how airlines move in concert, UA/CO will probably be the first one to implement these types of changes with everyone else following like sheep.

At the end of the day, UA/CO needs to fill seats. Southwest's model proves that it's about filling the "bus" up, not about determining who's good enough (read "profitable enough") to ride the bus.

BearX220

But if he looked at this new program soberly, 2P wouldn't be worth the effort. So how many fewer trips would he take?

The whole point of loyalty programs is to extract incremental, discretionary revenue -- money you don't have to spend. We book UA for $400 when AA is $350 because of the loyalty program. Remove that incentive and a lot of discretionary spend disappears too -- I think. Or at least gets scattered elsewhere; maybe I'll check out Virgin America, as UA provides no incentive not to.

I think it's pretty clear they're willing to take that loss and instead reward the CEO who spends more on one ticket than a mileage runner spends in three or four years.

I agree with you, but look at how CO management, these past few years, moved away from rewarding historic loyalty patterns and toward fawning over today's big spender. Philosophically they have been shifting emphasis and effort from loyal customers with history... to inherently disloyal ones with fistfuls of money.

demkr

Right-I'd lose all the fun perks, and they'd lose $ that they'd get for specific mileage runs or positioning flights or what'd have you-and flying would be less fun for sure.

But I'd save cash, and pretty much only fly if I need to, really want to, or see a great fare to a good destination from my home airport. Maybe that's just the future of the industry.

I wonder if the airlines regret even making FFPs. Despite the obvious, that anything on boardingarea I am pretty sure would not have been posted unless heard from someone who is reliable--I just can't see any airline making such radical changes in a short period of time...it'd be a complete shake up and change

FlyerChrisK

Right, but if someone's on a paid international F ticket (I notice fully unrestricted F for LAX-SYD is pricing out at ~$32k on UA, which would easily be a few years of my expected travel spending with UA), why aren't they rewarding (in terms of the travel experience) those fliers already? There's very little they can really do to encourage paid F besides a bit of loyalty to the hard/soft product over other airlines. In Y, loyalty, at least for now, matters due to upgrades, lounge access, etc. enabling UA to capture additional revenue.

luv2ctheworld

Holy cARp! I cannot believe the radical changes that are being "rumored". If any of it were near the truth, I can say there will definitely be some changes for my flying habit. It's fairly accurate to say UA's trying to "fire" their customers (the ones they don't believe contribute to them enough financially).

However, I have to wonder if this is truly genius or madness... as others have noted, getting your premium passengers is the sweet spot, but there aren't that many around, percentage wise. It's not like they compete in a vacuum... the "marginal revenue" passengers still account for those seats that they otherwise can't fill. Setting such high purported standards to be an elite will just push a lot of those pax elsewhere. Although those pax don't contribute as much, there's still money there (and the services those marginal pax request are probably incremental to UA's operating costs).

I guess this doesn't really come as a surprise, given the LCC's approach to revenue based status (i.e. B9's and WN's new RR2.0). Matter of time I guess for a legacy to try something along those lines... and what better timing than to put a whole new version out from a merger...

Wow, so in a period of 24-48 hours, there's been some massive thread activity over @ DL (change in award and rebooking), UA (Lucky's rumor blog), and Miles Buzz (83K+ AA miles for $10)... wonder what the metrics look like on the postings.

Sadly, I was just posting over @ DL forum about how it has been pretty better leaving them... so if UA really goes down this path, AA ChAAllenge, here I come! Luckily, I think I'll be good on UA through 2012 (assuming my current EQM accumulation keeps up and that I won't bother requalifying under next year's draconian program).

FOX85

I know people that are lifetime 1K. I wonder how this would effect them and in general all the BIS million milers (if true)

BearX220

This former CO elite predicted nothing but misery out of this merger, and I take no pleasure in my prescience.