UnitedConnection

When your business is trying to fill fixed-size aluminum tubes with people, your least profitable customers are the ones that leave you with empty seats.


EDIT: After reading a few more posts in this thread that showed up while I was posting, it seems folks are starting to miss what COdbaUA is trying to do here. I'm not sure they give a sh*t that a few hundred flyertalker-1Ks are earning their status with the lowest fare buckets / vouchers and are otherwise taxing the system.

No, the statement here in both actions (policy changes) and words (CFO's comments) is much broader, and is twofold:

(i) With airline consolidation, 100K miles flown just fundamentally means less than it did before, so CO is reducing benefits (especially when compared with pmUA's treatment of top-tier elites) to reflect that viewpoint.
(ii) CO mgmt believes certain types of transactions are more valuable than broader customer relationships. In particular, they believe high gross margin (e.g. Y fares) should be encouraged more so (or in some cases instead of) than a general long-term relationship (2Ps on Y fares trumping 1Ks in discount economy buckets for u/gs is one manifestation of this)

Personally, I think (i) is probably the inevitable result of consolidation (though COdbaUA may be undercutting the market on this one at least initially), and (ii) just represents a poor understanding of airline unit economics and demand elasticity, but that's neither here nor there. Point is UA is not on a campaign against the FT "gamers-of-the-system", (don't be so self-centered, FT ); it's much broader and much worse than that.

belynch

I don't necessarily think the "bad customers" are limited to bottom-fare feeders. UA sets the fares, they have to accept people buy them.

We shouldn't ignore that there's folks who try and manipulate the system for their personal gain whose behavior borders on unethical. And then there's those that are simply irrational. Why would I want a customer purchasing my product that compares me to Nazi Germany (as I've seen on these BBs multiple times)? If you're so disconnected with reality that you would even think that, let alone post that in a public forum, you're probably not worth dealing with.

But again, I don't know explicitly who the CFO was talking about, any more than the folks who are making the leap to assume that he was referring to FTers, or elites in general.

bseller

Nicely Done, Sir!!!

THIS is the essence of the problem currently being created by FLIBS, Rainey, and the HouCrew.

In a time of under capacity, over demand and stable (if HIGH) fuel costs - UA can make money whether it likes, hates, or is indifferent to the wants and needs of high frequency travelers. Ma and Pa Kettle can cover the lost revenue with a couple E+ purchases and an extra trip to DisneyLand.

HOWEVER, in times of high capacity, low demand and unstable fuel costs, this whole thing goes 'gznorbitz' - and the high frequency flier is NEEDED to cover fixed costs.

Whether TeamCLE can win them back, when they NEED them, is yet to be seen. And it will be the deciding factor as to whether UA makes it or not, IMO.

Dave

btbx11

Wow this guy is a jackass... In responding to the first question he seems to blame the monumental fiasco that was the month of March on his customers' and employees' "inability to handle change".

nova08

I'd argue that we still aren't in a great economy but the airlines finally tipped the scales in their favor and slashed capacity. They also benefit from fewer competitors (some LCC's some Majors) which also means less capacity. Fewer players in the market also mean people have fewer options and disgruntled elites don't have many options if they are not pleased with their benefits.

I do get where you are going with this but I'd argue what do you really pay for in a Club membership. I finally caved and went with the First year free Club Card promo but held out for this long because I just didn't see the value. I mean UA offers (costs):
Leased space at airports
Club Agents/Bartenders/Cleaning staff
Cheap snacks (probably purchased in bulk and cost $.50 an item if that)
Free beer/wine/alcohol
Magazines
Printer/a few computer terminals
Showers at a few clubs
Free Wifi

Yet look at how crowded some clubs can be. No more AMEX holders so the *G people and guests are the only one's getting in "for free". I'd argue anyone that goes in and doesn't drink or has 1 every once in a while costs the Club very little. So take the thousands of members and multiply by an average of $400/year and I wonder if it is UA that is really making a fair amount of money off of us. Yes, they are in the business of making money, but you should get the point.

I wonder about this as well, at least from a post 3/3 perspective. Fares have generally gone up. You really have to search high and wide for a deep discounted MR. The days of the PMCO cheap B fare when you could fly EWR-HKG for $1500 on a B fare and make Plat in 2 trips and change are a distant memory. I’m a 1K and generally try find the cheapest fare (on UA) due to corporate policies and still spend a large chunk of change.

Spot on right here. I know many of us travel so much that they just want to get from A-B as quickly as possible but many of us stick with one airline and try as hard as possible to stay with that carrier for earning purposes. I know I have connected on UA rather than taken a nonstop on DL. The schedules were comparable it just required me to get up earlier Mon morning and I did it.

pbuntrock

The problem they have is this. I was a very loyal NW customer before the DL merger for international travel; always Plat. US was my number two, they fit my east coast travel. Post the NW/DL merger I moved all of my domestic travel to US and international to *A. Now I'm locked in, I never look at DL. Once you've pushed customers to move, they get locked in and they never look back. Pushing your top tier customers to consider other options is very dangerous. Once they're locked into another carrier/alliance it's very hard for them to change back.

bseller

All true. However, these "disgruntled elites" don't need MANY options. They only need ONE in order to stop them from giving their high frequency travel money to UA.

Wait till planes aren't jammed full and see what happens to the bottom line. @:-)

Dave

dgcpaphd

Don't count on it.

Not yet.

This is the first time that a major air carrier severely slashed frequent flier benefits for most of its members.

Yes, I agree that the airlines have a right to change their program. However, in the case of UA, there were specific "lifetime" benefits that UA did not have a right to rescind. In those cases, a contract was created after members agreed to purchase services from UA in anticipation of the advertised "lifetime" benefits.

This is a particular area of frequent flier change that has not yet been explored in the courts.


Crystal clear to whom? Certainly not to many out here.

It is not only the "lifetime" benefits that cannot be breached by an airline.

In a hypothetical case an air carrier suddenly decides to no longer offer a bag fee waiver to certain members. Suppose those same members possess the UA/Chase Mileage Explorer credit card that has an annual fee and includes a bag fee waiver.

Do you really believe that Chase and UA are not obligated for the contract that was created when the passenger acquired the UA/Chase Explorer credit card?

Do you really believe that the customer would not have a claim against UA and Chase in the above example?

Yes, elites do have contracts in certain cases. I could cite more examples but there is no need. Clearly, in many cases, a contract with UA was created when customers accepted specific offers.

Consequently, in light of Mr. Rainey's speach to BofA personnel, UA should, immediately, rein in Mr Rainey from future speaking engagements. Rainey's
speech created additional ill will to the little remaining reputation of the merged UA.
-

channa

Yes, but if DL had the 787, it might be a different story. A lot is riding on that plane...

bseller

Don't they also need a "ROUTE NETWORK!!!!" ??

Just askin.

Dave

DCEsquire

I know. I couldn't believe that line.

I've seen these types in my own organization. When no one is flying UA metal, he will be touting to investors how UA was able to dramatically decrease its spend on fuel.

mp00118

====================

This guy is a great CFO. Cost cutting adds to the bottom line immediately means a bigger bonu$ to the board and the senior management. The damage, if any, to UA will only be visible years later. By then, he is similing with $$$ in his pocket and is well-sought after for CFO/CEO possitons by the wall street to run other companies.

Yes. I have seen these types in my own organization too.

No more loyalty from me but I will fly UA if the price and schedule are right.

GadgetFreak

Good point Dave. I would love to see the number of people who have switched recently. Unfortunately, only AA and DL will actually know. UA wont really know themselves since they will only be able to look at broader measures such as how many elites requalify. And it will probably take until 2014 for them to get good numbers on that with the merger this year.

nova08

No doubt but as some threads have alluded to, the grass may not always be greener on the other side. There are positives and negatives to every FF program and you just have to find the one that suits your needs/expectations appropriately. Yes you only need 1 airline to fit the bill but it may be tougher to find that in today's consolidated industry.

rankourabu

This whole concept of loyalty to a corporation is ridiculous.

Maybe I am from a different generation, but to me, being loyal to a corporation seems stupid. As stupid as the notion of the corporation caring about me in any other way than to extract money from me.

For me, its all about how I can use the current system to my advantage, and what I can get out of the corporation, I have no sense of loyalty at all.

UA currently works for me because they offer what I value most - easy to get, good value incl one-way, surcharge free complex international itineraries as rewards on very good partners. Throw in an occasional domestic upgrade, and I m happy. Certainly wont cry if I miss one. Once upon a time NW worked for me, then it was CO, then it was the BD scheme. Now I will have A3 Gold. No loyalty whatsoever, its all about ME.

Unlike so many here that feel that somehow United wont function without them - I have no illusions that my business somehow matters to UA.