Do You Think UA Will Lose a Lot of Revenue With Fewer MR?
Jul 1, 2013, 11:53 am
#31
Join Date: Dec 2010
Location: Tulsa, OK
Programs: AA EXP, UA Silver, SPG Plat, Marriott Plat
Posts: 1,264
They won't lose much if any from the MR'ers. That being said, I think it's a fallacy to associate Mileage Running with this PQD change.
They weren't going after the mileage runners when they announced this change.
They weren't going after the mileage runners when they announced this change.
Jul 1, 2013, 11:56 am
#32
Join Date: Aug 2011
Programs: UA 1K
Posts: 8,634
New kayakers will materialize. After the MRs ate up all the cheap space, Kayakers went over to DL or AA (who still had cheap buckets open). With the pesky MRers gone, more Kayakers will see UA's lowest buckets instead of going over to DL or AA.
In short, UA doesn't need MRers -- they'll more than fill the space with kayakers.
In short, UA doesn't need MRers -- they'll more than fill the space with kayakers.
Jul 1, 2013, 12:02 pm
#33
FlyerTalk Evangelist
Join Date: Jul 1999
Location: ORD/MDW
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That is very much the Jeff Smisek view that customers are an inexhaustible resource which cost nothing to acquire.
Jul 1, 2013, 12:02 pm
#34
Suspended
Join Date: Nov 1999
Posts: 24,153
That may be true on a route where any carrier has the vast majority of the flights. But on say a JFK-LAX once the ElCheaps are gone from DL,AA,VX and UA stil has theirs not many non FTers would pay more to still fly DL and pay say $100 more then what UA is asking. So UA will still sell its ElCheapos just maybe it will take longer then before. On say ORD-IAH UA wont have any worries
Jul 1, 2013, 12:04 pm
#35
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The essential point is that UA has the numbers which we're all guessing at. Furthermore, we are at the point in the cycle where UA is trying to maximise profitability, and enjoying very high load factors. They will have figured this one out and concluded that the odd (in both senses of the word) mileage runner adds very little to revenue and potentially adds just as much to costs.
But I do suspect that this is a sea-change in FF programs, and the end game will be to move much closer to a system where status grants are much more heavily skewed to the purchase of profitable (perhaps defined as high fare bucket) flyers. As a 1K, my other account is with BA but I can't get anywhere with them because of their Tier Point rules - essentially I qualify easily with UA but if I transferred exclusively to BA, I'd be struggling to obtain their equivalent of Gold. People in that program go on Tier Point runs, buying expensive AA First tickets in order to bump up their totals spending thousands rather than hundreds. I have no doubt that that is the direction of travel, even if it takes time coming.
But I do suspect that this is a sea-change in FF programs, and the end game will be to move much closer to a system where status grants are much more heavily skewed to the purchase of profitable (perhaps defined as high fare bucket) flyers. As a 1K, my other account is with BA but I can't get anywhere with them because of their Tier Point rules - essentially I qualify easily with UA but if I transferred exclusively to BA, I'd be struggling to obtain their equivalent of Gold. People in that program go on Tier Point runs, buying expensive AA First tickets in order to bump up their totals spending thousands rather than hundreds. I have no doubt that that is the direction of travel, even if it takes time coming.
Jul 1, 2013, 12:05 pm
#36
Join Date: Sep 2003
Location: LAX
Programs: UA MM | BA Silver
Posts: 7,193
For 2013 thus far, i'm at 62,534 EQM at US$1,647 PQD...not very beneficial for UA, self admittedly.
That said, UA will either not fill those seats at all (not likely) or sell them other Kayakers (most likely) who will fly for the price I paid or even higher.
The key takeaway from this is that the Kayakers will not use/accrue RDMs or any elite benefits on a large scale and it in turn keeps UA's liabilities a lot lower than if I were on them.
In UA's best interests are getting the stupidest, least knowledgeable, least active flyers on their flights every so often. By doing that, the passenger's complaints are overlooked, UA's cost AFTER the flights (RDM, elite perks, etc) are slim and most importantly - they have the opportunity to charge them for EVERYTHING - food, bags, e+, ToDs...you name it.
UA doesn't want cheap elite flyers, and I get that, but they do want cheap flyers because they can get that ancillary revenue they so lovingly grab.
-jeremy
That said, UA will either not fill those seats at all (not likely) or sell them other Kayakers (most likely) who will fly for the price I paid or even higher.
The key takeaway from this is that the Kayakers will not use/accrue RDMs or any elite benefits on a large scale and it in turn keeps UA's liabilities a lot lower than if I were on them.
In UA's best interests are getting the stupidest, least knowledgeable, least active flyers on their flights every so often. By doing that, the passenger's complaints are overlooked, UA's cost AFTER the flights (RDM, elite perks, etc) are slim and most importantly - they have the opportunity to charge them for EVERYTHING - food, bags, e+, ToDs...you name it.
UA doesn't want cheap elite flyers, and I get that, but they do want cheap flyers because they can get that ancillary revenue they so lovingly grab.
-jeremy
Jul 1, 2013, 12:09 pm
#37
Join Date: Aug 2011
Programs: UA 1K
Posts: 8,634
That may be true on a route where any carrier has the vast majority of the flights. But on say a JFK-LAX once the ElCheaps are gone from DL,AA,VX and UA stil has theirs not many non FTers would pay more to still fly DL and pay say $100 more then what UA is asking. So UA will still sell its ElCheapos just maybe it will take longer then before. On say ORD-IAH UA wont have any worries
Assuming that no one has special market power, it doesn't matter how many players are in the market. If demand is 500 "units" one day and 498 the next, prices will drop.
The "they will just sell slower" idea is a red herring. If that was the case, they would set prices higher to begin with. Prices are as low as they are because they want to sell those seats, and they want to sell them NOW.
Jul 1, 2013, 12:15 pm
#38
Join Date: Oct 2005
Location: SEA, OGG(I wish)
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Has anyone on FT noticed that Michigan is instituting "dynamic pricing" for single game football tix. Perhaps some vague similarity to airline faring via those complex models for predicting demand/etc referred somewhere upthread? Oh BTW, Go Blue!
Jul 1, 2013, 12:21 pm
#39
Join Date: Aug 2011
Programs: UA 1K
Posts: 8,634
"Hello, I'm a new poster to the GoBlue forums, but I'm hoping you all can help me a bit. I have expert mode enabled and I'm trying to book a ticket for this Sunday's game. I see that there are 5 G class tickets available, but the website is only offering me M class! What gives?!?! Does this have something to do with the warning message I ignored when I enabled expert mode? I thought expert mode would help me get cheap tickets!!!"
Jul 1, 2013, 12:34 pm
#40
Join Date: Jun 2007
Location: YVR SFO
Programs: UA G
Posts: 4,866
He's right -- at the lowest fare, they are effectively an inexhaustible resource and the only cost to acquire is to match the lowest fare in the market. Hint: they're already doing this. Withe MRers out of the picture, they won't have to pay for elite benefits. It's a smart move for UA.
Jul 1, 2013, 12:50 pm
#41
Join Date: Jul 2010
Location: London, UK
Programs: BA Gold, UA Nobody, Hilton Gold
Posts: 2,372
As I've said I don't believe MRs are the target of this. But with fewer elites amongst a similar number of passengers they will have a better chance for ancillary revenue generation from E+ and luggage. E.g. a mixed business/leisure traveller who wouldn't make PQD but would be Prem Gold, when he flies with his family for leisure UA has probably made an additional $200 from the same trip in checked luggage and E+ fees.
Jul 1, 2013, 1:08 pm
#42
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How many 1K MR'ers are out there, 100?
Youre foolish to believe this is a move to go after MR'ers. But keep on believing that, its nice to have a mythical scapegoat.
Jul 1, 2013, 1:10 pm
#43
Join Date: May 2012
Programs: UA IK, Hyatt Plat, Avis PP
Posts: 225
As a few others have pointed out, this new PQD requirement is not targeted at MR'ers. They are purely an incidental/secondary casualty. This is mainly targeted at the US based int'l business market. As other carriers soft/hard product have improved, UA's continues to deteriorate, especially the soft product. The unreliability of schedules and irrops have taken a toll on UA's image as well. The only thing they have going for them is the best FF program out there. Since the merger, I believe a large portion of the int'l business community continue to buy tickets on other *A carriers while keeping their UA status. This program is targeted at bringing back HVF'ers, not MR'ers.
This is a huge gamble by UA requiring the purchase of airfare on 016 ticket stock. They are forcing them to choose one carrier or the other. It'll be interesting to see how the business community responds.
This is a huge gamble by UA requiring the purchase of airfare on 016 ticket stock. They are forcing them to choose one carrier or the other. It'll be interesting to see how the business community responds.
Jul 1, 2013, 1:28 pm
#44
Join Date: Jul 2010
Location: London, UK
Programs: BA Gold, UA Nobody, Hilton Gold
Posts: 2,372
As a few others have pointed out, this new PQD requirement is not targeted at MR'ers. They are purely an incidental/secondary casualty. This is mainly targeted at the US based int'l business market. As other carriers soft/hard product have improved, UA's continues to deteriorate, especially the soft product. The unreliability of schedules and irrops have taken a toll on UA's image as well. The only thing they have going for them is the best FF program out there. Since the merger, I believe a large portion of the int'l business community continue to buy tickets on other *A carriers while keeping their UA status. This program is targeted at bringing back HVF'ers, not MR'ers.
This is a huge gamble by UA requiring the purchase of airfare on 016 ticket stock. They are forcing them to choose one carrier or the other. It'll be interesting to see how the business community responds.
This is a huge gamble by UA requiring the purchase of airfare on 016 ticket stock. They are forcing them to choose one carrier or the other. It'll be interesting to see how the business community responds.
Jul 1, 2013, 1:30 pm
#45
Join Date: Apr 2005
Location: LAX
Programs: UA Silver, AA, WN, DL
Posts: 4,091
I agree the PQD policy doesn't really target MR'ers in the purest sense. Instead, I think this is more likely to impact the business traveler that is willing to take a MR (or few) to get to the next level of status or maintain the current status.
These people will now have to give a long hard look at whether it is worth paying out of their own pocket for the status (because their business travel isn't going to get them past the PQD threshold).
Now it may not be worth taking the MR because the cost/gap is too great to justify flying on the own dime to make up for the difference.
This could lead these people that are impacted to look elsewhere (namely AA, as DL has a similar requirement). Though with DL, their hard/soft product is generally nicer.
These people will now have to give a long hard look at whether it is worth paying out of their own pocket for the status (because their business travel isn't going to get them past the PQD threshold).
Now it may not be worth taking the MR because the cost/gap is too great to justify flying on the own dime to make up for the difference.
This could lead these people that are impacted to look elsewhere (namely AA, as DL has a similar requirement). Though with DL, their hard/soft product is generally nicer.