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Do You Think UA Will Lose a Lot of Revenue With Fewer MR?

Do You Think UA Will Lose a Lot of Revenue With Fewer MR?

Old Jul 1, 13, 8:03 am
  #1  
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Do You Think UA Will Lose a Lot of Revenue With Fewer MR?

Since Jeff has instituted the revenue requirement for status I would imagine there will be a significant decrease in Mileage Runs. Although we can never know a Dollar amount what level of decreased revenue will occur - insignifcant, signficant, or a lot?
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Old Jul 1, 13, 8:19 am
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My guess is that the trend will be to attempt to balance fares more going forward. I expect two things...

1) Further capacity cuts (the people who need to fly will continue to fly), eliminating the seats taken up by the MR people, and increasing the average fares

2) A likely flattening of the fares somewhat to attract more mid budget people. There will always be the full fare purchasers, but I would expect that if right now the discounted fares range from ~$200-$800 on a given flight, that it might be more like ~$300 or $350 up to $800, but with the vast majority of the seats towards the lower end. In other words, maximize filled seats, but don't hemorrhage money in the process.

I am also convinced United will not be alone in this effort.

Edit: But to directly address the question, not much. Furthermore, what they do lose is revenue that they probably really don't want in the first place.
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Old Jul 1, 13, 8:29 am
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I would suspect that much lost revenue will be made up by business travelers intentionally booking higher fare classes for more PQR (or delaying purchase, forcing higher fare classes by default). I know not everyone can get away with that, but a fair number of people have little oversight on the actual booking class as long as it fits within their corporate travel policy.
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Old Jul 1, 13, 8:33 am
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Originally Posted by dvs7310 View Post
I would suspect that much lost revenue will be made up by business travelers intentionally booking higher fare classes for more PQR (or delaying purchase, forcing higher fare classes by default). I know not everyone can get away with that, but a fair number of people have little oversight on the actual booking class as long as it fits within their corporate travel policy.
This. People who can (OPM'ers), will delay buying to pad 'their' spend, if they can get away with it.

I dont understand this exxageration of the MR phenomenon. How many people do MRs at any given day on the grand scheme of things, 100 a day maybe? Its such an insignificant number of people.

Really, outside of FT, people think you are insane to fly for no reason, I mean, really?
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Old Jul 1, 13, 8:37 am
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Originally Posted by TonyBurr View Post
Do You Think UA Will Lose a Lot of Revenue With Less MR?
no.

i got an MR once EWR-SAN for $201 RT. i seriously questioned whether UA actually incurred a cost larger than $201 in fuel burn for adding an extra 175 pounds of weight on a 5000 mile flight.
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Old Jul 1, 13, 8:38 am
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I think the airlines might start to study trends in inventory management as a result.
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Old Jul 1, 13, 8:40 am
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Not much if any will be lost. Most FTers will simply circumvent the Spend by charging $25k on the UACC they still will have to fly 75K. What they probably wont do is fly the extra 25k they did, so either others will be able to grab a sale fare or UA will end up selling for higher fares in the end then a G fare

and for all the doomsayers UAL is back up to just under $33 a share
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Old Jul 1, 13, 9:02 am
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Originally Posted by TonyBurr View Post
Since Jeff has instituted the revenue requirement for status I would imagine there will be a significant decrease in Mileage Runs. Although we can never know a Dollar amount what level of decreased revenue will occur - insignifcant, signficant, or a lot?
There may be a corresponding increase in PQD runs -- e.g., what's the shortest time I can fly to spend $468 in revenue because I'm that much short of a threshold.
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Old Jul 1, 13, 9:05 am
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Originally Posted by dvs7310 View Post
I would suspect that much lost revenue will be made up by business travelers intentionally booking higher fare classes for more PQR (or delaying purchase, forcing higher fare classes by default). I know not everyone can get away with that, but a fair number of people have little oversight on the actual booking class as long as it fits within their corporate travel policy.
I fall into this category, but I am likely to simply book on SQ/NH. I'm not going to reward UA for providing a worse premium product, often at a higher price, then trying to force me to buy it to maintain my status, even if it's with someone else's money. Then I'm likely to credit the miles to A3, so that UA can't get an extra $1 out of me for ancillary revenue even when I do travel with UA. And as I said in another thread, if I miss my CPUs to/from Hawaii, it will make the decision even easier, because the main reason I keep status on UA is for CPUs (which Jeff keeps increasingly trying to sell out from under me, while not even giving me an instrument to use to get them back like the old 500 mile upgrades).

To address the original question: no, I don't think fewer MRs will result in less revenue. Those MR revenues typically would be snatched up by anyone. However, I DO think UA will lose revenue from fewer elites booking at a premium to get upgrades and/or get PQM, and are replaced by Kayakers.
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Old Jul 1, 13, 9:11 am
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They will not lose a lot of revenue from reduced MRs because the amount of MR traffic is so tiny (and likely did not even factor into the conversation about the new rules).
Their biggest revenue risks are from frequent flyers (including business travelers) no longer paying a premium to fly on a UA flight due to reduced incentives, and switching instead to lowest cost/convenient flyer or another alliance (I predict this move will hasten shifts to the new US-AA in the DC market, for example, but that would make less sense in other places without strong alternatives).

Obviously, the consolidation in the airline industry has strengthened the logic of FF revenue requirements, as many will find themselves flying UA regardless. The goal is to extract a bit more surplus from those people.
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Old Jul 1, 13, 9:15 am
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Originally Posted by TonyBurr View Post
Do You Think UA Will Lose a Lot of Revenue With Less MR?
No. Ten different kettles will buy 1 ticket each instead of one mileage runner buying 10 tickets. So UA will not have to give the kettles elite benefits like they did the single person.

The mileage runner will still exist. They either have to do A LOT more runs to make the qualifying UA airline spend, or they have to charge $25K on a Chase credit card.


SunLover
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Old Jul 1, 13, 9:29 am
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Originally Posted by TonyBurr View Post
Since Jeff has instituted the revenue requirement for status I would imagine there will be a significant decrease in Mileage Runs. Although we can never know a Dollar amount what level of decreased revenue will occur - insignifcant, signficant, or a lot?
You mileage run to make another status level. Giving higher status to flyers has a cost associated with it. Presumably, any revenue lost due to reduced MR bookings is offset by expenses curtailed due to fewer elites.

UA didn't change the terms of the FF program to demand more spend on a whim.
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Old Jul 1, 13, 9:37 am
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I stop by this thread for the briefest of moments to point out that the only reason tickets are going to MR-ers is because it's the most economically efficient allocation of resources. Airlines have incredibly complicated and advanced revenue management systems and personnel. Except for true mistake fares, setting prices at a level that makes MR-ers bite is no accident. If you think that UA can simply "replace" the demand created by MR-ers with business travelers or kettles, you need to go back to Econ 101. They could potentially reduce capacity, though.

I have no idea whether there are MR fares that are so low that UA records a net loss due to fuel burn. It's an interesting question.
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Old Jul 1, 13, 9:57 am
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I don't have to fly at all so technically ALL of my revenue is from mileage runs for status. Needless to say, that will decrease as it will no longer be worth the spend to get to 1K for me.
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Old Jul 1, 13, 10:05 am
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Originally Posted by hockey7711 View Post
I don't have to fly at all so technically ALL of my revenue is from mileage runs for status. Needless to say, that will decrease as it will no longer be worth the spend to get to 1K for me.
Are you saying that you don't fly a single flight where you're actually going somewhere? Or are you just saying that you only do cheap leisure travel?

If the latter, mere leisure travel is not "technically" mileage running, despite what some business travelers here seem to think.
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