5khours

I actually think it has more to do with UA management catching up to the reality that they can't have their cake and eat it to.

I agree most MP members have no idea about the value of miles. But buyers of accelerators miles (other than people just topping up their accounts) are not typical and will have a much better idea. If I spend a few thousand bucks for miles for an award ticket, I have a pretty good idea what they're worth.

RNE

Everything after your word "if" can be ignored. The prevailing price of an Accelerator RDM will not drop below 2.1¢.

jz52057

Thank you all for your precious opinion. Really appreciated.

I booked a few one way tickets from US to Europe to Asia ticket going on last week and wanted to boo return tickets. I need 7K more miles to book the award ticket. I will go ahead to purchase the miles.

KenInEscazu

This is a perfect example of why I don't think they are going to lower the price. Topping off your account to complete a specific trip is an excellent value.

There are enough cases where the real value justifies the price that UA really has no incentive to lower it. Plenty of people can use those miles to their financial advantage to keep some sales ongoing. It isn't their intent to load up the market with more outstanding miles on the books.

They didn't devalue the program to lower the price. They did it to make their outstanding liabilities decrease. Lowering the price of new miles purchased would have a negative impact on the intended result of the devaluation.

Kacee

This is one possibility.

It's also possible that the reason for the devaluation was as stated by UA, namely to reduce costs incurred in paying for partner awards. This seems to me the more likely explanation, in fact, given the market's focus on earnings rather than balance sheet.

Of course, since none of us have access either to UA's internal financials nor its strategic plans, we are all speculating as to what will happen with miles pricing.

I do believe though that the recent drop from 2.3 cpm to 2.1 cpm was not coincidental, and that we will see further price cuts as the effects of the devaluation are slowly acknowledged in the market. To me, this is basic microeconomics. If you overcharge for a product in a competitive market, demand will eventually drop, and the net effect will not be revenue neutral.

KenInEscazu

I think we are really saying the same thing in two different ways. Reducing the costs of paying for partner awards simultaneously reduces the liability on the balance sheet. They no longer have that ongoing threat hanging over their heads, and apparently there were a lot of people taking advantage of it, judging from all the outrage.

I don't fault them for their focus on earnings, but they seem to be going about it in very peculiar and ineffective ways. Cuts are the only real noticeable method, and today's customer is simply too demanding for that to grow legs. That, of course, is an entirely different discussion.

As for the "drop" you cite from $0.023 to $0.021, that is really interesting. We regularly see different offers being proposed to different people here, and this is another fine example. I have been seeing $0.021 for years on international flights. This usually includes even my award bookings on CM or AV within Latin America which are always under 1000 miles.

If you have been receiving $0.023 offers, but now see $0.021, perhaps they are expanding the group of customers to whom they are offering the lower rates. That would be a price decrease of sorts, without lowering the bottom rate. You're certainly right in stating that we are simply speculating, but we are a pretty astute group.

On a side note, back before they changed the award offers to a greater number of miles than the scheduled flight, I would often buy the accelerators on my flights inside Latin America. I liked being able to spend very few dollars to get credit for the actual miles I was flying. While the additional mileage offers are probably a good thing for those in need overall, I have no interest in buying 6000 miles for a 1400 mile trip, where I may have still had an interest in buying the 1400 miles.

Perhaps I could still do it 1 out of every 4 if the price was right, but it's still a psychological barrier that prevents me from clicking through. I guess they want to keep it simple, but adding one more option for actual miles would certainly create more revenue for them from this passenger from time to time.

WineCountryUA

But that is this the crtitical point. Is this or is this not overcharging. We all have our opinions/guesses but only UA has the data. Then the second issue is (if the supposition of overcharging is true) then how long will it take for UA to acknowledge the situation.

One person's overcharging is another's correcting past underpricing.

5khours

That's a convincing argument.


It's not about the liability. Nobody cares about the liability. There is no carrying cost. Any carrier can make the liability go away over night in a pinch my changing he terms of the program. What UA is interested in is maximizing profit, which is volume times spread. If it was optimized before and nothing else changes, then either lower or raising the price of miles will cause profits to drop. It has nothing to do with whether it's still a good deal for some people to top up. It's now a less good deal to top up. Assuming they had it right before, the impact on profitability of the volume drop will be greater than the increase on spread.



No. UA does not charge different rates to different people. They vary the number of miles offered depending on the person buying but not the rate. The rate only varies depending on the type of flight.

Management incompetence is at least a logical argument as is your earlier argument that other things may have changed. As for management (in)competence Jeff is a numbers guy and the quant jocks will give him a very specific answer on this, which I don't think he'll ignore. As for other things changing you may be right, I just don't see what else may have changed.



As Kacee pointed it out, UA management is relying on imperfect information to make this strategy work. The bulk of the mileage activity comes from average passengers who don't realize that UA has effectively raised ticket prices by lowering the value of the discount (miles earned) on the ticket. So at least over the short/medium term UA is almost certain to make more money on this strategy because it will take time for the behaviour (of the bulk of the customers affected) to change. That said, there is nothing to preclude UA from separately readjusting accelerator prices (for whose customers information is less imperfect) to further optimize the profitability deriving from the deval. So unless management is incompetent, then ceteris paribus (that's for you Wine Country) accelerator prices will drop.

RNE

I don't argue. I answer.

False.

5khours

It's not an answer, just a totally unsubstantiated assertion.


Sorry you're absolutely wrong. UA does not do this and it would be illegal in many or most of the markets where UA does business.

Take any booking you like and get anybody else to make the same booking at the same time. They'll get the same rate.

WineCountryUA

You and I have had that discussion before in this thread. At that time provided 3 equivalent examples priced differently. My wife and I on same flights have gotten different offers.

You can offer different promotions to different folks --- as they do with the X% off Personal Miles offers.

UA absolutely price PQMs separately. RDMs do seem to be more consistent but there has seemed to be some small variation.

5khours

No question that PQMs are separate. I was referring specifically to RDM.

controller1

When the miles were devalued, the liability on the balance sheet is lessened. When that liability is decreased, where do you believe the other balancing entry is made? It's on the income statement and the result is increased profit.

WineCountryUA

So you are agreeing on individual pricing differences for purchasing PQMs but not RDMs??

Where does this stand?
Or the fact that UA regularly offers purchasing Personal Miles with 20%, 30%, 40%, .... discounts to different groups?

RNE

No. It's a totally unsubstantiated answer. And it's correct.