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Wow - selling the upgrades at the gate so explicitly.

Wow - selling the upgrades at the gate so explicitly.

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Old Apr 1, 18, 4:05 pm
  #376  
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Originally Posted by PDXalways View Post
Not necessarily. The earning algorithm could be as generous or as restrictive as UA desires. In a most beneficial model to the airline, Premiers might only one upgrade dollar for every $100 spent on airfare. A 1K member who spent exactly $12,000 in a year would only earn $120 in upgrade credits each year. That would barely pay for a one-time upgrade from DEN to the West Coast. On the flip side, if the upgrade dollar earning accrual was one dollar for every $5 spent, the same 1K member would have $2,400 in upgrade credits to apply - a much more generous model for the customer. Both of these examples are extreme and not based in reality, but I use them to illustrate how there could be a sweet spot for UA that allows for cash upgrades to still be sold at the desired volume & yield... along with accompanying opportunities for Premier members to guarantee occasional upgrades by applying their banked upgrade dollar credits at their discretion.

Under this model, domestic CPUs would completely disappear. Everyone pays for an upgrade - either with cash or with the stored value of their banked upgrade dollars. The airline can be as generous or as stingy as they want in how they determine who earns upgrade dollars and at what accrual rate. It has the benefit of potentially being more revenue-positive (transactionally) for UA if they're tight with it - and it offers Premiers the system transparency needed to allow them to self-manage when & how they upgrade domestically.
This generates no new revenue and displace / reduce the present cash upgrade systems. {Although you might try to say it will generate revenue by increasing "loyalty" -- but that is old style thinking and not the direction the airlines are going)

This "system" is just a revised version of e500s, of award miles, of upgrade certs, ... these are the approaches airlines are leaving in the past, see no hope of them creating new versions. At least not until the economy turns and airlines have a need to fill empty seats. For now the airlines are interested in more hard cash revenue and see no particular need to enhance their benefit programs. But one day they may.
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Old Apr 1, 18, 4:48 pm
  #377  
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Originally Posted by WineCountryUA View Post
This generates no new revenue and displace / reduce the present cash upgrade systems. {Although you might try to say it will generate revenue by increasing "loyalty" -- but that is old style thinking and not the direction the airlines are going)

This "system" is just a revised version of e500s, of award miles, of upgrade certs, ... these are the approaches airlines are leaving in the past, see no hope of them creating new versions. At least not until the economy turns and airlines have a need to fill empty seats. For now the airlines are interested in more hard cash revenue and see no particular need to enhance their benefit programs. But one day they may.
and when they ‘need’ to fill empty seats, they’ll use another relatively new model: capacity reduction. Not that this model is really new, but it is relatively new approach instead of keeping/increasing capacity to gain market share from rivals, as has been the tendency in the past. They’ll give aircraft more downtime instead of insisting on tight turns. Markets that now see 737-900s constantly will get more 737-700s, or A320/319, and the markets that typically used those will get more E70/75. And what kind of distribution of seats are there can change, too. If the market gets bad for premium cabin. The 739s, for example, have 20 F seats, but there’s no reason why, if demand warrants, it can’t take a row out and go to 16.

The days of excess capacity giving way to lower fares are over - and while there are still some ‘free’ upgrades happening now, those have been declining, and will continue to. I don’t blame the airlines, and I don’t get upset because I don’t clear much anymore - this has always been a benefit which I appreciate when it happens, but don’t get upset about whe. I don’t. The fact is that I need United to survive so I can fly where I need to go, and I understand that giving away all the premium seats away for the price of economy, much less deep discount economy, is not a sustainable way to do it.

The fact is hese seats are going more more and more to the people who are willing to pay for it, which really is how it should be. The distorted beenfits of the FF programs have fogged a lot of people’s vision on this, and gives them the impression of expecting upgrades. IMO, it would be better for carriers to go to a model where folks are expected to pay a premium fare, or a buy up at minimum - if they want to sit in a premium seat, unlesss in case of operational necessity.
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Old Dec 8, 18, 3:30 pm
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Hmmm....so it seems my GPUs aren't worth very much anymore? I'm #1 on the UG list for IAH-MUC, right now, but the last few biz seats just vanished, so here I am, at least in an exit row aisle.....
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Old Dec 8, 18, 4:19 pm
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Originally Posted by tkc98110 View Post
Hmmm....so it seems my GPUs aren't worth very much anymore? I'm #1 on the UG list for IAH-MUC, right now, but the last few biz seats just vanished, so here I am, at least in an exit row aisle.....
There are always some passengers that will be tempted by the TOD, especially those that do not have GPUs.

And even some that applied a GPU will be tempted by the TOD to insure that other passengers don't buy the upgrade under them.

I learned my lesson and all my last flights to MUC were on week days. Tuesdays-Wednesdays are usually good. Weekends not so good.
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Old Dec 11, 18, 6:07 am
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Reading back through the thread, I can't tell if an instrument (GPU, RPU) has any weight (value) in the decision process of who gets upgrades, or does it always go to someone who is willing to charge it to their CC right then and there?

And it seems to me that in the past year any upgrades via instruments are getting to be a rare bird.

Dang it.
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Old Dec 11, 18, 7:01 am
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Originally Posted by tkc98110 View Post
Reading back through the thread, I can't tell if an instrument (GPU, RPU) has any weight (value) in the decision process of who gets upgrades, or does it always go to someone who is willing to charge it to their CC right then and there?
In most cases, UA will sell upgrades until check-in closes. They may process instrument upgrades at any time from ticketing until boarding. So, absolutely having an instrument applied has weight. That said, if they think they can sell every seat, they may not process upgrades in advance, and they will often sell the last remaining J/F seat even if someone has an instrument applied.

That said, there are two things to keep in mind. 1 - it's not uncommon for there to be more instruments applied on a flight than there are seats in the front cabin (hub/hub or premium transcontinental routes), and 2 - for domestic / Canada flights, the price they're charging for the upgrade is usually the same as the difference between economy and first would have been when purchased originally.

"Selling upgrades" is often blamed for low instrument clearance, but the truth is that the biggest factor is that the airlines have figured out how to price first class attractively.
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Old Dec 11, 18, 7:34 am
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Originally Posted by jsloan View Post
"Selling upgrades" is often blamed for low instrument clearance, but the truth is that the biggest factor is that the airlines have figured out how to price first class attractively.
And this is the summary in a nutshell. AA created the first mileage program in 1981, primarily in response to deregulation in 1978. Fares were essentially the same no matter who you flew (anyone recall APEX fares?), and airlines were seen as all the same. I can recall intentionally flying different airlines out and back, just for the heck of it as it made no difference in the fare. More importantly, midday load factors were 60 or 70%, leaving lots of open seats. Mileage programs were a free way to lock in passengers without adding costs.

Fast forward to 2018. The airlines have figured out how to segment the market such that they can fill every seat at the maximum revenue. Load factors are well over 90% and good luck trying to find less than 100% on midday flights. Loyalty programs are meaningless as they aren't interested in what you spent yesterday. The only thing that counts is revenue today. If they can generate $1 of hard cash at the gate, they will. Fortress hubs and choice limited to 3 or 4 airlines at best make it hard to switch carriers, and for every passenger that switches, they are likely to get one moving in from another airline.

It's another War Games situation - the only way to win is not to play the game.
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Old Dec 11, 18, 12:36 pm
  #383  
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In the 1980s and into the 1990s with load factors well under where they are today the marginal cost to the airline of giving a good customer an upgrade was close to $0.
Today the load factors alone make upgrades much more costly to the airline and marketing also has made first much more profitable.
The perks (E+, bags, lounge access etc.) we do get today are easily more valuable in a high load-factor world than those upgrades ever were. It just doesn't seem like it.
I am not sure I follow how one can come to believe that airlines view loyalty as meaningless when they all have Million-miler programs that provide meaningful benefits for life.
The way I see it they are grateful for past patronage and hope that the past is an indicator to future patronage. It is just that what they see as an enticing emolument in this high density business is not what some of us have thought we deserved.
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Old Dec 11, 18, 1:15 pm
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Originally Posted by 8MiHi View Post
I am not sure I follow how one can come to believe that airlines view loyalty as meaningless when they all have Million-miler programs that provide meaningful benefits for life.
The way I see it they are grateful for past patronage and hope that the past is an indicator to future patronage. It is just that what they see as an enticing emolument in this high density business is not what some of us have thought we deserved.
With respect, I would argue your conclusion is flawed. I've worked in the industry for over 30 years, so I have a somewhat informed perspective on how airline marketing works. You are of course welcome to disagree.

Starting from the airline perspective: Mileage programs exist *today* for one reason only: to generate revenue - not loyalty. Wall Street are focused on ticket revenue, ancillary revenue and cost. Mileage program details do not affect the stock price. The primary source of mileage revenue are credit cards. Airlines sell miles to credit card companies, credit card companies offer miles as an inducement to use their card, for which they get paid by the merchant, and also the not so insignificant annual fee. The only way to maintain that revenue is to create a perception that those miles have value. So they come up with ways to create the illusion of value.

Right now, the primary way that illusion is created is by boarding order. It costs the airline nothing to structure the boarding order any way they like, but it means a lot to some travelers. As I mentioned previously, the airlines have gotten very good at filling empty seats with revenue passengers, so the days of getting a mileage upgrade are rapidly disappearing. They can't go away completely (see need to maintaining that perception of value above), but just like casinos and lotteries tweak the odds of a payout (more smaller payouts or a few bigger ones?), they airlines will continue to devalue awards that have a real cost impact. Million mile status may make some people feel good, but if you can't really use upgrades (because there are no empty seats or upgrades were sold at the gate) and the only actual benefit is boarding first, what's the point?

My view is that I won't surrender my vote on how well an airline is doing by letting their mileage program sway me to by tickets from them automatically. I'll buy the ticket that best meets my need for this flight, be it schedule, fare, equipment, seat space, or whatever. Next week I'll make the airline compete all over again.
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Old Dec 11, 18, 2:10 pm
  #385  
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Passengers were simply spoiled by a significant error made by the US carriers during the financial crisis. When business travel dropped, the economy crashed, and leisure travel then dropped as well, the legacies dropped prices and handed out free UG's rather than cutting capacity.

Anybody can fill a plane. It is just a question of cutting prices. But, if one does that enough, one goes under.

So, now the lesson is to keep track of PRASM and cut capacity when profitable demand drops.

That disappoints people who had become used to routine freebie upgrades and redemption tickets pretty much anytime they wanted them. That was not the scheme when AA first started its program. It used excess inventory for redemptions and people understood that and were quite happy with the occasional ticket.
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Old Dec 11, 18, 2:42 pm
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Originally Posted by Often1 View Post
Passengers were simply spoiled by a significant error made by the US carriers during the financial crisis. When business travel dropped, the economy crashed, and leisure travel then dropped as well, the legacies dropped prices and handed out free UG's rather than cutting capacity.
Nonsense. This goes back to the invention of differential pricing. When the cheapest F bucket cost about the same as an M class fare, hardly anybody purchased F, and there was plenty of excess capacity to go around. Dropping the F prices wouldn't have solved anything, because if you'd made them lower than Y, you'd just invert the demand curve and end up costing yourself money. So, they kept F pricing high and then let elites upgrade. Upgrades were plentiful on pmCO during the '99 - '04 timeframe when I flew them.

Now, with differential pricing, they can drop the F prices but still keep them higher than Y, and it's incremental revenue.

Originally Posted by Often1 View Post
That disappoints people who had become used to routine freebie upgrades and redemption tickets pretty much anytime they wanted them. That was not the scheme when AA first started its program. It used excess inventory for redemptions and people understood that and were quite happy with the occasional ticket.
Well, AA hadn't sold millions of miles to Citibank yet, so it was a different story -- but in an era of 60% load factors, there was excess capacity on nearly every flight.

Mix the two effects -- better pricing and capacity reductions / load factor increases from demand outpacing supply (and consolidation) -- and you get the current situation.
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Old Dec 11, 18, 7:53 pm
  #387  
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Originally Posted by glbltvlr View Post
With respect, I would argue your conclusion is flawed. I've worked in the industry for over 30 years, so I have a somewhat informed perspective on how airline marketing works. You are of course welcome to disagree.

Starting from the airline perspective: Mileage programs exist *today* for one reason only: to generate revenue - not loyalty. Wall Street are focused on ticket revenue, ancillary revenue and cost. Mileage program details do not affect the stock price. The primary source of mileage revenue are credit cards. Airlines sell miles to credit card companies, credit card companies offer miles as an inducement to use their card, for which they get paid by the merchant, and also the not so insignificant annual fee. The only way to maintain that revenue is to create a perception that those miles have value. So they come up with ways to create the illusion of value.

Right now, the primary way that illusion is created is by boarding order. It costs the airline nothing to structure the boarding order any way they like, but it means a lot to some travelers. As I mentioned previously, the airlines have gotten very good at filling empty seats with revenue passengers, so the days of getting a mileage upgrade are rapidly disappearing. They can't go away completely (see need to maintaining that perception of value above), but just like casinos and lotteries tweak the odds of a payout (more smaller payouts or a few bigger ones?), they airlines will continue to devalue awards that have a real cost impact. Million mile status may make some people feel good, but if you can't really use upgrades (because there are no empty seats or upgrades were sold at the gate) and the only actual benefit is boarding first, what's the point?

My view is that I won't surrender my vote on how well an airline is doing by letting their mileage program sway me to by tickets from them automatically. I'll buy the ticket that best meets my need for this flight, be it schedule, fare, equipment, seat space, or whatever. Next week I'll make the airline compete all over again.
I think we are arguing two sides of the same coin. Loyalty programs that lose money would be binned faster than a silver would accept an upgrade. Given that many flights are close to 100% sold out and that F is priced to sell, upgrades are often not available. The perks a Gold gets today probably have a higher revenue cost to the airline than an upgrade on a long flight back when those happened even to mid-tier FFs.
My primary argument is that I perceive the overall dollar cost to United of the benefits I get as a mid-tier elite is higher than it was 15 years ago. Unbundling the airfare changed everything.
I most definitely agree with your last point: you should always fly on the ticket that best meets your needs. Flying out of EWR makes that best ticket likely to be issued by United. That I have lifetime perks with them helps.
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