McFlyPHL

Here we go again... Even if we take your example at the extremes, a 500 mile segment and a $100 fare, that's still 20 cents per mile flown. In a plane with no cabin to upgrade into. Further, if one is only flying the minimum 500 mile segments it'd take an awful long time to rack up the miles required for that mythical F/J partner award.

... but we know that short haul tends to be even higher yielding. Long story short, the numbers just don't support your theories.

...and yet you seem to view using revenue - something that can be directly tied to margin - as superior to something such as segments or miles, which simply reflect where someone went vs. how much of their money is collected. You've not cited a single, concrete example of how someone who spends a lot of money isn't someone you'd want to reward... and even when you've tried to do so, you bring up an example that would have qualified for the benefits that you seem to think cost to much REGARDLESS of their total spend.

The reason I mention the incremental cost point is that that's how most airlines account for miles as a liability. The formula is then tweaked based on actual redemption patterns for partners.

Your theory also assumes that partner awards are an out-flow only situation. They're not. The entire argument you're making appears predicated on the notion that customers are some how taking out more than they're putting in. That's false in many cases, especially with the higher spend population.

BoeingBoy

Believe what you want. I'll just note that you've cited no factual data supporting your claims. I'll also note that I used the CRJ-200 for a reason - the cost per seat mile is north of 22 cents as it's the most expensive plane in the fleet on a seat mile basis (any ERJ-145's that come with the merger would give it a run for it's money).

Jim

McFlyPHL

I've given you math... and you've come back with pretty much nothing but anecdotes suggesting that customers are somehow taking out more than they put in. That's false, especially for high spend customers.

When we look at the aggregate costs of the system, a 20 cent yield would be far above system average. That's a fact from 10K's and 10Q's. Those same documents would tell you that on average that's also a quite profitable passenger. And that's just taking the bottom end of your range. If we take the more favorable end of the range - the $150 segment that was 400 miles long - that's 37.5 cents per mile and MORE than enough to cover even the 22 cent cost you mention.

Surely you're not trying to imply that a yield of 20 - 37.5 cents isn't profitable...

ty97

AA flies LAX-NRT.

Their partner JL flies LAX-NRT and SFO-HND, with AA codeshare numbers on both flights

BoeingBoy

Nope, I've just given an example of what could happen with the numbers you provided.

When we look at the aggregate costs of the system, a 20 cent yield would be far above system average.[/quote]

True for the system average, not for every flight every day. The average yield is derived from the longest flights and the shortest. The average doesn't tell you that every passenger spending $10,000 is profitable. The specifics of a person's flying do, but you disagreed with that too.

Using system averages doesn't prove anything other than US had a profitable quarter. It definitely doesn't say anything about whether a given passenger flying given flights is profitable over the course of a year.

The 22 cents per seat mile is the average Express cost, not every flight or every aircraft type. Since US doesn't break out seat mile cost by flight/airplane type, the CRJ-200 is somewhere above 22 cents. As I said, I picked it because it's the highest cost/seat mile plane in the current US fleet. Now that's the cost to haul around the full 50 seats. With a 50% load factor it would take double that to break even. So even your 37.5 cents revenue per mile is not necessarily profitable. That's part of the reason that having a system that calculates the actual cost of carrying a passenger on any flight(s) is very complicated.

All I've said is that $10,000 - 15,000 per year spend isn't necessarily profitable. I gave you an example of a $10,000 per year spend FFer that was marginally profitable at best. So I consider my point proven.

Profitability is a function of two things - cost to provide the service and revenue from the passenger (summed with the revenue from the other passengers on a flight for the flight to be profitable). Unfortunately for US, the cost of providing the service varies relatively little compared to the various fares passengers can pay. According to this very site, FFs run the gamut from those required to buy the cheapest fare by their employer to those able and willing to pay "full boat" as you put it. Trying to use averages to prove a point about such a diverse group is impossible.

I also stand by one of my initial statements - annual spend is a poor way to guess at the profitability of a given passenger, at least till you get higher than your range of $10K - 15K. That's because spend can be high per mile on short haul flights, as you yourself said. And even at a system average 85% load factor (mainline, 80% for Express this month to date) every flight isn't full and load factor has to be taken into account. Then there's the various things that increase the cost of providing transportation - diverting around weather, longer than average taxi times, diversions, fuel stops, and on and on. Which is why the same flight 2 days in a row may and likely do have different costs. But the fares don't change, although a passenger may get one fare one day and another fare the next.

But like I said in my last post - believe whatever you want. It seems you will anyway since you keep trying to "prove" the unprovable, at least with publicly available data.

Jim

fly747first

Yep

Fanjet

The combined carrier at DCA will have a few more daily flights than what US has right now. AA has a few more than 44 flights (the number to be dropped) at DCA right now. So the middle concourse at DCA will definitely still be needed. And if the new AA doesn't want to take a capacity hit there, they will probably upguage some express flights from ERJs/CR2s to CR7s/175s (which can use the main terminal concourses and ease up the mess at 35A). I'm hoping the US Club and Admiral's Club in the middle concourse become one giant club. And hopefully with showers like a lot of the others ACs. BTW, do they have to relinquish any gates at DCA? I didn't see that.

BoeingBoy

I believe so but not positive. And it makes some sense - slots are useless without gates to park at.

Jim

bkafrick

Even WestJet has pretty limited routes...

Yuck, so no PQM's on Westjet for AA?

I'm def not flying LX from the States to Canada, dude.

ROTFL.... this was great.

McFlyPHL

I've now referred you back to my original statement multiple times. I'll do so again. What I said was that ultimately, anyone wants to incentivize profitability and as such using total spend as a qualifier vs. just a disqualifier makes sense. It ABSOLUTELY does. To deny that is to argue with math.

If someone is going to qualify anyway with 100k PQM or 120 PQS and you add a minimum spend to get there of say $10-15k - it's in the interest of profitability to get that 10-15k on as few miles/segments as possible.


Really? Are you seriously contenting that system average costs don't tell you what the breakeven point is on an average passenger?


So now you want to determine the profitability of a specific passenger based on the airlines ability to sell seats to other passengers? Again... really? To try to drill down individual profitability based on whether someone takes, say, the fully loaded 4pm flight or the half full 5:30pm flight on the same route doesn't make any business sense at all - it adds zero value over the overall average.

Yes... because we would never want to reward marginal profitability. Even by your own estimations, that passenger is profitable. And that's with the extreme example of a fairly long CRJ stage length and a fairly low CRJ fare. Someone dropping that kind of spend would have to find 120 of those flights to qualify as a CP - more than 2 per week - and then would have to fly them all on routes so lightly loaded that a yield of between 20 and 37.5 cents wouldn't be profitable - even if we accepted all of your (unrealistic) assumptions.

Your assertion on using averages to approximate system performance for profitability is wholly incorrect. As is your characterization of "lowest fare" folks as the ones who are taking advantage of the system. Just because someone has to book the lowest fare doesn't mean that fare is a bottom feeder. It often means that they paid the fare that stunk the least. (remember the good old days when you guys were gouging folks for $900 r/t PHL-BOS? with a 7 day advance?)



Much like in a casino where the house "wins" most of the time but occasionally has a huge payout, there are a wide range of possible outcomes ranging from on time to severe delay followed by a diversion. That's why the use of a system average is helpful - most of the time things go as planned, but there are few outliers such as light loads, diversions, delays, fare variations, etc. What you're suggesting is required would be the same as a casino trying to recalculate the odds and payouts for every single play. Not only isn't it feasible, it adds no real value.


Again, the assumptions you make are easily disproven with basic math - and even then many of them don't support your point that spend isn't a measure of profitability. Even taken to extremes, you have to resort to "but what if this one flight that someone happens to be on is really lightly loaded" to support a conclusion that's flat out incorrect.

dtremit

I think you're missing the larger point here. No one is arguing that annual spend is the best metric of profitability -- simply that it is a better metric than those tried previously. Would you argue that miles or segments flown is a better metric than spend?

The point of a frequent flyer program is to encourage customers to modify their behavior to increase profits. If they can't predict the outcome of the program, they're not going to modify their behavior.

BoeingBoy

True, but as I said in my first post on the subject, average spend per trip/itinerary/flight/segment is a better metric by far and not that hard for carriers to keep track of. To many variables make up total spend annually - it's really not much better than just segments/miles.

Jim

lizs

This is quite the debate.

No actual information still? I'd assume they have to get info to us before merger is official, right? Especially with January 7th date of reciprocal FF benefits?

BoeingBoy

I suspect that the 1/7/14 date is when you can earn/redeem on either airline - US DM members can earn DMs/redeem DMs on AA and vice versa ala the CO/UA merger.

Jim

ty97

To the contrary, I am not sure they can really "officially" announce anything until the merger is official. I would not expect any official announcements about changes at least until Judge Lane (the bankruptcy court judge) okays things, which presumably will happen in the hearing on the 11/25. However, it is probably more realistic that all/most official announcements will not be made until after the merger closes, which is expected in December.

As a (mainly) AA flier, the exact merge date and the US/*AA/UA codeshare divorce is of no import to me, but I do hope the PTB are working things out so that trips you all have booked cross-airline per-merger close still earn you miles. Unfortunately, it may be a couple of weeks still before we have clarity on that point.