He wants suggests it really doesn’t matter. He makes three points:
- “[T]ravelers that are buying last minute high (or highish) fares should rejoice at these changes” He says he will be better off next year with Delta’s new revenue-based earning.
- Revenue-based earning doesn’t change credit card rewards, and other opportunities.
- Southwest carries the most domestic passengers, because they don’t suck, even though their frequent flyer program has revenue-based earning and redemption.
I’m glad MJ is happy, and thinks his frequent flyer future is so bright he’s gotta wear shades.
I also think there are several arguments here that don’t take him as far as he wants them to go. Most importantly, downplaying the significance of the changes misses the opportunity to help flyers make the most of their situation.
Most People Won’t Break Even
- The idea that business travelers are better off. It’s a misnomer to talk about ‘business travelers’ and ‘leisure travelers’. Business travelers are also leisure travelers.
- You can look at full fare tickets and think you’re going to come out ahead, but you have to look at your average fare per mile (and remember to back out taxes!). The break even is set at 20 cents a mile with both Delta and United.
- If you buy some last minute full fare tickets, but pay a mix of fares, there is a very strong chance that your AVERAGE fare is less than 20 cents a mile.
- And indeed overall the average fare is much lower than break-even for mileage. Take United ~ 12 cent RASM, adjust for load factor, and the average United fare is ~ 15 cents a mile. It would have to be a full one-third higher just to break even.
That means most people will earn fewer miles.
It Isn’t Just the Earn
- United devalued its award chart, too. So even if you break even or come out a little ahead based on the fares you’re paying, you still lose — because those incrementally more miles are worth less than they were at the start of the year.
- Delta devalued twice too and has a new redemption chart coming. We don’t know what the availability distribution will be across five tiers of availability at Delta, so we have no idea what Delta’s miles will be worth next year.
- And we increasingly know that Delta members do not have access to the same partner award availability that other Skyteam members have. Just compare what Alaska members can book on Air France to what Delta members can. Delta won’t pay the going rate for seats. For all intents and purposes, even though Delta blames partners for not giving them seats (at a lower price than other partner airlines pay), they’ve brought back the equivalent of Starnet blocking.
Credit cards are still good
- Agreed, it’s true. But it’s cold comfort for folks used to flying 100,000 miles butt in seat a year, where their employer is buying them discounted tickets. It doesn’t help them when their company has a great deal, or the deal is so great that it’s a bulk fare and United’s system can’t register the fare at all (because it’s “bulk”).
- Airlines value their third party mileage sales more than miles as a reward for flying.
- Planes are full. They think they don’t need as much marketing spend to put butts in seats. That’s probably true for Delta, probably not true for United. Delta could be fine under this model, United is less likely to be.
This does show that non-flight activity is more important than flight activity, that these are marketing programs not flying programs, and that airlines don’t think they need to spend on the flying part in the current climate.
But when planes aren’t as full, they’ll need to leverage their mileage programs to put people in seats. They may not re-up the structure of the program again but we’ll certainly see bonus points-earning (“100% bonus on all points earned based on fare”). Just as we’ll see bonus qualfying dollars if elite ranks fall in a recession.
Southwest is the Bee’s Knees
- Southwest’s marketing engine isn’t its frequent flyer program, MJ essentially makes that point and he’s right.
- They’ve historically not wanted to spend on traditional distribution outlets for their tickets, they certainly haven’t wanted to invest in the kind of frequent flyer program that the majors have.
- They did become about the biggest liquor distributor in the State of Texas in 1977 though as they gave away alcohol to reward high fares.
- Southwest’s frequent flyer program also doesn’t have the market value that the spun off programs have, or that the United, Delta, and American have.
You can spend you marketing dollars in lots of ways to fill planes. By not spending them on their frequent flyer program except as a rebate for more Southwest travel (valued more highly for seats that are going to go empty anyway), they’ve done all they needed to do on the airline marketing side but haven’t built a valuable loyalty company.
That’s fine, jetBlue didn’t even really want a program but ultimately found they needed something and ‘something’ is what they gave us.
The Way Forward
People shouldn’t assume that a revenue model has only one look just become United lacks creativity and follows Delta exactly.
Remember, their business — and need for marketing — is different than Delta, it’s not obvious that they should be setting earn rates the same.
Delta makes the dubious claim that they’ll award as many points under the new scheme as they do only. But if that’s remotely close to true then United certainly won’t award the same number of miles from flying since their revenue per passenger seat mile is lower.
And since there doesn’t have to be just one model, whatever we see out of American — and not any time ‘soon’ given the US Airways integration — could well be quite different.
But The Upshot Here Is..
Regardless the best advice certainly isn’t “shut up and take it.” The best advice is to understand what kind of flyer you are, how you’ll do in the changes to your airline’s program, and whether or not another program will reward you better — like American, or like a frequent flyer program based outside the U.S.