I had around 500k unused miles in my account because the last thing I wanted on vacation after flying back and forth each week to different places was to go fly somewhere.
My vacations were usually cross country road trips. My wife and I would rent a nice car, pile the trunk with luggage and just hit the road stopping whenever we wanted. It was the perfect vacation from an overly structured life.
Within a few months of me no longer consulting on the road like that, I was alerted that United was buying Continental, and I'm sure in that press release I didn't read, it probably said something about all my miles, but I didn't pay attention to it until about a year later when United told me my miles were expiring.
So I logged to trade those miles in for a couple tickets to somewhere far far away, and saw my 500k miles from Continental had be devalued to 50k miles at United. Worth at the time 2 domestic round trips if I paid $150 per ticket to redeem them before they expired.
So my miles that used to get me into lounges, and first class upgrades, and basically free flights to almost anywhere in the world got me about a 20% discount on 2 round trip tickets to Denver...
That was the last time I flew United unless it was the cheapest "real" option (I refuse Spirit and Allegiant).
Worse, they're claims the airline reserves the right to unilaterally devalue. They're deposits in a Venezuelan bank.
As such, the best strategy is eagerly consuming miles. This is admittedly not always easy to do, particularly mileage flights can't be paired with upgrade certificates and do not count towards status. In my experience, frequent fliers with lots of miles and who care about maintaining status are best served by buying others flights with miles.
Are you sure? Debt that gets diluted to nothing like those airmiles or deposits in a Venezuelan bank would be best kind of debt.
The U.S. should invest in sending youth abroad (not excluding domestically). The U.S. should also invest in sending entrepreneurs abroad. Thanks for coming to my two-cent talk.
Flying in my lifetime has moved from being something 'fun and exclusive' to 'taking the bus with strip searches'.
After 911 none of the airlines really pushed back on the Orwellian security theater its customers were forced thru...I understand it, perhaps it just wasn't worth the effort, perhaps enough of their customers wanted more searches.
Around 8 years ago, I moved to trying to do online meetings when possible and agreeing to drive for anything less than 8 hours or so. Its been a welcome upgrade in life. As much of a pain as driving 6 hours for meeting is, you strangely feel less stressed out than dealing with the insanity of airports and cattle-cars.
The bonuses were self propagating, I would get a bonus miles because I was upgraded for free to first class because I had so many miles.
That is probably why they were devalued so hard when United bought them.
“ Flying in my lifetime has moved from being something 'fun and exclusive' to 'taking the bus with strip searches'.”
I’m the same way now too. I will drive up to 8 hours to avoid flying and typically just don’t make the longer flights unless absolutely necessary.
In recent years I’ve been lucky enough to largely fly private and it feels like it must have felt pre 9/11, at least on the security and not having to arrive hours early fronts.
Back in the 90s, you still had to go through security checkpoints, you just didn't need to take anything off, open anything up, or be touched/prodded/scanned except for maybe a metal detector.
You still had to show up early, because they still checked people in manually and thus you traded long security lines for long check-in lines. They also were much worse about losing luggage back then, and if it was lost, if was gone for good usually.
Private is another ballgame entirely. If you can afford it (or someone else is paying), and you don't mind the inflated carbon footprint, there's really no reason not to choose it.
If it’s too far to drive I have to fly first class. The security is still a pain in the ass but at least you don’t have to be stuffed in coach like cattle, people lining up to use the bathroom while farting 2 inches from your face. If that ticket is too expensive then wherever I’m going is not worth the trouble.
This was my opinion long before covid and needless to say I haven’t warmed up to flying in the last 6 months.
Isn't that what most people pick anyways?
This may have changed, but they also didn't do precheck a few years ago.
Oh, and expect to hear about their credit card offer during the flight. You can get a spirit points voucher for applying today, and can leave the application with your flight attendant as you leave the plane.
That being said, they do get you from point A to B relatively cheaply, as long as you're willing to live with the constraints of a low cost carrier.
I have never flown Spirit, and I will continue to avoid it in the future because the low fares aren't enough to justify potentially getting stranded and having to book last minute at extreme cost on a competing airline. If your plans are flexible and you just want to travel for the lowest amount possible, it's probably a good option to consider.
I've heard compare to ryan air in europe
I have only flown them once (well twice, round trip to Vegas for a show and back). It cost $400 to go from Houston to Las Vegas round trip, which was only 30% cheaper than the next option... which i should have paid for.
I got on the plane about 10 minutes after take off was supposed to happen, the pilot and co-pilot were huddled talking very fast and low, which piqued my suspission. After 30 minutes of not moving back, the pilot let us know that we had to get off and go to another gate to another aircraft, and that this one had a light that was concerning them.
So then, after everyone had finally boarded the new plane, we took off about 2 hours late. As we got to Vegas, and the flaps were down and we were coming in on final, the flaps went back up, the pilot sped up and we circled the airport for around 45 minutes, and apparently the landing gear was stuck.
I guess they eventually got it unstuck, because we landed. But 2 planes in a row that were screwed up was too much for me. Even after an uneventful flight back home that same night, I swore them off forever.
I don't have any real data, but anecdotally, the only people I've known who are truly loyal to a loyalty program are the hyper-milers, and they accumulate so many miles and just sit on them.
United has since changed their program (of which I'm still a member, but only use begrudgingly), and you wont lose your miles so long as you remain active on the program. I'm sure there are more caveats, but I don't pay attention to it anymore.
You can have a big valuation without profits
"Frequent flyer" programs started as an under-the-table way to bribe corporate flyers to take one airline over another: that is, you tell your employer you want to fly Delta, your employer books you on Delta, you get a kickback.
If some people who pay for their own flights feel some loyalty that's one thing, but the programs have mutated into financial skullduggery, some version of "borrowing from Peter to pay Paul"
This is a little bit more complicated.
Part of the reason that airlines used to award miles based on distance flown and not on how much you spend is that they weren't trying to incentivize business travelers.
For most business travelers, the company usually has a corporate contract requiring employees (or strongly incentivizing them) to fly on a given carrier. Otherwise, business travelers will book according to schedule (non-stop vs connecting, timing). Business travelers are also often "hub captives" -- if you're in Atlanta, you're taking Delta. As such, they often don't have discretion, so it doesn't make sense to pay incentives to a group who has no choice but to use your product.
For paid luxury travelers, they're going to be picking based on product.
The expensive fare flyers aren't going to be incentivized to the same extent as the low fares flyers by frequent flier programs. These high fare flyers pretty much pay for the flight.
So what was the deal with frequent flier programs? Once the flight is paid for, any incremental passenger you can get into the back of the bus is pure profit, and they're the most likely to engage with your ancillary products like paying to check a bag, buying food, and buying alcohol.
Historically, the idea was to convince a leisure traveler to take a 1-stop American flight instead of the non-stop on United because of the AAdvantage credit card.
Prior to the pandemic, however, load factors were so high, airlines found they didn't need to incentivize people to fly, so they decimated the value of their programs, and started awarding miles based on amount spent, and capped it per ticket. This was a large net reduction in amount of miles awarded.
If you want to pull an additional business traveller onto your flight, discounting by a tiny amount doesn't help you much (if at all), but giving them something that they can personally use later does. Business travelers also have more chances per year where you can influence their decision. Getting 10 or 20 chances to land an additional short-notice and/or higher-cabin fare seems like where the money is.
My company does recommend one particular carrier/group, but I have freedom to book other carriers without any fuss or extra effort on my part if the itinerary makes more sense for my trip. I do try to fly our preferred carrier, mostly because of the frequent upgrades I get and much less because of frequent flier miles. (Spouse and I use airlines once, maybe twice, per year for personal travel, so just accumulate miles which will be devalued to nearly worthless by the time we retire and travel more for leisure on airlines.)
The loyalty program didn’t really work on me though, because I’d fly enough that I managed to get into the top loyalty category on each of the major programs.
This has to do with segmentation. Not all business travelers are allowed to fly in a premium cabin, and reducing all economy tickets to $10 wouldn't allow them to obtain maximum revenue.
This is why historically airlines have priced flights cheaper earlier on (catering to leisure travelers) and raised the prices as the departure time approaches (catering to business travelers). They literally do make flights $10-20 in advance, in an attempt to snag more leisure travelers. Segmentation has gotten a lot more advanced, since, too.
I agree there are some cases where companies allow free choice, although any midsize and large company I've worked at, I've been pretty strongly guided towards the companies' contracted airline -- if not mandated. For many business travelers, they're not the ones making the decision. These earning rate decisions are made for everyone, not for individuals or groups.
Even without being the very top tier of frequent flier, I am upgraded on around half of my domestic flights on our preferred carrier.
I'm referring to earning structure around redeemable miles.
You're referring to rewarding frequent travelers, that's the status program. The status program has also been devalued tremendously as load factors go up, since there's no need to incentivize people to fly at all.
> "Even without being the very top tier of frequent flier, I am upgraded on around half of my domestic flights on our preferred carrier."
That depends highly on which routes, which time of day you fly, and which carrier. As a top-tier Executive Platinum on American, pre-pandemic I wouldn't ever count on getting upgraded on SFO-DFW. That's a hub-to-focus-city route with gobs of money on either side. I had like a 33% success rate. On the other hand, DFW-YUL, you can bet your life on it. An AA Silver wouldn't clear an upgrade on either, though.
I was really happy when the airlines started holding the exit row seats for their frequent fliers. I could book an exit row and chance an upgrade to first. If the exit row ACDF seats were all booked at ticketing, that meant my upgrade chances were also lower.
As a very tall person, I can assure you, I agree :)
For the record, I did mean to make it $X-10 or $X-20, not to make it $10 or $20 in total, but I agree that it was awkwardly worded.
I think your statement has merit whichever way it was interpreted, fwiw.
Also, your usage of "paid luxury travelers" is suspicious. I get that traveling on vacation is a luxury, but I feel like it implies they pay more.
Businesses may get discounts for picking an airline, but what's the mix of business-class seats sold to business travelers vs personal travelers? I think it's the corporate travel that props up the whole system, even if buying at a discount.
To be clear, by "paid luxury traveler" I was referring to folks who pay for business or (proper) first-class when they travel. The well-to-do retiree or executive type. The people who pay for Lufthansa First.
its just a gimmick to call their loyalty points "miles", they can call it "tokens" with same success, as they are have no relation to miles whatsoever.
When that correlation doesn't exist they are usually referred to as "points" instead, as in hotel programs.
So airlines have miles, hotels have points.
There is a certain scam in the fact that miles are a "kickback" for employees, but also keep in mind that third parties will pay vast amounts of money to participate in the miles ecosystem: Every co-branded credit card that is printed is 10-15 USD straight from the bank to the airline, without anybody having booked a flight yet..
Back a few years ago the rough book value of a mile was 6/10th of a cent per point. Credit card sign-up bonuses are easily in the 25-100,000 point range, so every premium co-brand card pays $150-600 to the airline.
Further, breakage is high in the airline loyalty space, something around 20-30% if I recall correctly.
Source: Have negotiated these deals with airlines
I had the impression that the value of an airline mile to the consumer was 1 cent. That would make paying more than a cent nonsensical.
Did airline miles suddenly become a lot more valuable?
That said there are offers to get cash for signing up. Some time ago First Republic Bank was giving $300 for cc sign up for Google employees (aka rich people).
(1) They work because the bank and airline partners are able to offer you something of high perceived value (a vacation, even in business or first class) for very low marginal cost.
(2) This means that (in my most recent redemption) the bank pays the airline $462 in rewards, that cost the airline $400 to deliver, and provides to you with $2500 in value.
(3) Points are great because people don't consider them "cash" but instead something they don't mind parting with. More of a rebate.
So the economics of it are that the bank collects $0.018 in interchange for every dollar spent on a card, converts that to a point that costs them $0.007 to deliver, which the airline services for $0.006 by disposing of inventory that would otherwise go unsold.
The airline wins again because they've created a secondary market for unsold inventory that they can sell to leisure travelers without undercutting the amount they can sell the same inventory for to business travelers.
It's a very nuanced and successful way of motivating people who have a choice to make the choice you want them to make.
On the other hand, $0.01 in cash back costs the bank $0.01, and then if you redeem for travel the airline gets paid $0.01, and you get $0.01 in value.
When the credit card says $200 in cash-back rewards, there's a lot less room to play games. 20,000 miles might buy a ticket today, but only an upgrade tomorrow. And that even assumes the ticket you wanted was available through the program you decided to back.
In general rule of thumb is Alaska miles are worth $0.02, American are worth $0.013, United are worth around $0.013, Delta are worth $0.01 (since you can redeem them for $0.01 as cash towards paid tickets if you have one of their credit cards).
Hotel points are different, Hilton, IHG and Club Carlson are around $0.005, Marriott are worth around $0.009, and Hyatt are worth $0.016.
But I digress, that's value to the end user. We're debating what the credit card company pays the airline for it.
If a flight is $500, the miles are always >= 50,000, at least on United.
Hilton’s points are worth far below $0.01. I don’t know what they go buy, but it’s usually $0.005 at best, if not worse whenever I have searched it.
International business and first class flights are often 2x or 3x the number of miles, but usually 5x to 15x the number of dollars.
United, however, are worth substantially more. I just redeemed 77K for a one-way business class flight from SFO to IST non-stop on Turkish, which was priced at $2000 on a half-round-trip basis ($0.025).
It's actually quite easy to get $0.015 on United when redeeming for economy class. Maybe Pandemic pricing is messing with the numbers, but this shouldn't be too challenging most of the time. They don't impose fuel surcharges which helps a lot.
That said, these profits are in part an accounting artifact. This is because up until very recently airline accounting rules only required carriers to realize the marginal cost of carrying a passenger when frequent flyer miles were redeemed. Since the marginal cost of a passenger is only ~$20 or so, this yields great margins.
These days however the overwhelming majority of airline miles are awarded for credit card spending rather than actually flying, though. As your second article notes, for United the split is 70/30 or so.
I feel like one of those numbers includes all the costs while the other doesn't.
That said, the logic behind structuring the rules this way isn't completely crazy. Essentially, award seats are intended to be seats that the airline cannot sell to paying passengers. Since those seats would otherwise earn the airline nothing, accounting for them on a strictly 'found-money' basis makes some sense.
This sometimes creates amusing situations when new loyalty program managers look at their margins and conclude massive sales make sense. For one example, see below - Garuda selling ~$20,000 first class tickets for ~$200 worth of points. On an internal accounting basis, this was still profitable for the program!
A side comment somewhat in humor is the killer app that's used to explain rete rules engines which is frequent fly programs: how in heck can you compute what a customer is due with all thr crazy rules. This is akin to fica scores for loans and credit cards.
Nonsense - buy a cheaper, non-point earning ticket if you don't want the points.
I think it is an option almost all the time? It is when I look to buy tickets.
> Not every country has 100 airports.
Sorry I've got absolutely no idea what this has to do with it?
I said 'buy a cheaper ticket', not 'fly from a different airport'.
Customers are being convinced to get a frequent-flyer-miles card rather than, say, a cash-back card.
That's why I opted out of the "points" bullshit and went with a good cash-back card instead.
With a reasonably generous point scheme - and more importantly, one I could transfer to about 8 different airlines, I just accumulated points for a decade.
In 2015, I cashed in 2/3 of my points balance for a round-the-world trip on Singapore Airlines in Suite Class (where you get your own cabin).
I wasn't getting free flights each year like a business traveller, but for an effectively cost-neutral card that didn't require me to change my spending habits, I feel like a Suite Class RTW flight every 6-7 years is a decent reward.
SkyPennies would be more accurate since that's about what they are worth, but to me implies it has some monetary cash out value.
Just my .02
I was flying weekly as a consultant to and from an AA hub last year. I was hired down here this year, so no more corporate expensed AAdvantage points for me. I just got my AAdvantage card so I can earn airline points when I buy groceries or whatever.
Sometimes I need to travel, but if I had enough points for a roundtrip or two, I might take a weekend and fly to go see someone some weekend - when things get back to normal any how. If I had to buy a roundtrip plane ticket for over $300, I might think twice about it, even though I can afford $300. If I get the flight on points, I might just go for a weekend getaway. My card has no annual fee, and I don't plan on carrying anything other than a small balance, if any, so it all works out for me as far as I can see.
Whaaat? How on earth can a credit card sign up be worth that much?
This really should be illegal along with advertisements on every screen on the aircraft that you can't turn off.
edit: either i got a downvote or the hackernews bot decided my discussions aren't up to snuff. more gaslighting from the mods.
If someone has a problem with the moderation on this site, email the moderators. I've done so many times and they have been very honest and responsive. If you've reached out to them and you don't feel they're being honest and responsive, no one is forcing you to use this site. Sometimes I get fed up with the people and/or mods too (I don't always 100% agree with their actions including actions taken against me) and I take a break for a while, go visit other sites and engage in other communities.
What I don't do is threaten a cyber attack on an open-registration Internet forum because someone clicked a button next to my comment.
Actively harassing people trapped in a crowded room with no way to exit is pretty serious.
If you did what the airline does with the ads, you'd be kicked off the plane and arrested.
The in-flight ads are mostly avoidable if I put on headphones and/or just close my eyes and take a nap. As long as the plane is in the air, on schedule, and moving in the right direction, I am getting the core product I paid for.
I fly Delta. I have never been harassed about their cards. I pay a premium to fly Delta on most routes. But it's partly to avoid this sort of crap. When I was in college and early adulthood, on the other hand, I'd gladly take some marketing in exchange for another twenty bucks in my pocket.
Banning that subsidy seems like a poor use of legislative power.
Well of course you would, you don't own the plane.
Are you asking for a court precedent or something? IANAL. I assure you that if there was a federal popular vote question for "should airlines be able to advertise to you on the airplane where you can't turn them off after you paids 100s of dollars for a ticket?" there would be a unanimous NO.
Are there other types of private speech you would like to make illegal?
Or perhaps require opt-in be offered (like the discount Kindle with ads on screen while sleeping).
I am sure they would be very grateful to you for making advertising illegal on flights and therefore their tickets more expensive.
No, this is an incorrect inference. A better explanation is that people have little money to spend, so in this situation they prefer to get something rather than no travel. Your explanation would be valid only if everyone had enough money to buy expensive tickets and always preferred to buy the cheap ones instead.
It is also funny that for affluent consumers they reach the conclusion that such consumers "prefer" comfort, when in fact they're not different from anyone else in this matter, they just have more money to pay for it.
They did pretty good business because many fights were booked through travel agents who would be able to explain that a flight that costs a bit more was worth it.
When flight aggregators arrived on the scene, people (casual fliers in particular) would almost without exception book the cheapest flight that was reasonably within their time preferences and without extra stops, if possible. Because there was no one to talk you into the better value of other airlines it became a race to the bottom. The edge these airlines had in selling comfort became obsolete and they mainly sold out to larger carriers during the airline consolidation of the early 2000's.
"Airlines look like they make money from flights, but really they make it from frequent flyer programs".
The same market is made about car dealerships with maintenance, Tesla about selling regulatory credits, gas stations with junk food, et cetera.
But I believe that a more accurate description is that the side behaviour is enabling the companies in question to lower prices in an attempt to steal market share. Without the side businesses, prices would rise, it doesn't necessarily mean that the businesses would be non-viable without the side businesses. Of course if you don't have it but your competitor does, that may cause problems.
Doesn't invalidate this article though, it's more about COVID-19 adaption than side businesses.
Airline standards are the direct consequences of vote with your wallet. No matter what some claim, 99.999% of people will buy the cheapest ticket possible.
This is definitely not the case, otherwise airlines like Delta, United, and American wouldn't be in business.
Business travel is the money making industry for airlines, with leisure travel being lagniappe revenue. Business travelers book tickets based on convenience of schedule over everything else. Loyalty programs direct that purchase to a specific airline. That is a proven fact and factually dismisses your claim that "99.999% purchase" based on cost.
I simply don’t believe one can simplify down the profits as crudely as you have put it.
People will go on vacation once or maybe twice a year, but fly on business a dozen or more times.
Often you will hear "we really make money on B and A is just a hobby" a few years later or maybe a few hours later to a different audience.
If a company is serving you as a hobby then it is not listening to you through price signals, you are going to get bad service, and the company will be out of touch for the market and heading for bankruptcy in the long term unless it is counting on a bail-out.
Because as a former IBM SE, I've done it HUNDREDS of times for business travel. Literally hundreds of times. Last second tickets, fully refundable tickets, you name it.
The ticket pricing market is designed to extract maximum revenue from business travelers (convenience) and keep them coming back (loyalty programs).
Don't be obtuse and argumentative. This is the way it is and it is a fact. Stop trying to find answers that don't exist.
In the last decade airlines merged a lot and have gotten some monopoly profits in the US but that looks like it is all over.
More fundamentally airlines look like a broken business that makes excuses after the fact and is allowed to get away with by enablers.
I find it hard to believe, however, because the usual pattern when I want to fly out of my small airport is as follows.
I might find United is $298.44 and so is Delta. American airlines is $301.55. Maybe there is a $375 flight listed with an extra stop on one of the airlines. The next price up is a $700 flight which has nothing obviously special about it, in fact it might be worse with more stops, more delays, and worse timing. (Maybe the expensive flight lets me reschedule or has some other benefit but that's not clear when I am buying the ticket)
The market is not giving me any meaningful choice at all through the price mechanism in that two airlines seem to be colluding to give me the exact same price, and the difference between the third is so small that $3.11 is not worth thinking about if you find anything about the American flight preferable to the other two.
In theory I could pay $1200 for a first class flight but the first leg of the flight has no first class cabin, and that's a huge jump. Before 2008 there was no "Premium Economy" or other efforts to let people vote with their dollars in a meaningful way. Still it's limited. When I save everybody time and frustration by checking a bag instead of contributing to "rollerbag hell", why I am paying more when I should be getting a discount?
Looking at airline pricing shows the rules of microeconomics are being thoroughly violated and I'm not going to believe the claim that "customers won't pay more for a better experience" until somebody hits the STOP button on both the flights and the airline bank accounts and accountants go over every single line and they can tell a story that makes sense.
What I see is that customers aren't being offered meaningful choices about their flights, or if they are, only in certain geographies.
I was a 737 hater long before the MAX came along so now it's appealing to drive to Syracuse to take Jetblue which is a no Boeing airline. In terms of $'s to the airline it isn't dramatically different than what I'd pay to fly out of Ithaca, but I an now paying with transport costs and maybe an extra night's hotel stay.
At ITH the service from the major airlines is undifferentiated (do you want to fly a CRJ-200 or E-145?) other than the hub you go to. Delta's Detroit hub is ideal for the west coast, American's hub is ideal for points south. Somehow they charge the exact same for flights that must cost differently for the airlines so there must be price fixing involved.
For me American and United are always the same price, but Delta wants me to fly to their Atlanta hub for some reason, while American and United hubs are approximately the same overall flight distance.
The real kick is "full content agreements" - the airline has to promise not to undercut the final fee charged by GDS/Agency. This ensured nice profits for the GDS ecosystem, but airlines are starting to fight back by pulling out of them (and hence increasing prices for indirect bookings)
I mean its the same situation as every man-in-the-middle platform right? You have players who hate paying the middle guy, and try to spin off, but everyone else gets too much value to break off
Sometimes the middlemen are worth paying. They might be better at searching all your alternatives and so they can find a route that you didn't find at all in your search. They might know something that you didn't think of (yes the non-stop is $100 cheaper, but wouldn't you prefer two 8 hour flights and two hours to walk around an airport over 16 hours in your economy seat?) They might guarantee your cruise doesn't leave without you if your flight is late. Only sometimes though.
It’s the same issue for airlines, you don’t want to have to open 10 tabs every time you want to search for an itinerary, so there will always be middlemen. The airlines just want to make sure the middlemen don’t have as much power :)
Give me the option to pay the real cost of a comfortable seat, and I'll pay it.
No, I don't believe it costs 5x as much.
Every single airline sells the same product, more or less. The same 2-3 class system, at the same price differentials, with the same seat width and pitches.
For the airline industry, yes. This isn't true in all industries.
Part of the $2.9B package was Citibank buying $1B worth of air miles to give to their cardmembers.
That created a liability on American's books, but because they controlled the redemption policy and capacity (and had an expiration date on miles once issued to customers) that they had some control on how the liability got called in.
Without loyalty programs, people book things at the last minute, with minimal effort spent looking at the flights (at least that's my attitude and what I've observed in cases when I've had to travel to a location has no airlines with good loyalty programs flying there). This ends up costing the company money due to poor booking. Finding good flights and other travel arrangements is an additional job duty, and usually other job duties take precedence.
But if there's a possibility of a traveler benefitting from the booking, they'll do so more promptly, be willing to spend time outside of work looking at flights, and try to find reasonably priced flights to avoid this perk being taken away from them.
This is my observation from travelling within a small company, it probably does not hold for larger companies.
Business travel will never become a thing again except for the cases where it is absolutely necessary (and those travelers are still traveling now).
Business travel is where the majority of profits come from for airlines.
Now that layoffs can start happening expect airlines to shrink and air travel to return to what it was in the 60s: an expensive, luxury travel option.
I understand it’s as simple as that, but it seems incredible wasteful to operate a transport company only to be able to make money on credit cards or cheap alcohol.
And is that why US airlines appear to be better of finacially than the European airlines?
Let them find their own way. Maybe next time the airlines won't use 96% of their cash flow on share buybacks.
I would also entertain the idea of loaning the airlines money at student loan interest rates. We can even defer payments until the pandemic is over, accruing interesting in the interim of course.
Or liquidate shares and sell them to the public treasury if they need the cash so badly.
Anything, legitimately anything, other than a bailout.
You can say what you want about bailouts but saying a “business model is bad” because of a once in a lifetime disaster is ridiculous.
Since you mentioned Google, they have over $100 billion in cash and could easily survive an interruption of this magnitude. Google could go to $0 in revenue and survive for many years. Having cash for an emergency is what a well managed and responsible business should do.
Airlines don’t have any money because they were poorly run and greedy. Let poorly run and greedy businesses fail.
The way we do business today is casually over leveraged and sold as normal.
We are not building stable, 100-yr organizations that support people and their livelihoods. We’re building huge ATM machines that siphon massive amounts of future opportunity from a 1000 people and exchanges it for massive short term gain for 1-100 people.
Airline behavior is a reflection of our revealed preferences and the reasons airlines are the way we are is because we all talk a good game about what we want flying to be but then become the ultimate capitalist bastards when we are asked to weigh our cash against our theoretically appealing goals.
All a restructuring would do is bring airlines even closer to our revealed preferences, think if Amazon ran the airline industry. That means goodbye pilots unions, hello to rigid and punishing performance metrics. Goodbye any free perks, everything becomes a nickel and dime horror show. Goodbye any semblance of a collegiate relationship between regulators and carriers, there will be an out and out attempt to regulatorily capture the regulators.
The credit card partners will purchase huge blocks of frequent flier miles, up front for chase, to hand out to their customers to incentive purchases. These block deals are enormous, billions of dollars at a time.
As co-dependent as they are (and as prone to bankruptcy as US legacy airlines are) the card issuers have historically provided debtor-in-posession financing for the airlines .
The article is looking at valuation, not actual revenue.
It's kind of like the idea that certain routes lose money but airlines keep those routes around because they add value to the network. Scott Kirby of United has stated that he wants to bring JFK-LAX/SFO back because of the value it added for customers who didn't want to go to EWR even though the JFK routes supposedly lost money.
Also, it's not like we've seen a successful spinoff of a loyalty program. Look at Air Canada or Virgin Atlantic.
If anything they've done all that they can to try to make status harder to hit/maintain and used it to grab more profit. Now that they're not getting profit they're trying to cry to FFs.
Subsidizing your frequent customers at the expense of your infrequent ones is
anti-competitive and anti-consumer and obviously not strictly a scam but somewhat scam-adjacent.
It all seems like very race-to-the-bottom type stuff.
I'm not much of a ban-happy guy but honestly I'd be open to the idea if it were not so unfeasible.
Meanwhile, the cost differential between flying at 9am or 6am or a different airline is usually $100. I've never been convinced after that the pain of dealing with the tracking and the login account is even worth it.
What is the discount for those flyers still - one free round trip for every ten flights? That 10% is still pretty small difference compared to how much you/the company would save switching airlines or skimping $15 a day on per diem.
If you don't travel a lot, it's probably not worth it, but if you're already going through the motions, why wouldn't you?
I can confidently say that I'd come out ahead by working (billing to a client) the time I would otherwise spend wrangling all my rewards programs, but not everybody has the option to just work another hour whenever they want.
Also I'm much better at my job than I am at wrangling rewards points so I generally get more satisfaction from it.
I also think that these systems, in addition to most retail sales etc, are created to appeal to a segment of the population that only really buys when they feel like they got some kind of special deal.
They already have all of your identifying information, so you’re not even giving up any privacy.
If anything, by not playing the game, you’re subsidizing those who do (since the time cost of playing the game is so low - clicking a button on a website). Same situation with paying with cash back credit cards in the US, at least for online purchases.
It is called a loyalty system for a reason.
Unfortunately the credit lobby is too powerful in this country, so seems politically untenable.
But you are earning by using credit.
When I buy on credit I literally earn cash back. I also get additional consumer protections.
No scare quotes needed!
Do we have evidence rewards increase total spending? I thought it was more about issuers fighting for wallet share. Not increasing spend.
I'd be curious to see a more formal academic analysis of this, however.
William Shakespeare, Coriolanus
@dang could we switch the title and link?
Submitters: please follow the site guidelines, which include this:
Please submit the original source. If a post reports on something found on another site, submit the latter.