If this is your first visit, be sure to check out the FAQ by clicking the link above. You may have to register before you can post: click the register link above to proceed. To start viewing messages, select the forum that you want to visit from the selection below. |
|
|
Thread Tools | Display Modes |
#1
|
|||
|
|||
The future for frequent flyer programs
The future for frequent flyer programs
AskEd & AnswerEd by Ed Perkins - November 5, 2007 http://www.smartertravel.com/travel-...6&u=SL4F6B4DC5 Frequent flyer programs, frustrating enough as they are, can get even worse, and the future of those programs seems to be worrying lots of you. One recent email from a reader, for example, asked about one specific development. "I see that United's CEO is considering selling off Mileage Plus or perhaps making it a stand-alone subsidiary. My gut reaction is to use up all my miles and to start with some other program --another airline, a hotel, or cash-back. A change in ownership can also mean a drastic change in the current program rules and benefits. What would you suggest or advise?" The short answers to this reader: * An ownership change does not necessarily mean drastic revisions. * Programs will nevertheless change--perhaps faster than in the last few years. * If you fly a lot, you'll still be better off with an airline program than with any other; but if you earn most of your miles from a credit card and other non-flying sources, by all means switch to a cash or gasoline card program. Clearly, there's no "one size fits all answer." But I think I can add a bit of clarity to what is often a very confusing situation. Loyalty or profit? When frequent flyer programs first came along--and later the copycat programs from hotels and other travel suppliers--the generic term for them quickly became "loyalty" programs. The fundamental purpose was to keep you flying on one line (or staying at one hotel chain), even when a competitor maybe had a slightly better schedule, more convenient location, or lower fare or rate. And that system worked pretty well for the airlines. With load factors hovering around 60 percent, they had plenty of extra seats to give out for award travel without displacing paying customers, and everyone was happy. Two developments upset the early equilibrium: * Airlines found they could make more money selling miles to other companies--especially banks that issue credit cards, but including just about any kind of consumer marketer you can name--than by selling seats at their lowest advertised fares. As a result, the inventory of miles in the hands of travelers skyrocketed. * During succeeding financial crunches--especially post-9/11-- airlines started to control capacity more aggressively, and load factors grew to between 70 and 80 percent, meaning fewer seats to "give" away. The net result is that airlines (and Wall Street) now view their frequent flyer programs more as profit centers rather than as loyalty programs. Sellout possibilities Combine their ability to sell lots of miles and limit the number of "free" seats awarded, frequent flyer programs have acquired a significant value as freestanding independent operations. According to some analysts, Mileage Plus, as a stand-alone entity, is worth more than United Airlines itself. Air Canada sold off its Aeroplan program a few years back, and several other lines--not just United--have been reported as considering similar divestitures. Future sell-offs by cash- hungry parent companies seem to be in the cards for quite a few lines. Even if several programs are spun off, however, major changes will come slowly. And probably no faster than changes in programs that remain in the airlines' corporate portfolios. Chances are Air Canada would have made the same changes regardless of who owns Aeroplan. I have some significant worries about the future of frequent flyer programs, but sell-offs aren't at the top of my list. |
Thread Tools | |
Display Modes | |
|
|
Similar Threads | ||||
Thread | Thread Starter | Forum | Replies | Last Post |
Airline service and frequent flyer programs | Steve | Air travel | 0 | December 5th, 2006 02:40 PM |
Airline Frequent Flyer Programs | [email protected] | Air travel | 7 | September 30th, 2006 07:17 AM |
frequent flyer programs: Alaska vs Continental vs Northwest | Bucky | Air travel | 1 | March 23rd, 2006 01:19 AM |
Help..frequent flyer programs | Conch-mon | Air travel | 1 | June 22nd, 2005 02:28 AM |
Frequent Flyer Rewards | Colorado Jack | Cruises | 5 | December 28th, 2004 11:41 AM |