Thursday, February 27, 2014

Why Airlines Devalue.

Because there's very little downside to doing so.  The Blogger Rene, on the Delta Points blog, does a pretty good explaining why.

Has Delta gone too far? Will you opt out and #boycottdelta over #skymiles2015, Rene. Delta Points

If you are keeping track, Delta & Skymiles2015 keeps the big spenders happy & AMEX happy. Then who is not happy? The now and then flyer who is just looking for the cheapest price ticket they can find to fly to see grandma! But with bag fees, charging for “better” coach seats, for food, headsets & movies, drinks, wifi, lounge access and anything else they can dream up those undesirable flyers will at least contribute to the company bottom line and be rewarded with a pittance of Skymiles for 2015

The reason airlines are devaluing various loyalty programs right now is that they have figured out that they CAN.

What airlines value most is the high-frequency business traveler paying premium fares on the corporate dime.  They also value so-called "whales" who fly for personal (or business) reasons in premium cabin on their own dime.  Add to this the frequent business traveler booking last minute and paying full fare rates and you have the triumvirate of industry favorites laid out for you. Let's call them the 'Most Favored 3'.

So why devalue when you might be hurting these people?

The simple answer is that they won't be.  Any of the above class of traveler are going to benefit from a program the most.  As tiers (and dollars spent) escalate, so do miles earned. What airlines are effectively doing is decoupling their loyalty program from miles flown to currency spent.  If you're a low-dollar, high-mileage flier you're not going to like this. Fortunately, for the airlines, they don't much care if you like it or not.

Under the old structures the programs could be "gamed" by people flying a lot of routes at deeply discounted "sale" or "mistake" fares.  There were also tricks like "fuel dumping" or other routing gimmickry that would reduce the fare.  Now, granted, some (not all) of these tricks walked around the gray areas of the contract of carriage but they were not "illegal".  Because of this many people (self-included) liked to use them to save a few bucks on International travel.

Of course, much like the casinos and card-counting, the airlines didn't like these "tricks" and if they became noticed there were instances of people being asked to pay the fuel surcharge upon airport arrival.  As more and more of these "YQ dumps" were published (stupidly) by miles and points bloggers looking for page hits, the airlines wizened up and started fixing the code in their systems. Today it's very rare that a successful fuel dump can be found, to the point that I stopped looking for them in late 2012.

That doesn't mean that I gave up on cheap fares.  I still took advantage of sales and mistake fares. I was moderately successful at this and my dollars per mile in 2013 was just south of 7 cents. In 2012 however it was just South of 5 cents so you can see where fuel dumping helped. Given the changes to United's MileagePlus system for 2015 qualification, my average spend would need to be somewhere around ten cents per mile.  Under Delta's program, using their new system, the price would be even steeper.  Again, this is not going to be a problem for the most-favored 3, but it will effectively price the low-cost high-tier elite out of the market.

I've said before that I truly believe that many airlines are going to do-away with their low-to-mid tier elite programs. I would imagine that you'll see two-tier, high-elite programs in the very near future, with credit-card co-branding destined to be the only entry level available to the former lower tiers. United has already started to do this by merging the Gold (middle) and Silver (low) Premier levels with their co-branded CC customers in boarding and free bags.  Soon you'll be able to pay a credit card fee for admission into the complimentary upgrade list (space available, and you'll only get a limited number of shots per year) and you'll see more and more bonus miles given solely to itineraries purchased with said CC.  Entire swaths of low to middle elites are going to be pushed out of their former programs and offered a credit card application if they desire to keep their perks.

This will, in theory, cause many former elites and other casual travelers to break out with much wailing and gnashing of teeth.  "I will never fly XXX airline again" is going to become the 201X's version of "I'm mad too Eddie".  The problem with this is, in many cities, due to the strength of hubs, limited competition in the Oligopoly that is the airline industry, and force of habit, most of these 'never again' fliers are going to spend much of their time on the same metal regardless. What business the airlines do lose because of this is going to be of a more marginal nature than anything. If an airline loses 1/8 of the volume of steerage class, low-fare customers they're not going to bat an eye provided they retain the lion's share of the three most-valued groups mentioned above.

In short: The airlines don't care about the majority of airline passengers.

That doesn't mean that they won't take your business or that they won't continue to engage in discount pricing to get it, but it does mean that they are not going to spend any additional time catering to you (us) other than with price.  Stated another way: Whether or not 5 people choose to pay $10 less each-way to fly from Houston to Las Vegas via Southwest is not going to change United's mind about any of this at all.  If 200 chron.commenters continue to rage against United for "stealing Continental" it won't matter because most don't fly enough to matter any way.  In short, if you're not one of the most-favored 3, you just don't matter from a marketing/elite perspective.

If United, Delta & American lose 10% of their low-fare customers there's no reason for them to worry because they can compete on price and pick up those same type fliers from the losses of the other airlines.  What they really want to do, is retain the most favored 3.  Part of the reason United has made so many changes that people term "flyer unfriendly" is that they lost a large tranche of their business travelers after the merger.  They are now trying desperately to get them back and one of the ways they are doing it is by reducing the head count in their MileagePlus Premier tiers.  Stated again: they WANT to lose some of those to reduce the clutter in front of the customers to which they assign value. Having fewer Premier fliers means higher percentages of complimentary upgrades (CPU's) which means that the upper-tier elites perceive that they are getting value for money and will be more likely to continue paying higher rates.  And higher rates equal increased profitability.

Another driver of profitability are passenger fees.  By reducing the numbers of qualifying elite travelers the airlines can charge more of those as well.  For the airlines this means higher revenue per passenger mile which equals increased profitability which means higher stock prices.  All of this means higher bonuses and more stock options (on a stock that's now increasing mind you) for the executives who are making the decisions.  What the media leaves out is that this also means sustainability and profitability for an industry that's struggled to find such things.  This means more and better jobs for employees, fewer lay-offs and furloughs (in theory) and an all-around general working environment.  As with anything, there is good and bad in every business decision.  Airline executives, in all companies, have made the decision to de-emphasize the low-cost, loyalty traveler.

For many, this realization will anger them.  Saying that a company doesn't value your business is a slap in the face to those who once thought that airline programs were designed to honor loyalty.  The fact is, they weren't.  They were designed to drive a profit. Many are still very profitable despite the small group of mileage runners who take advantage of the system's weakness.  It's very clear the airlines feel they could be more profitable if they took steps to push that group out.

Time will tell whether or not this is a successful effort.

Wednesday, February 26, 2014

Houston's White Whale

It's a sad time in Houston as the city was omitted from consideration by USA Today as America's Best Convention City.

Despite amazing conventions, Houston misses out. Heather Alexander,

Houston has missed out on a chance to be named best convention city in the U.S. in the results of USA Today's public vote.
The award for the reader's choice of best convention city in the nation considered convention facilities, recent modernization programs as well as what the city offers to visitors.
Both Dallas and San Antonio made the cut, but Houston missed out despite high quality convention centers and a fast growing infrastructure to support guests.

Beaten by Dallas and San Antonio, oh the horror.  As you can imagine this has those in Houston of a World Classiness bent wailing and gnashing their teeth. How Dare They! Seems to be a refrain followed closely by Something! Must be done.

I've no doubt this means there will be Blue Ribbon panels created to do Something! with a focus being on creating "amenities" that will convince the nice folks at USA Today that Houston is indeed as world classy as say.....Phoenix.

Certainly these august bodies will determine that Houston could aspire to the heights of Philadelphia and Indianapolis if only taxpayers would shell out a few measly Millions to build more downtown hotels, possibly a nice entertainment district downtown.  We're assuming this would be markedly different then the downtown entertainment district that popped up briefly during the Super Bowl and then faded away as most of the bars and entertainment centers became financially insolvent.  This time Houston, we're going to get it right.  THIS time, we have a few more miles of light rail and another world-classy hotel on the horizon.  THIS time we're a dining mecca dammit!

As is typically the case with these stories the rhetoric (specifically that found in the comments of this story) does not match reality.

Houston is hot! humid! and boring!  Of course, this is not entirely relevant in the grand scheme of things.  After all, Las Vegas is hot, Orlando is hot and humid and Atlanta is just as hot, humid and boring as Houston.  The Peach city has a lesser public transportation system as well.

What Houston does lack, in spades, are diversions, things to do when people aren't shoe-horned in a room, eating dry chicken and laughing uncomfortably at the jokes of a keynote speaker best known for either writing a book nobody can remember or being an expert at something no-one understands.

In Las Vegas, you can (most likely) be relieved of your children's college fund at the casinos or (if you're not thinking clearly) risk contracting an unreachable itch from one of the town's many escorts. In Orlando you can bring the family and spend their college fund on a mouse and his friends or Indiana Jones. In Seattle, you can get hit in the head by a flying salmon or see some really, really beautiful nature.

In Houston? Let's face it. NASA isn't the draw it once was and while there are hundreds of things to do, most of them involve hanging out at a bar or waiting in line for an hour or so to eat above-average food accompanied with below-average service.  Many of the things we say are "great fun" in Houston hold little attraction for the conventioneer. And no, the downtown Aquarium is not a draw to visitors, just stop it. Neither is Montrose for that matter or Washington Ave. Provided people could park on Washington (unlikely) in the end it's just a bunch of bars and designer jeans, making it indistinguishable from other bar districts.

Then we get to infrastructure, Houston's Achilles heel.  Our roads are a mess, our traffic makes several areas impassible due in part to poor light sequencing, constant road-works and a public transit system that is seemingly planned by someone with no concept of the need for people to get their butts in the seats on-time.  Trust me, it doesn't look good to your boss if you show up 30 minutes late to the opening break-out session, even IF you have in your back pocket the excuse that the Light Rail had stopped because it ran over a family of seven. Even if you decide to pass on Metro's daily crap game you still have the problem of renting a car, driving on streets that are so pitted they can homogenize milk, and arrive harried, tired and a little frustrated after being cut-off 75 times as you wait either to merge or make a right turn.

All of this comes back to a leadership vacuum.  Houston currently has a Mayor who has promised to "Try to do better" when it comes to pothole repair, but that's not saying much really. "Better" in this case could simply mean we're going to shoot for roads equal to Singapore, and not Rwanda. "Better" is a very low bar.  Also in question are the priorities of leadership, as illustrated in this post by Kevin Whited from BlogHouston. It's not that Houston doesn't have the money to fix the roads, it's that $2.6MM on a "downtown inspirational center" is deemed more of a priority than residents (and visitors) tires.  In today's silly political climate this could be spun as job-friendly policy, since the numerous tire repair shops/dealers in Houston cannot be unhappy with our moon-scape of a road-system.

Aside from all of the above, the cruel reality is that Houston, no matter how many Danger Trains, half-empty taxpayer-subsidized hotels, FoodBorg-ey restaurants or hip, new True Religion-filled bars they decide to build is ever going to finish better than 6th or 7th in any convention poll.  The entertainment deck is stacked against them.  Hell, even Oklahoma City and Tulsa have gambling facilities. St. Louis has Busch Gardens, Las Vegas their casinos and Orlando the Mouse.

At this point I'd place Houston slightly above Salt Lake City and that's only because the latter doesn't have alcohol. A necessity if you have to sit in a room and discuss techniques for creating an inclusive, eco-friendly office environment all day.

Tuesday, February 25, 2014

Do you drive any of these?

Consumer Reports says you shouldn't.

Consumer Reports' annual auto report doesn't just recommend the best new cars to buy, based on its data. It also tells you the new cars it thinks you should avoid — no matter the deal or the bit of styling that appeals to you.
And it's perhaps a more interesting list than the menu of good cars. At least it can be a good place to start an argument.

For comparison's sake here is the  The Top 10 vehicles are here

Granted, the selection of the combustible Tesla Model S raises questions regarding the validity of the rankings, overall it's still not a great picture for the US Auto industry who dominate the bad list and weren't seen (except for the Tesla and the Dodge Ram) on the best car list.

If you want to know why Detroit is struggling? For a large part their cars lack refinement and, the trickery of the Tesla S excluded, lack technological sophistication.

As for me, hang Consumer Reports my next vehicle is a Mercedes.

Monday, February 17, 2014

Why do Newspapers still pen endorsements?

It's endorsement season, that mystical time when newspaper editorial boards across the land feel an undying need to 'educate' voters on the pivotal issue of for whom they should cast their ballots.  The New Mrs. White goes crazy on this stuff, throwing out endorsements, many times for races where there is no real need.

For example: Do you really think that Republicans need to be told that Attorney General Greg Abbott is the best choice for Governor? Or Democrats that Wendy! Davis is their go-to Gal?

I don't think so.  Then there's the question of credibility.  In short, I see nothing that qualifies the members of the Editorial Board to tell voters anything regarding who they should vote for.  Also, judging from the comments on both of these endorsements, they're not moving the needle anyway.

In short, who gives a crap what a group of J-school grads and other Courtiers think?  Republican and Democratic primaries are best decided by the parties themselves. If this means that one party or the other picks a dog of a candidate, so be it.

This is another step in my long-running argument that the Editorial Board is a concept past it's time. A better result would be to shutter them and redeploy the resources in local reporting.

There are plenty of endorsing agencies that voters can go to if they're concerned about such things. They also can do things the old fashioned way: By doing a little research and picking the candidates for themselves.

A thorough take-down of the Texas Tribune.

Not written by a member of the "extreme right" as reporters like to characterize such attacks, but by a dyed-in-the-wool Democrat, a Wendy Davis/Leticia Van de Putte supporter at that.

It's a four-part story that you should read if you care about good political journalism in Texas.

The Trouble with the Trib. James Moore, Don't Grow Texas

These are many charges that I (and others) have leveled against the Trib in the past only much, much more well researched and reported.  This is political blogging at it's best.  it is very much worth your time.

It should also be the final nail in the credibility coffin of the Texas Tribune.

Wednesday, February 05, 2014

Burka the Clown: Asking the wrong questions, giving the wrong answers.

It's past time for Paul Burka to retire.  He's not even trying any more.

Primary Experience, Paul Burka, BurkaBlog (Texas Monthly)

The evolution of the Republican primary into a race to the far right is a sad moment in Texas politics. There is nothing left of the party of George W. Bush, or even the party of Rick Perry.


How did this happen? The simple answer is: Ted Cruz. He has remade the state GOP in the image of the tea party.

His contention and conclusion are, of course, entirely false. Not that Texas has moved to the Right politically (it has) but that somehow the election of Ted Cruz has led to a rise in calls for abortion w/no clause protecting the mother's health or exceptions in case of rape or incest, and that every Tea Party member suddenly wants Creationism taught in schools.

This is not to say that the two things above have not been central to the Lt. Governor's race of course. Unfortunately, those two items were the takeaway from the recent debate.  But to suggest that this is the fault of Sen. Ted Cruz, who has been focusing primarily on the National Debt and the Affordable Care Act, is ridiculous on it's face.

Lest I remind you it was the Texas Lock Step Political Media who made up the moderator panel, who formulated and asked the questions, and who were primarily responsible for setting a terrible tone for the entire debate. They followed the lead of the other members of the TLSPM who continually confuse the "social-issue Right" with the mainly fiscally-obsessed Tea Party movement. If anything, the current state of the election is due largely to poor coverage by the TLSPM, of which Burka is a founding member.

Has the TLSPM been sharply focused on Wendy! Davis' campaign missteps?  Yes. But I would argue that, in an election for an executive position, how you perform the executive function of managing a campaign could be considered part of one's CV. If you can't trust a candidate to hire the best people to run his/her campaign for the biggest executive office in the land, how do you feel about his/her ability to make hiring decisions when in office?

All of the prior said, it is fair to say that the TLSPM has a (very) one-track mind.  It should be, theoretically, possible for the TLSPM to focus on Wendy! Davis' campaign follies and on education funding, water funding, infrastructure funding and the loopy-brand of social issues that they think makes for good page-view.  They could, but they don't.


Because Burka and his fellow travelers of the TLSPM have long-ago decided that the citizenry of Texas are (mostly) made up of the mouth-breathing and gormless.  And it's much easier to chastise those who you consider to be your intellectual inferiors than it is to try and understand them.

The fact is, most of the TLSPM spends most of their time in Austin sharing drinks and Franklin's BBQ with their fellow Courtiers inside the halls of the ruling class. Texas however, does not provide the endless stream of access and gratification for the Courtier class as one would find in D.C. and other government centers. Texas, you see, is ran by the wrong party for that.

This makes Burka angry, very angry. His dream is to have his mediocre career celebrated in the same manner as the mediocre career of Helen Thomas. Burka wants his seat in the press room named in his honor and painted gold.....or something.  The realization late in his career that this is not going to happen that, in Texas, he's just a normal, lightly read schlep much like the rest of us makes him angry.  So he lashes out.  Earlier it was at Rick Perry, but now that he's gone I guess Ted Cruz and the Tea Party folks will just have to do.

Of course, even if you're a Democrat and reject most of this (mainly because you share the Republican need to view yourself and intellectually superior to your political opposites) then there's always the fact that Burka cribbed his entire idea from former co-worker and current Chron.columnist Patricia Kilday-Hart who, it should be noted, had much trouble in her column getting Texas politics 101 correct as well.  County Judges, you see, don't preside in Courthouses.

There are a lot of things wrong with Texas politics these days. I think that the Republicans have an incredibly weak slate of candidates running for most of the State-wide races.  Unfortunately, many of them are going to win by default because I find the Democratic ticket all but unelectable.

Monday, February 03, 2014

United and CLE: Trying to make reductions one-sided

On the heels of the United Continental Holdings announcement that CLE will be 'de-hubbed' and face severe drops in service and employment news comes that UA has followed up with a letter to Cleveland residents thinking them for their tireless efforts (read: tax breaks) to keep UA and asking them to overlook the obvious and continue their end of the business relationship. As Seth, the Wandering Aramean blogs, there might be some financial incentives for CLE passengers to do just that. 

I think it might be a bit premature to make any final judgment on this matter however as we'll need to see how the newly available slots are filled, by what airlines, and what the resulting effect on pricing (if any) will be.  What I do think is that this announcement and the resulting UA spin is indicative of how the airline has chosen to conduct business with it's customers during the Jeff Smisek era.

Under Smisek, the company has shown a tendency to make drastic cuts, and then remind customers that they are still, through either some creative accounting, happenstance, or just due to their sluggishness in racing to the bottom, still the best option going. When UA devalued their miles chart the company line was that they still offered the most "saver" space of the major airlines, never mind that the definition of "saver" immediately changed to being something so expensive as to not be, and when UA announced service cuts at IAH they trumped (rightly so) that they still offered the most extensive route network from IAH for customers.  When UA changed the pre-boarding process to effectively down-grade low-to-mid level Premiers they pumped up mileage bonuses and all but ignored that you're luggage allowance was pretty much now available to the general public as well.

In short, United's default reaction to any decrease in service is to immediately go into damage-control mode, and insult the customer's intelligence by demanding that things are still as they were, and that customer's should continue purchasing tickets from the "flyer-friendly" airline because.....well just because.

Loyalty, to United, is now a one-way street. Never mind that, as constructed, the loyalty business model was doomed to failure and, once miles became more about credit-card purchases than actual miles-flown, the entire bones of the "fly more to get more" programs were bound to collapse, the idea that pushing the overwhelming majority of your flying time to one airline was always going to go the way of the Dodo in the consolidated market.  Gone is the "community" airline (Continental) that had a primary hub (IAH) and did it's best to ensure the hub was well-ran and as profitable as possible. What's in it's place is a global corporation (United) still with a primary hub (ORD) but whose main goal is now the high-end business traveler who, in most cases, is moving around on the company dime.

What remains for the majority of passengers (and I've said this many times before) is a white good, something to be purchased on price with little consideration for other factors.  As the slim-line seats grow in popularity, even flying in cramped-comfort is going to require action on the part of the passenger.  In the world of economy future, the most important flying decision you make is not who you fly, but what travel seat-cushion you purchase, where you by your in-flight meal at the airport and which carry-on luggage will allow you the most bang for your soon-to-be-feed buck.

Meanwhile, the airlines (while this post is centered on United I'm not singling them out) will continue to try and polish the turd that has become customer loyalty while taking away perks and benefits at the same time. I've said this before but I truly believe that "Complimentary Premier Upgrades (CPU's) are going to be the next "perk" purchased by the big banks to tack on to credit cards.  As a low-to-mid level elite your flying future is soon to have its perk package reduced to nothing more than a mileage bonus that's going to be worth less and less every year.

All of this will occur while airlines such as United continue to remind you that they have more flights out of your home airport than anyone else, that they are hitting their 'on time metric' targets and that lost luggage complaints are way down.  What they won't tell you is that many of these flights now have too-tight connections, that their metrics and on-time performance still lag the industry as a whole and their luggage performance is still sub-standard.

They'll also admit that the majority of the "flyer-friendly" baubles that they are promoting are for premium cabins only. If you're sitting in a slim-line seat in steerage, you can have 'Flier-Friendly' but it's going to come at ever-increasing prices.