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.
