29 Responses

  1. Gary
    Gary at |

    The biggest problem with rumored changes aren’t the minimum spend requirements for status.

    It’s the transactional nature of prioritizing upgrades, etc. trumping status.

    If we take a certain minimum spend as necessary to achieve status, then at least treat members who achieve it consistently regardless of the fare they happen to be flying on any given day.

    Continental already has full fare trumping status of course. And so does Delta. Continental also sells upgrades on day of departure, even to elites, before processing elite upgrades. Anyone with $100 bucks isn’t more important to someone giving the airline 100,000 miles of travel and a minimum of spend, the bulk of their travel wallet share.

  2. Gene
    Gene at |

    Does UACO have the technology to accurately track revenue? I know CO has been doing this for a while and admittedly I’m not familiar with that system, but I wonder how they will account for StarAlliance partner revenue, customer service vouchers, VDB vouchers, etc. If they will give credit for “revenue” from vouchers, there will still be some room for leeching!

  3. Alex
    Alex at |

    How are you GS? You mentioned in a blog post a while back that you only spend $2,800 a year on travel yet you also posted a picture of your boarding pass that clearly stated you were a Global. I find it convenient that recently your posts on FT regarding the matter have pointed towards spend being a good qualifier for airline status, and here we go with the blog post. Are you being paid by UA/CO with GS status so you can be an apologist?

    I just don’t get you. You stay in hostels yet you are a GS. There is something fishy about your story.

  4. Carl
    Carl at |

    I don’t mind having spend as a criterion for each elite level so long as they announce it well in advance, give us a decent tracking tool, and make the criteria clear as to JV flights, ticket stock required, purchasing restrictions, etc. If they announce it this fall it should cover travel in 2012 to determine 2013 elite level.

    Heck if you fly one or 2 international trips in C or Z class, you will hit the spend – but you still have to fly a bunch of miles or need more like 5 trips in Z or 3 in C.

    I am significantly more opposed to letting low or no status flyers on YB fares or using miles and co-pay to upgrade ahead of higher elites. That’s why there are F, A, C, Z fares – let the no status or low status flyer buy those fares if they want to pay to upgrade, otherwise the unsold seats should go to the elites who are showing long-term value to the airline, even if the mix of flying includes some cheap fares, with the spend requirement they’ve already determined that we provide real revenue to the airline.

  5. Frank
    Frank at |

    I don’t disagree that using spend as a qualifier for elite status is reasonable. As Gary points out, the real problem is the transactional nature of prioritizing upgrades and trumping status. It’s possible to construct a scenario that sounds reasonable: I’m a 100K flyer on a deeply discounted ticket and a 75K flyer ahead of me has paid four times as much for a full-fare Y ticket… shouldn’t that person get the upgrade? Maybe. But once you go down that path, it’s a slippery, slippery slope.

  6. Adam S
    Adam S at |

    Good article – refreshing to see someone look out beyond their own narrow interests. I’d be both a winner and loser from this but think that it makes much more sense to the new UACO in terms of incenting the type of flyers that make them money so is a good thing from a business perspective.

    Looking at my own selfish interests, I would not be affected by the spend threshold, except insofar as I benefit indirectly as it creates fewer 1Ks, as I consistently cross it with ease (usual spend $20-30k per year). But I would lose out somewhat from the upgrade priority as a 1K who travels a lot on late-booked fares than are often around the E-M range which currently do very nicely on upgrade prioritization. Yet I agree that there are a bunch of Premiers and Prem Execs that are more profitable to UA than many 1Ks and it makes all the sense in the world for them to get better upgrade priority when travelling on the type of ticket that makes them so profitable.

  7. Frank
    Frank at |

    @Seth

    Candidly, it’s getting old reading comments on boards like, “the airlines are running businesses, not charities for our travel habits”. That’s a straw man. I’m not saying that. No one is saying that (of whom I’m aware).

    Like Adam S above, I wouldn’t be directly affected by the spend threshold. No problem there. But if UA decides to prioritize upgrades based on spending rather than my status, then what, precisely, is my incentive to remain a 100K/year flyer? If it’s upgrades I want, my strategy should probably switch to attaining 25K/year status at three or four airlines with similar transactional policies, then buying high-fare coach tickets on each. So then I’m buying higher-fare tickets but flying 1/4 as much on UA. If the spreadsheets tell UA that’s the right thing to do from a business standpoint, good on ’em. But I doubt the numbers really work like that. And business isn’t purely numbers; it’s about relationships.

    My son is in the US Navy and bought an iPad a few weeks ago. After getting back to base, he discovered it wouldn’t be as useful to him as he had hoped due to various restrictions on tablet usage there. He couldn’t get back to the Apple Store within two weeks on account of duty obligations, but went in shortly afterwards. He wasn’t in the return window, and he didn’t even have the packaging with him. But Apple happily took back the iPad, no questions asked. On a one-off transactional basis, was that the right thing to do? No. They would have been well within their rights to decline the return and it undoubtedly cost them hundreds of dollars to take it back. But on a long-term relationship basis, was it the right thing to do? Yes. They kept a customer who will return in the future to buy more iPhones, iPads, and MacBook Pros.

    At some point you have to set aside the spreadsheets and ask yourself, as a businessperson, what the right thing to do is from a long-term customer relationship standpoint. The hypothetical UA policy as described would absolutely not be in keeping with such a philosophy. It would treat even highly loyal flyers as transactions to be maximized one-by-one. And if those flyers have alternatives that are better (an open question in the US airline industry), some of them will avail themselves of those alternatives. UA needs to think carefully about that.

  8. Frank
    Frank at |

    Seth, where have I or anyone else suggested that “the airlines are running… charities for our travel habits”? When did I say that I view loyalty “simply through a number of miles flown”? You’re throwing out straw men, citing arguments that no one is making, and you’re calling people who disagree with you “naive” or “delusional”.

    My Apple Store example isn’t a red herring at all. It’s an example of a business in a different industry that seeks to encourage customer loyalty and repeat business for its high-margin products. Airlines should seek to encourage customer loyalty and repeat business for their high-margin services. If UA believes, as you seem to, that the best way to do this is to prioritize upgrades based on fare classes to a far greater degree than they do now, I’m actually with you: I think they should do it. But I don’t think it will work out the way they want it to. I think what they’ll end up with is a much-reduced upper-tier elite population and a larger group of lower-tier elites who buy higher-fare tickets but fly much less often. And I think this will come back to bite them. I don’t have financial spreadsheet models to support this assertion; it’s just a hunch. But then I’m guessing you don’t have spreadsheets to support your assertions, either, and are similarly basing your opinions on hunches. Fine, but don’t then insult people’s intelligence or experience for disagreeing with you.

    You wrote, “what part of giving upgrades first to the highest yield customers and then to the folks who fly the most miles doesn’t accomplish that?” Because, as I keep saying, it treats each flight by each frequent flyer as a one-off transaction. It says, “you’re only as valuable to me today as the amount you’re willing to pay to fly today”.

    There are a variety of things UA can do to maximize its transactional revenue. It can implement the changes contemplated here. It can go much farther, say, by prioritizing all upgrades based on the dollar value of the fare paid. It can throw all of its elites into a single bucket and upgrade the n who paid the highest fares. It can stop giving out upgrades entirely and sell seats to the highest bidders at check-in. It can upgrade only elites on full-fare tickets and sell the remainder of F seats at check-in. Which of these ideas would you support? Which of them do you think would be likely to improve UA’s long-term finances?

  9. Steven SF
    Steven SF at |

    I think your analysis is spot on.

    The complaints from some posters above about harder upgrades, etc. are somewhat disingenuous.

    First of all, once such a system is implemented, there will be a thinning of the ranks in the ranks and therefore less competition for upgrades. Even the new restriction on Economy Plus seat assignments for Silver Elite to day-of-travel may not be a serious issue if there are fewer elites trying to get one of those seats.

    Furthermore, the assertion that a Diamond Elite traveling on a discounted fare will be routinely trumped by a full fare nobody for upgrades is silly. Most fliers paying full fare will be Elites already. Do people really think there are that many nobodies flying around on full fare Economy?

    Frankly, the entire loyalty program concept should be reevaluated. The single-minded notion that elite perks are a reward for your loyalty ignores the reality that those benefits are also a real cost that ultimately gets passed on to other passengers. When you are upgraded to first class on a cheap (or even mistake-) fare, other passengers are footing the bill for your services and amenities. I doubt they would look kindly on your enjoyment of elite perks at their expense.

  10. Continental Randy
    Continental Randy at |

    Seth, what have they told you about the legacy CO lifetime Plats?

  11. Continental Randy
    Continental Randy at |

    Well, if they do, please let me know. I just wish they would bring back the Qantas awards.

    Cova

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  13. eds1830
    eds1830 at |

    I actually think that this is a trail balloon. I think that corporate travel managers are going to have some heartburn about this one. It’s one thing to limit earning by fare bucket but another one to just state the fact that if you spend X with us you get status. They do this and presto, few sigma projects later and companies start hammering people with Y only on overseas trips, and no booking under 14 days on any routine trips. The P&L of the fortune 5 company I work for already requires Y only overseas for anyone under a full VP, and if you book any trip less than 14 days out you end up on a list that goes to the CEO (and no senior manager wants one of their people on that list). And our P&L had revenue of $18B last year.

  14. Alex
    Alex at |

    How did you attain your GS status rather than through spend?

  15. Rick
    Rick at |

    a option (yes, I own the USD Mint and USD trademarks, key domains and processes etc)

    United can rename Miles to USD (like Choices).
    USD United Service Dollars.
    USD United Status Dollars.
    USD buy any seat or upgrade the same as Cash.

    Choices and miles buy any seat, room, or car rental now.
    USD deliver a clear 1:1 value, with 2:1 and higher options.

    USD offer you personalized deals for seats, upgrades, packages,
    ie: free or half price upgrades, 2 for 1, special prices, deals for you.

    USD Free Pass Card for Personal Access to Sales, Services, Status.

    Status is from all Spending and Segments … your combined activity.

    Miles convert to USD at 1 to __ cents based on elite status, spending.

    Earn USD at 10% of spending +bonuses for service class, elite status …

    a option to consider … rename miles to USD to reward the customers.

  16. Golfingboy
    Golfingboy at |

    Very good post, however, I strongly think that this is not going to help the airline’s bottom line or its image/brand… What they need to do is drive RASM up by controlling capacity and when the airfares start going up that is when the cheapo elites will start disappearing.

    The cost of filling a seat that otherwise will go out empty is VERY marginal*, so having a cheapo elite buy the seat for only $100 on a transcontinental flight will still either make the flight more profitable OR reduce the loss… So, the airlines DO prefer cheapo passengers over an empty seat and this program works against that. I am sure the % of cheapo elites in the MP program is VERY small as well.

    So, right-size the capacity and the airfares will continue to creep upwards to a point where mileage runs do not make sense unless you are only one trip short of the next status level, those cheap elites will fade away. Let it happen naturally, and trying to “force” it to happen does not do much good IMO.

    *Fuel is the biggest cost of transporting a passenger nowadays, and my uncle is a private pilot who flies the bombardier CL600 challenger jet for a businessman. For fuel, they put in 5% of the payload weight to compute how much fuel… So, lets assume they are having an additional guest onboard increasing the payload by 200 pounds [body weight + luggage] will require 20 pounds more fuel or 3.5 gallons. At IAH for private aviation the fuel is around $6.50 [the airlines don’t pay that much] per gallon which means they will add $22.75 worth of fuel. Now we all know how inefficient those little birds are, I am sure the $22.75 figure is a bit lower on the boeings/airbuses plus the airlines pay less than $6.50 per gallon.

  17. Kyle
    Kyle at |

    Seth, we know you have Global Services

  18. Eric
    Eric at |

    So if your GS story isn’t that sexy or conspiratorial, why not share?

    I think this is the 2nd time I’ve ever read this blog and wonder whay anyone bothers, what with the condescending and rude tone by the writer.

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