22 Responses

  1. Joey
    Joey at |

    Thank you for your insight Seth. I think that loyalty should be a two-way street, hence why I’ve respected Air France’s method of redeeming First class tickets on their metal. I’m more of an old-school on this in that loyalty is based on flying a certain airline all the time and getting rewarded with the privilege to redeem a first class seat on that airline (as a way to say “thank you for your loyalty.”)

  2. Kerwin
    Kerwin at |

    In Jamaica, we say “yu free paper bun,” which means basically, the airlines and the card companies have wised up and you have to spend proper money for them to reward you for loyalty.
    I remember fliers who used to fly IAH to HOU enough times to gain status, Is that loyalty?
    It also did not help that everyone and their mother publicized every loop hole in the programs. The card companies and the airlines and hotels watched and now they are reacting. It was bound to happen.

  3. DWT
    DWT at |

    As much as all of us (myself included!) are going to hate the shift to revenue based frequent flyer programs, it DOES make sense and is more fair to directly tie elite qualification points and award points to how much one spends. What’s certainly not fair now is awarding the guy who is flying a last minute, short haul flight that costs, say, $800 1000 elite qualifying miles when someone else who got in on that $500 mileage run to Brazil is getting 8000 elite qualifying miles.

  4. Jessica
    Jessica at |

    revenue based qualification is one thing … Th real horror is when earn and burn are both revenue based – VX and B6. I have absolutely zero incentive to stay loyal or even bother earning their miles.

  5. Ryan
    Ryan at |

    Thanks for the post, this is quite interesting. I think the loyalty/frequency programs will always be shifting in some manner, as this is still a soft science, no matter how much research data they have.

    After all, in my mind it boils down in large part to emotional and psychological factors…airlines sure want customers to *feel* rewarded, which can mean different things for different folks. The guy who never checks a bag anyway, won’t care about waived baggage charges, for example.

    For that matter, some of the benefits that people strive for in earning status or keeping a co-branded credit card , used to once be free for everyone (like a free checked bag)! That always sticks in my craw…though I suppose younger folks who never flew in those days aren’t as aware of that.

  6. Marshall Jackson
    Marshall Jackson at |

    Thoughtful, well-written, and true. Good work.

  7. Kent C
    Kent C at |

    not worried. airlines get tons of revenue from miles blogs, credit card issuers like Chase and Amex. Stop miles and you will lose that free advertising. Secondly Chase and Amex buy millions of dollars in points directly from the airlines each year. It’s my guess that only 70-80% of those miles are ever redeemed meaning a 20-30% return right there. Their “revenue” butt in seats are one thing. But they get revenue from miles/points, don’t kid yourself. That side business is here for good.

  8. Copa
    Copa at |

    I don’t disagree that the miles and points will never disappear. The answer, as it usually does, lies somewhere in the middle. The new generation of loyalty programs might benefit from being a hybrid of old and new: redemption is points-based with a sliding scale for the strength of your revenue-based loyalty. Rather than tier-based fare bucket availabilities, move to an any-seat model with varying point prices based on revenue.

  9. Adam
    Adam at |

    Wow. Certainly a Byzantine kind of logic at work in ranking the value of customer loyalty. And the idea that if I spend 65K a year on my DL Amex Reserve and 35K on Chase Sapphire, that I am less valuable to Amex than someone who spends $15K on a DL Gold card but has no others, is patently absurd.

    I am grudgingly coming around to revenue-based earn, especially. As I’ve come to see the way the system is gamed by the points and miles sharpies I’ve discovered that rather than being a savvy fellow flying on discount tickets and racking up card bonuses, that I’m a piker who has to fight for upgrades with folks who pay a fraction of what I pay for their loyalty.

    But if they go to revenue based awards as well, then there’s no point in not switching to cash back cards. But don’t the credit card partners suffer in that sort of devaluation too?

  10. WanderingEntrepreneur
    WanderingEntrepreneur at |

    I would love to know what the kickback is to Delta for the American Express co-brand.

    Also, Rabkin doesn’t really consider the contingent benefit of the frequent coach flier. I was that flier at one point, and because Delta had treated me so well, both in terms of customer service and in terms of loyalty rewards, I stayed staunchly loyal to the airline. Eventually when I opened my own business and started to travel more, my wallet also grew, and all of a sudden purchasing first and business class fares was feasible. It was their treatment and service to me as a lowly Silver Medallion though that earned this long term loyalty. Delta will profit from this strategy, and it will reward their balance sheet for sure, but I think it is short sighted and not aligned with long term customer retention and passenger growth. I can no longer promote Delta and the Skymiles program as I used to.

  11. Ryan
    Ryan at |

    I wonder on average, what percentage of flyers – or at least of the “big spenders” – are only loyal due to corporate contracts or other restrictions? Or aren’t free to choose their carrier on a personal basis? I guess the airlines may not care, but if I’m only flying Airline X because I am forced to by corporate, am I really loyal? I guess it doesn’t matter to the airline if they’re getting the revenue and have a deal with the company.

  12. ffi
    ffi at |

    I can be what I want to be!

    If Amex is true to its plan, I will get my kids a DL plat card and allow them to spend 1000$ a year on it as a student. 99% of their spend.
    Maybe they will make them DM ! for their “loyalty” !!

    As for me, I will earn a few 100k on the Chase UR and be a nobody with Amex despite spending 60k on a DR ?
    I think not! If they believe that they are in for a shock.

    Any system can be gamed.
    The more transparent the working the better.
    I have gone to the dAArk side and to UA – despite the new problems, the CO award engine actually works and is fine.
    This is the booking engine interface that NW almost had and DL should have.
    All partners are shown online and if 1 segment is in high, it shows the price for the trip in high instead of adding low + med + high for each segment and coming out with 2 MM miles for DC to LA!

    Anyway as long as loyalty can not be relied upon by the consumer, forget about my loyalty to the company. Until they fix the awards system so that it is fair to me, it is stupid to stay with DL. Bye to DL, hello to UA/AA/US

  13. Mike
    Mike at |

    If they go revenue, I’ll go to cash back cards. Credit card issuers will offer 100k signups like nothing, as 50000 pt saver level tickets for domestic flights would be here to stay. Just a joke with those FF program, I only fly jetblue if there price is only that good to forgo the other airlines.

  14. Lark
    Lark at |

    @ Jessica:

    I really am valuing my VX Gold status. Baggage, boarding, Main Cabin Select, etc. (Branson was at SJC today for the kick off of the new LAX-SJC route, by the way.)

    In this case, the loyalty paradigm is working for me: I fly them, they treat me well. I have not redeemed a point yet with them…

    My Fairmont status follows the same value equation. I frequent their hotels, they treat me well – on property ad with some room / upgrade / food certs. I have Fairmont points with the visa card, but honestly do not know how many points I have or how to redeem them.

    I feel, by the way I am treated and the benefits that I get, that both of these companies value my business (loyalty?).

  15. Jessica
    Jessica at |

    @Lark : exactly my point …. you stayed loyal to VX due to service, not the value of their FF program (the benefits you’ve listed for VX Gold are on par with pretty much all elites at the big 4 legacies so nothing extraordinary about them)

    The whole point of loyalty is what value they could reward me after my original flight. If aspirational awards are unattainable, then they become boring cash back products. Ill once again switch back to being a pure kayaker (sans Spirit – I avoid that like the plague)

  16. Carl
    Carl at |

    If the programs become purely revenue based, who needs the airline? It’s just a cash back card. And corporate customers should demand the rebate back for the company.

    If frequent flier programs are profitable for the airlines, they would be idiots to destroy them. Not saying that accountants might not make idiotic decisions.

  17. sshank
    sshank at |

    @ Jessica. You have it exactly right. I can stomach revenue based earning (right now it would even work in my favor), but revenue based burn would truly kill any “benefit” I see from these programs, and I seriously doubt we will see that anytime soon from the legacies. What would that look like? Lets see maybe 600,000 points for a round trip in C from US to China because a revenue ticket costs $6K? Hmmm … no thanks. The carrot of a front cabin award /upgrade is pretty much the only thing keeping me loyal. I can see myself completely exiting the FF prison and freelancing each trip on which ever carrier makes sense.

  18. Carl
    Carl at |

    My point is we can already earn somewhere between 1.25% to 2% cash back on credit cards. Good old cash that you can use to book any revenue ticket on any carrier or revenue room, and earn full elite benefits and points. The only reason to accept miles or points instead of cash is if they offer the potential of a substantially better reward. And it can work for the airline because of “breakage” as well as people who earn while thinking of an aspirational award, but who then redeem for something much less valuable. If they just convert it to revenue-based redemption, a cashback card is simpler and less onerous all around. Also less loyal, eh?

  19. Carl
    Carl at |

    If airline award pricing become revenue based, they’ll likely let you pay with a combination of points and cash. I think UA or DL have something like pay with points that values the miles at 1c each.

    In any event, I’d expect that the infrequent flyer wouldn’t find airline cards very compelling any more. And the frequent flyer can still accumulate enough points/miles.

    Seems to me that the allure of the airline programs and associated cards has been that the airline can provide otherwise-unsold premium cabins to the points earner. If it’s just a 2% rebate on purchased tickets, and you have pay for awards, the secret ingredient seems gone… unless you can travel via RGN or CMB