7 Responses

  1. Joyce Beckett
    Joyce Beckett at |

    Any word on Air Miles with Air Canada?

  2. AnonCHI
    AnonCHI at |

    Seth – any thoughts on whether carriers are actually making a gigantic mistake by this switch to changing the rewards dimensions towards higher revenue travel?

    Here’s my thinking:

    1. Premium cabins take up far more real estate and the fixed asset cost (E.g. a lie flat seat) is far higher than that of economy cabins. So just on a pure unit cost basis, premium cabins cost the airline a lot more money.

    2. Loyalty matters a lot less when you travel in a premium cabin. Non-stop routing, timing, and amenities become substantially more important. The first two are hard to compete on while the last one has real cost and is an arms race.

    3. Premium cabin travelers are now earning massively more miles than they did before. While airlines may be awarding fewer total miles for travel than they did before (assuming $0.20/CPM as the breakeven point with most revenue based programs vs. their usual RPM), the premium cabin travelers are on average more savvy and less likely to have breakage on miles (forgetting to redeem them or using them for crappy redemptions).

    4. Add #1 + #3 and the unit costs are even higher for premium cabin travel. If pricing drops, on a per unit basis, airlines could end up losing a lot of money on premium cabin traveler and have made economy so crappy (10-across Y on a 777/9-across on a 787) that they drive themselves back to the place where Y-purchasing decisions are purely made on cost giving themselves no differentiation.

    5. While our US economy is doing well (Thankfully), there are lots of major aviation markets around the world where that’s not the case (Brazil, China, Europe, Canada, Australia, etc.) and average fares are dropping fast. The only thing saving the airlines are low jet fuel prices.

    So…. is this a boneheaded move? I realize this is a highly capital intensive space so it’s not like WN can say “hey, let’s do all-Y, good quality long-haul travel and steal all the Y pax from the legacy carriers and destroy their business model because we all know no premium-cabin only airline has worked out.”

  3. webtime
    webtime at |

    So do these extra pqms go towards million miler status. For example 333,333 miles in f nets you 1 mm status?

  4. Nick
    Nick at |

    It’s basically part of a transition from loyalty to marketing program. 1K can be earned with just about 2 roundtrip business class trips to Africa. Except that it’s not worth what 1K was back in the day.