First Delta, then United, then Delta again because the first time wasn’t quite enough. Then bloggerverse favorite Hyatt announces a devaluation all its own, though I thought they handled it quite well. Oh…and there was Hilton way back before all of that. Notice a trend here? Maybe it’s just me, but 2013 seems like the worst year in recent memory from the perspective of program devaluations. Devaluation in the amount of travel you can buy with your miles and points, and devaluation from the perspective of implementing a revenue requirement (which I support) to maintain elite status with Delta and United beginning next year.
While I can’t say I’m a huge fan of a lot of this, what we are witnessing is an inevitable consequence of currency inflation not unlike that of any country that prints too much of its own money. From an airline perspective, too many miles chasing an increasingly scarce number of seats have resulted in where we are today. Have miles ever been easier to obtain? I don’t think so. Something had to give, eventually. And I do not think we’re done yet. We are addicted to cheap miles, and the sellers of those miles and points are addicted to the revenue they provide…..without an equal desire to allocate inventory for redemption, at least at a number of miles equivalent to what appear to be historical norms. Why? Because they can sell the seats for cash.
Concern on the part of airlines about increasing award liabilities, and decreasing inventory is not a new phenomena. Airlines managing for actual profit and not market share is. While many disagree with me, I think this new discipline is as permanent as anything has ever been in the airline industry. Yes, a terror attack or some kind of oil crisis could change the equation a bit in the near term, but over time, the new kind of managers in the airline industry will adjust accordingly. Is there a way out of this? Not one that is going to make everyone happy.
Let me ask you a question. If your airline switched to a revenue-based loyalty program tomorrow, would you change airlines? Yes? What if your new airline made the same switch 3 months later? What if within a year, all the programs are revenue-based? Will you stop traveling? Didn’t think so. Perhaps it will free you to choose based on convenience and price. Was that why you were flying your first choice of airline anyway? I can say with certainty that if Delta rolled out SkyMiles 2.0 tomorrow, it wouldn’t change my travel behavior one bit. Perhaps that’s because I live where I live, but there’s more to it than that. Schedule, service, reliability all figure into my equation at roughly equal percentages. Am I in the overwhelming minority of travelers? More likely, I’m in the minority of FlyerTalkers and bloggers, but I’d bet money that’s about it.
Am I convinced revenue-based programs are in our future? Only time will tell. There was a lot of angst when Southwest rolled out Rapid Rewards 2.0, but last time I checked, they still carry more domestic passengers than any other US airline. Perhaps they are uniquely structured to succeed with a revenue based program. What I am sure of is that none of us (flyers, airlines, banks, candlestick makers) can go on like this forever. Today’s frequent flyer (earner?) program was created in a day when 55 percent load factors were average, 65 percent was considered a holiday bonanza, and a mile was a half-way reliable measure of value. Change is coming. Whether that means a revenue-based earning and burning model, routine 250K awards, or yours truly spending a lot more time in coach on award trips is yet to be determined. Whatever happens, don’t give up. There’ll be a new game to play, and we’ll figure it out.
-MJ, November 11, 2013