When United rolled out its revenue requirements for elite status I wrote a quick and mostly unnoticed Tweet, “Breaking News – Airlines Do Not Exist Solely to Support Their Frequent Flyer Programs.” One might wonder what I meant, so let me elaborate. As a longtime observer of the airline industry, I can think of no time like the present. The sun, the moon, the stars, and airline capacity have arrived at a place where those companies in the business of running an airline are profitable….and not just getting by on borrowed money.
I have written from time to time that those of us (and yes, I really am one of you in spite of the rumors – I don’t blog about every single trip I’ve ever taken on miles) who have capitalized on airline mileage programs are going to have to face the reality of airline capacity closely matching demand in ways previously not known in the airline industry. As fares rise to a level that actually cover the cost of providing transportation (go figure), it is not possible that the mileage programs will not be impacted. Miles are just another currency, right? And if they are, it simply isn’t possible that redemption rates don’t rise (and potentially fall, I suppose) in lockstep.
Yes, things are going to be different, but different does not necessarily equate to awful. There are benefits to participating in airline mileage programs, and they will continue to be there, even as those benefits evolve. As we navigate through the ins and outs of this new reality, there will be challenges, but challenges are made to be overcome. Stop worrying about it, and start getting ready for the next phase. Yes, the dog is finally wagging its tail and not the other way around, but I like dogs.
-MJ, June 28, 2013
As an ex-airline guy, anything that lasts longer than two years seems permanent, but I see your point. I think I will adjust the word to something more like “in ways previously not known in the industry.” That’s what I get for writing late and tired. Of course, I was at least hinting at things beyond the loyalty programs with this short blog post too.
I would submit that the industry has arrived at a state of capacity equilibrium/discipline that I have never seen. I happen to think it’s going to last…..barring wars, terror attacks, etc. If those things do happen, the industry will just shrink again, assuming the same discipline continues to exist.
“permanently” is a pretty big word…the marketplace, overall economy, political events, disasters, etc. will always disrupt the status quo over time. I’m sure in 5 years things will again be different, whether better or worse.
Really, there wasn’t anything stopping the airlines from doing this years ago. Outside of the FT world, not that many people know or care about elite status. And the new revenue component may not always generate the loyalty they think it will even among big spenders, depending on their travel needs and especially if they come from corporate spending.
I’d submit that the real sea change happened a couple of years ago when the benefits of elite status – particularly at the low and mid tiers – started to be devalued (looking at you, COdbaUA!)