Posted by Seth on May 15, 2012 under Flying, News | 
The wait is over. A couple months after carriers applied to provide service for four new slot pairs at Washington’s Reagan National Airport the DoT has announced the winners of the coveted operating permissions. And the winners are exactly what I predicted back when the applications were revealed:
JetBlue won their first choice of routes, adding service to their quickly growing operation in San Juan, Puerto Rico. Alaska Airlines won their first choice as well, with service to Portland, Oregon being approved. Austin, Texas had two different applications for service; both Southwest and JetBlue indicated that they wanted to add the destination. Southwest was awarded that authority. Virgin America won their only application, adding service to their hub in San Francisco. The route to SFO will be the only of the new operations with direct competition on it; United Airlines is also going to be operating on that route. Southwest will face competition on the proposed through-service aspect of their Austin service to San Diego from US Airways which will operate that route with a non-stop flight.
So no real surprises in the route authorities awarded. Probably for the best; the routes picked were the favorites because they made the most sense based on the economics of the markets. Still, every now and then I do wonder if the DoT has a sense of humor and would award something like the Colorado Springs application Frontier put out there.
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Tags: Alaska Air, Alaska Airlines, Congress, DoT, FAA, Frontier, JetBlue, Portland, Puerto Rico, San Diego, San Francisco, San Juan, Southwest Airline, United, United Airlines, US Air, Virgin America, Washington DC
Posted by Seth on May 5, 2012 under frequent flyer, points |
The analogies of points as a currency are not new. There are a few programs out there today that already have "pay with points" types of functionality available, but there are still a number of limits on those systems.In most cases they can be used only for specific purchases, mostly travel related, or via certain merchants. American Express Membership Rewards are one of the most easily spent on non-travel events, though the point valuation of that channel is not very attractive.
Listening to representatives from the loyalty programs and the companies who help them make the programs work at the Randy Petersen Executive Travel Summit a few days ago, however, it seems that the idea of defining a specific cash value to points and allowing full fungability of them is not too far away. Loylogic has partnered with Etihad to put their PointsPay product in the market, allowing points to be easily redeemed for value on a credit card, making points instantly spendable anywhere that credit card is accepted, for example.
Other companies at the event spoke of the shift from points to real currency with different levels of optimism and excitement. Some were lobbying for full transparency on the points, noting that many customers have already figured out what the values are anyways. Others suggested that the opacity of the specific value actually increased the perceived value, making the customers feel that they were getting a better deal and allowing the programs to remove the liabilities more quickly.
Still other companies suggested that the best way to increase the perceived value of the points is to offer up redemptions that are less utilitarian and more creative. Whether it is allowing customers to use points to redeem for space travel, a week on a private island or cashing in 386,000,000 points for a yacht, the options are, at least in theory, endless. That those awards generally are never redeemed makes it easier to offer them and the perceived high valuation since they are still too far out of reach for most to attain.
One concern voiced (by me, among others) regarding this apparent shift is the potential that it will erode or displace the travel award segment of the programs, effectively taking away some of the variable value of the programs and making them truly fixed rebate opportunities. Most present in the room and in the private conversations in the halls seem to think that this point hasn’t arrived. At least not yet. The cynic in me still sees great potential for that time to come, sooner than not. A few carriers are already very close; JetBlue, Southwest and Virgin America come to mind, though they are all still essentially only travel for the redemptions. Switching from that closed redemption network to an open, fixed-rate system actually wouldn’t be too huge a leap, at least on the conceptual side of things. The actual work to make it happen isn’t so trivial.
I’m not throwing in the towel quite yet; there are definitely still opportunities to play the game and come out ahead as a customer. But they are getting harder and harder to find. The market seems to be shifting in that direction, both on the supply and demand side of the programs. This is definitely an area to keep an eye on in the coming months.
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Posted by Seth on March 19, 2012 under frequent flyer, News, points |
It was August 2010 when Virgin America announced their plans to offer reciprocal earning and redemption benefits with the other carriers in the Virgin brand. Alas, the frequent flier market works slowly in some cases and after more than a year there was no real news on the redemption side of the deal. That ends this week, with both Virgin Atlantic, Virgin Australia and Virgin America announcing redemption rates.
I’m focusing on the the rates for Virgin America here, mostly because I find the ranges they cover to be more intriguing than the numbers from the other two. Virgin America has published a calculator that displays the number of points required based on the city pairs that the two partners serve. Even more interesting to me, however, is that the underlying data is contained in a singe easy to download XML file. Drop that file into Excel and throw some filters on it and the data that comes back is quite interesting indeed.
First up, both one-way and round-trip redemptions will be offered. That’s the good news. Unfortunately, there is a penalty for one-way awards relative to return trips. The penalty is generally 5-10,000 points, based on the samples I saw, though one or two did go higher than that, especially in premium cabins.
As for the actual redemption rates, there are definitely some interesting sweet-spots on the chart. JFK to London return is only 35,000 points in Upper Class, for example, which is pretty nice. The down-side is that it also comes with $1100 in taxes and fees to be paid. Also, it is more than double the price of an economy award on the same route (15,000 points + $650 in fees). The fees do track directly with what Virgin Atlantic charges for a revenue booking (the APD and the YQ are both higher in business class) so that’s not completely ridiculous, but with base fares as low as $120ish round trip in economy dropping 15,000 points seems like a REALLY bad idea.
The real fleecing in the program, however, comes when you try to redeem for Business Class awards on Virgin Australia AND you add a connection in the United States. Los Angeles to Brisbane is a rather reasonable 80,000 points up front. Want to connect onward to Chicago? Tack on another 100,000 points. And if you want to go to JFK rather than Chicago it is an extra 50,000 on top of that. Yeah, it is that ridiculous.
And the taxes aren’t particularly great on those fares either. At least the transcon penalty on Virgin Atlantic is only 15,000 points.
Comparing the rates to the value via American Express Membership Rewards – one of the easier ways to accumulate Elevate Points – shows further examples of the limited value. Getting that JFK-London award is 35K Elevate points, which would mean 70K MR points. Redeeming via ANA would allow the same trip for 63K points and roughly the same fees. JFK-Capetown would be 190K MR points via Elevate or 115K via ANA.
Adding these partners is a great thing, in theory, for members of the Elevate program. With the redemption charts the way they look, however, the numbers are not particularly attractive. I’d stay far, far away.
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Tags: American Express, ANA, Australia, award, Chicago, frequent flier, frequent flyer, Los Angeles, Membership Rewards, New York City, points, Virgin America, Virgin Atlantic, Virgin Australia
Posted by Seth on March 13, 2012 under Flying, News |
Washington, DC‘s National Airport is one of the "lucky few" airports in the country where the government has limited destinations which can be served. The so-called "perimeter rule" keeps the long-haul flights out at Dulles for the most part, but there are a few exceptions to rule and those are coveted by the airlines. As part of the most recent FAA budget authorization bill Congress has added a few perimeter exceptions to the pool at DCA and now airlines are scrambling to grab those slots. The filing deadline was yesterday, and here’s what the proposals look like.
New Entrants
The slots are split into two pools, one for legacy carriers and one for new entrants. In the new entrants category six carriers – JetBlue, Virgin America, Southwest, Air Canada, Frontier and Alaska Airlines have applied.
Alaska Airlines is going big with their application, hoping to offer transcon service from both their Portland, OR hub as well as San Diego. Virgin America is also hoping for hub service from San Francisco. Southwest is aiming to provide service to Austin, TX, with onward connections to San Diego and JetBlue has applied to serve both Austin and San Juan. Air Canada is hoping for Vancouver service and Frontier is looking to serve Colorado Springs.
There is some interesting overlap with the routes being requested and it seems somewhat unlikely that the DoT is going to approve such applications so perhaps the final approval will look something like this:
Legacy Carriers
For the legacy carriers the access to beyond perimeter slots comes with a slightly higher price, as they have to give up service to a destination inside the perimeter to get the new service. On the plus side, the route authorities are more or less guaranteed given that condition so the DoT has less work to do there. Of the eligible carriers, Delta, United Airlines and American Airlines all made their intentions known a couple weeks ago, with service to their Salt Lake City, San Francisco and Los Angeles hubs, respectively. Apparently US Airways has decided to not apply for an additional beyond perimeter slot. They already have service to Phoenix and Las Vegas but it is still somewhat surprising that they haven’t tried for more.
The new routes should be interesting to watch, especially with the potential for competition on the LAX and SFO routes.
Tags: Air Canada, Alaska Airlines, American Airlines, Congress, Delta, DoT, FAA, Frontier, JetBlue, Las Vegas, Los Angeles, Phoenix, San Diego, San Francisco, San Juan, Southwest Airline, United, United Airlines, Virgin America, Washington DC
Posted by Seth on March 1, 2012 under frequent flyer, News, points |
I’m generally a big fan of Scott McCartney’s The Middle Seat column in the Wall Street Journal so I was excited to read his post today about "Getting the Most Out of Your Frequent Flier Miles." I was hoping for some great insight into award pricing algorithms or inventory patterns. Instead I got a primer on how to not get any value from points. Such a disappointment.
There are a number of take-aways from the post but the main conclusion is this:
With domestic coach tickets, you generally get not much more than one penny per mile in value from airlines – that’s a $250 ticket for 25,000 miles. If the ticket now costs $400, you likely will have to pay 40,000 or 50,000 miles.
Not only is it simply wrong, but it is also very misleading in terms of getting the most from your points. Other than the programs of JetBlue, Virgin America and Southwest, (and also one option from Delta or American Airlines) the redemption rates are not tied directly to the selling price of the ticket. If there are no discounted seats left it is less likely that award flights will be available at the lower rates, but that’s tied to the inventory, not to the fare price. As the prices go up at the low end it actually means that the "value" realized for redeeming points is arguably higher since the cash option will be more expensive.
McCartney also picks a few random routes and tries to read into overall domestic award inventory based on his searches for economy class seats on one carrier for each route. His approach fails miserable in many ways.
First off, it appears that the searches he performed were based only on using the website of the carrier where the miles are sitting and then by just putting in the end points. This resulted in finding only a handful of seats for Boston-Ft. Lauderdale on Delta, Orlando-Seattle on American or Washington, DC – Austin on US Airways. For the Delta results this approach overlooks the issues that their website suffers from for award bookings; it is very limited, especially when searching for connections. For American I see very different results than McCartney did, with plenty of award seats open at the "Saver" level.
Both of those are questionable, but the US Airways one is the most egregious bad advice of the three:
And if you’re in Washington, D.C., and have US Airways miles you’d like to use to go to Austin, Texas, get ready to pay a heavy price—besides the $25 processing fee that US Airways charges for a “free’’ ticket. For the 10 months in the rest of this year, there are only five days when US Airways offered a flight to Austin at its basic mileage price.
In addition to only searching on US Airways’s website, McCartney ignores the fact that Dividend Miles can be redeemed for flights operated by United Airlines. Checking the award calendar there it is clear that finding an award seat from DCA-AUS is actually a rather trivial task on most days for the rest of the year. Yes, you’ll have to call in to book it, but that’s a small penalty for saving 25,000 points.
Sorry, Scott, but you missed the boat BIG TIME on this one.
Tags: American Airlines, award, Boston, Delta, frequent flier, frequent flyer, JetBlue, points, Seattle, Southwest Airline, United, US Air, Virgin America, Washington DC
Posted by Seth on February 13, 2012 under frequent flyer, News |
PEOPLExpress is best known in most travel circles as one of the first airlines to operate in a LCC model following the deregulation of the US aviation industry. With a hub in Newark, New Jersey, the carrier offered up a slew of a la carte fees well before that was the norm and offered service to a number of cities across the USA and Europe. The company was acquired by Continental in the 80s and the brand disappeared. But now it is back.
A group of entrepreneurs has revived the brand and hopes to begin operations in the near future based out of Newport News, VA (PHF) with a fleet of Boeing 737-400s. The aircraft will be configured with 158 seats in an all-economy configuration. The carrier lists a few destinations in their press release, including Newark, Pittsburgh, West Palm Beach and Providence, with a promise of more to come.
The company’s COO, Mike Morisi is a veteran of the previous PEOPLExpress iteration, giving him a long history in the industry. And he promises that the new operation will change the way the public views air travel:
With the recent decline in airline service due to mergers and consolidations, we have all had to travel farther out of our way to get anywhere. Flights are more expensive and the many ancillary fees make flying a hassle. Our goal is to make flying fun again. We will eliminate most fees for items such as checked bags and seat assignments aboard our fleet of Boeing 737-400 aircraft.
Apparently Morisi doesn’t mind that the exact same line, "make flying fun again," was used just a couple months ago by Virgin America CEO David Cush in describing the goals of his brand.
Morisi also appears to be bringing back many of the hallmarks of PEOPLExpress service, like having a minimal staff at each airport and each employee working in multiple roles. If you buy the corporate spin that "reduces burnout and gives customers access to people knowledgeable in all aspects of the airline." Or it means that there are fewer people around to actually help out when things go wrong, or maybe the ticket agent would have to leave the counter to go load baggage, similar to the recent Allegiant flight where passengers were left behind because the counter had to close for the agent to work another role for the same flight.
Oh, and they are still working on securing both the necessary government approvals to operate as a commercial airline and the start-up funding to begin operations.
There are so many strange things about the announcement that it is hard to know where to begin breaking them down. Perhaps the choice of aircraft is a good place to begin. The 737-400 is a "classic" version of the Boeing jet. It is still in operation all around the world and it is a quite reliable workhorse, but it is also a questionable choice for a start-up carrier. Odds are they’re getting the aircraft at a great price and that’s the reason for the selection. But that bargain comes with a cost: the hourly operating costs of the 737-400 is the highest of the common versions of the type running today:
The numbers are out of date based on the fuel costs but the relative numbers remain so the premise that it is the most expensive holds true. Moreover, the fact that is uses more fuel per hour than other versions of the 737 means that the cost disadvantage has only grown, not gotten better.
And then there is the cabin configuration. US Airways also flies the 737-400, with a configuration of 12 first class seats and 132 coach seats. Those coach seats have a 30" pitch, while the first class cabin has 37" pitch. In order to squeeze in 158 seats the pitch will be somewhere in the bone-crushing range of 28-29" throughout the entire plane. Also, there is the federal requirement that an aircraft be staffed with at least one flight attendant for every 50 seats on the plane. Adding the extra eight seats means that the company also has to add a fourth flight attendant to the crew, increasing their costs of operation.
Also, the initial plans are for only 12 daily departures from Newport News, hopefully scaling up to 25 within a few years. In other words, it is going to be a pretty small operation for the foreseeable future. It is almost hard to believe that they’re going to be able to raise the capital to actually get off the ground. Maybe they’ll do so from the $19 fee they’re asking of folks to join their Club Travelati member-only promotions group.
Posted by Seth on January 18, 2012 under Flying, frequent flyer, News |
I’ll be the first to admit that I was definitely betting against Philadelphia scoring service from Virgin America in their announcement yesterday. There were a couple other destinations on their "short list" which seemed more likely to me. Alas, I was wrong, and the carrier will be launching five daily frequencies starting in April.
As part of the launch release Virgin America pulled no punches, describing their competition in less than flattering terms. Said company CEO David Cush:
Travelers deserve more options than just the typical legacy airline cattle car, and we hope our unique brand of low fares and inventive service will be a breath of fresh air for Philadelphians.
I didn’t expect Philadelphia to be the new market based mostly on the fact that transcons are expensive and it generally takes a lot of capacity to compete in those markets; once daily service, especially between larger cities, is often frowned upon by customers. Virgin America is coming in big, however, adding three flights to Los Angeles which will increase the daily frequencies from 7 to 10, a reasonably significant capacity upgrade. Similarly, the frequencies on the San Francisco route will increase from 8 to 10 with the two new Virgin flights.
But are there enough passengers – profitable ones at that – to make the service work? Virgin seems to think so, suggesting that roughly half of the passengers on each of those routes takes a connecting flight rather than a nonstop option. So maybe there are enough people looking for nonstop options; the question is whether they’re profitable. Time will tell.
With all the hating that goes on against US Airways, this route might seem like a perfect assault. But attacking them at Philadelphia with only a couple non-stop destinations seems unlikely to be the way to go. Even Southwest, which attacked many more routes, is pulling back in their assault there, suggesting that US Airways is reasonably stable and willing to fight their competitors.
One thing it might do, however, is convince US Airways to compete on pricing for the routes. A one-way fare is currently $850 on US from Phillly to LA; the new numbers with Virgin in the market look to be a bit lower:
Interestingly, while US hasn’t been matching Delta fares on the route (or United Airlines on flights to San Francisco) they appear to be taking the Virgin entry into the market a bit more seriously. They aren’t completely matching the fare, but they are much closer, at least for San Francisco. Apparently they’re banking on their frequent flyers or the more frequent schedules demanding a $20ish premium for the route.
For Los Angeles, however, the price disparity remains, at least as of this morning.
It is also worth noting that elites in the US Airways Dividend Miles program can confirm that $850 fare into the first class cabin at the time of ticketing. Virgin is selling their first class cabin – admittedly MUCH nicer than that of the US Airways A321s – for about $1,000, a premium for elites, though still $200 less than the non-elite upgrade fare from US. Both are significantly higher than Delta’s first class fare on the route.
What does it all mean? I have no idea. But there are enough interesting bits at play here that it is worth watching. Oh, and prices on some of the inaugural flights are still pretty reasonable, so I might be headed to Philly for some fun in early April.
Tags: Delta, elite status, Flying, frequent flier, frequent flyer, Los Angeles, Philadelphia, San Francisco, Southwest Airline, United, United Airlines, upgrade, US Air, Virgin America
Posted by Seth on November 27, 2011 under News |
If you’ve got $60,000 then that opportunity can be yours. Even better, the deal comes with a round-trip charter flight on any Virgin America route currently operated within the United States.
It is actually a pretty great deal for the charter flight option especially if you go for the transcon routes. The hourly charter rate at that point gets to be pretty close to costs of much smaller aircraft. Plus, they’re throwing in the standard catering kit for free to passengers. Open bar!
I wish I had the spare cash to do this. It would be an incredible party. Alas, I haven’t won the lottery lately.
Thanks to Dan over at Things in the Sky for pointing this out earlier.
Posted by Seth on November 26, 2011 under frequent flyer, News, points |
Virgin America wants things to be different. Very different. David Cush, the carrier’s CEO recently was interviewed by Scott Mayerowitz from AP and there are a few interesting bits in the Q&A that offer up a rather unique view of how he sees the company fitting in the market and how his old company, American Airlines, is doing these days. Here are a few of the bit I found most entertaining.
Q: How much more are people willing to pay for [food & entertainment on demand] services?
A: The model is getting them to pay the same amount with a much lower production cost.
For a guy who thinks he’s looking at the bigger picture and the long-term view of the airline it is not at all clear how he plans to maintain this approach. Every airline starts out with lower costs initially. The problem is that maintaining that cost structure is incredibly difficult as labor seniority (and the correlated costs) only go up over time. Yes, the new fleet means decent fuel efficiency but that will erode (or require major capital expense) over time as well. Doesn’t seem to be a particularly useful approach to long-term survival.
Q: How can you attract business travelers when your miles can’t be redeemed for Hawaii, Europe or other places you don’t serve?
A: The mile problem will be solved early next year. We have basic agreements with Virgin Atlantic and Virgin Australia that will be fully reciprocal. We also have agreements with Cathay Pacific, Singapore and Emirates that will develop into frequent flier relationships.
This is quite interesting and certainly will be a welcome change. Even if the reciprocity rates aren’t particularly great – and I’d bet they will not be – having more earning and redemption partners is a great thing for customers. Of the independent US-based carriers Alaska Airlines has done the best at this (and they’ve also been around the longest to figure it out) while JetBlue has a minimal partnership with American Airlines. Growing those relationships is about more than just having an interline agreement for ticketing and baggage; it is nice to see Cush recognize that value.
Q: In Dallas, you’re telling fliers to "dump your older airline for a younger, hotter one." American responded by slashing fares to San Francisco and Los Angeles. Can you survive this fare war?
A: We’ll survive. At current fares, it will not be a profitable route but it wouldn’t be such a loss-making one where we would consider any type of reduction. You have to be in Dallas-Fort Worth if you’re going to be a business airline.
This is a particularly interesting view on the value of certain markets (elsewhere in the interview there is also discussion of pulling out of the Toronto market). Apparently there are some markets so important that losing money over a long period of time while serving them is OK. He doesn’t note just how much they’re losing or for how long they’re willing to keep losing that money, but it is quite a claim. Definitely makes me wonder about the long-term plan once again.
Q: Do you think that American is on the right path?
A: It’s hard to tell. There’s a culture there that is perhaps a bit risk-averse. In the past, it was always an airline that was willing to accept risk. The industry’s consolidated around it and all of a sudden American finds itself in third place. I don’t know if they have the answer. I do know their top guys. They’re smart, capable but at some point you need to stick your neck out a little bit if you’re going to get out of a rut.
Well, cutting chunks of the route map is one version of sticking ones neck out, I suppose. For a guy so keen to run a very limited airline with a very limited route network, it seems that telling others who are running a much more complicated setup that they’re not trying hard enough is an entertaining stretch. That’s not to say I think the AA plan is particularly great, but they also cannot really effect wholesale change just by flipping a switch. There’s a lot of momentum to be dealt with there.
Q: Mile for mile, airplanes burn more fuel than cars, trucks or trains. Do you think this poses a problem for the industry?
A: If we don’t find a way to clean up air travel, we’ll become a pariah. We’ll be what the coal companies used to be.
How about, "Planes are ever improving in efficiency and they allow for connectivity in the world and great advances that cannot be had any other way," as a response rather than shying away from the problem with your tail between your legs?
Q: In ten years, do you see Virgin America being a full-blown national airline?
A: That’s not our goal. The biggest discipline we need to have is not outgrowing the model. That means maybe 100, 150 aircraft, probably no more. The goal would be to be consistently profitable, the highest quality airline where we can hopefully make a few hours of people’s day a little bit nicer.
This is perhaps the most interesting of all the responses. It makes sense from one point of view, but that is a very simplistic approach. No airline is going to be all things to all people; the numbers simply don’t work out. At the same time, however, artificially limiting yourself to only serving major cities or only serving limited frequencies is a sure fire way to make sure that you’re not going to meet customer needs. And when serving those markets becomes a matter of entering into markets that area already rather competitive the revenue pressures are going to be even harder. I respect the theory but I don’t think it maps to the real world very well.
It seems to me that most of the answers Cush offers up are rather small-ball or short-sighted views of the market and how to operate successfully in it. Maybe I’m wrong, but I’m certainly not feeling all warm and fuzzy about the company’s future reading his views.
Read the whole story here if you want more.
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Posted by Seth on October 2, 2011 under frequent flyer, News, points |
The partnership between American Express Membership Rewards and Virgin America was announced several weeks ago but without many details at the time. Those details were expected to be announced by October 5, 2011, when the partnership was supposed to be fully in effect. Apparently the numbers came out a bit early and The Points Guy noticed the rates. Wow do they suck.
The conversion rate is 200 AmEx MR points -> 100 Virgin America Elevate points. Virgin America’s Elevate program has relatively fixed redemption values for the points, topping out around the 2 cents/point range. With this conversion factor the AmEx points are topping out at 1 cent/point and can actually do rather worse. That’s a pretty bad rate of return on those points.
It is even more crazy when you consider American Express also has a buy with points option that natively values the points at a penny each (1.25 for Platinum/Centurion card holders) and buying via that method actually is seen by the airlines as a revenue ticket so one earns more points (the native program points, not Membership Rewards points) for flying on that flight.
The only slightly reasonable explanation for why one would transfer AmEx points into Elevate at these rates is if you’ve got almost enough for a reasonably high-value award already and you just need to top off the account. Otherwise it is quite a bad deal.
This change, coming on the heels of Continental exiting the program as a redemption partner and the impending doom of devaluation for US-based earners in the British Airways Avios conversion, doesn’t really do much to offset the losses in the Membership Rewards program.
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Posted by Seth on September 29, 2011 under Flying |
I’d love to use the 20% off any flight code I just got from Virgin America but the travel period ends a week prior to me next west coast trip. As such, I’ve got a one-time use coupon code that needs a good home. The flight must be booked by midnight pacific time on the west coast on 30 September 2011. The travel must happen by October 27, 2011.
The fine print says that the coupon is only available for non-refundable tickets in the S, L, M, U, E, H, B, or V fare buckets.
If you can use the code leave a comment as to what you’d use it on and I’ll pick one and send it via email mid-day tomorrow.
