With each change to loyalty program benefits it seems that the goal of the programs seems to be cutting benefits or shifting who gets the benefits. And these shifts are nearly all focused on revenue, not just miles flown. Looking at the recent changes to the JetBlue TrueBlue program and the virgin America Elevate program – both added elite levels recently (Read about JetBlue, Virgin America)- it seems that the pace of this change might be accelerating. The TrueBlue and Elevate programs have been revenue-based for a while now; that they have continued down that path with their elite programs shouldn’t be much of a surprise. But is their move to add elite programs changing the shape of the industry? In my recent story posted on the APEX Editor’s Blog I argue that the move is hastening the demise of benefits based on miles flown.
TrueBlue Mosaic, their new elite program, is based on feedback from the company’s customers according to the Director of Loyalty, Dave Canty:
Mosaic is a natural evolution; we have always planned for TrueBlue to add meaningful benefits that customers appreciate.… We engage with our customers listen to their feedback, and that helps inform our future plans. TrueBlue is indicative of that approach, we designed it with a lot of customers engaged in the process…a cross section of once a year flyers to 100+ a year flyers, it is important that we listen to all, not just the top.
And the changes aren’t ending with the introduction of Mosaic. Canty sees a future with more benefits and an evolution of the program:
We will continue to evolve the program, and look for opportunities that make it even better for our customers, I’m not interested in being Legacy-Like, we will make changes or enhancements that are true our brand and deliver for our customers. I see plenty of blue sky ahead.
Reading between the lines, it is pretty clear that the carrier is happy with their revenue-based program and that they see a bright future for the approach. And they are going to be continuing down that path for the foreseeable future.
While neither the TrueBlue Mosaic nor the Elevate Elite programs are likely going to see a massive influx of elites from other airlines based on their new tiers, it is quite easy to see how the move gives cover to some legacy carriers to further change their programs. Earlier this year United Airlines significantly increased the earning rates on many first and business class fares. Yes, the earning is still distance-based, but the impact of revenue is more significant now than ever before. Similarly, on the benefits side of the equation United is favoring fare over status level within the elite tiers for certain upgrades. Delta is in on the game, too, cutting earning rates on unpublished fares recently. And many of their benefits associated with upgrades on long-haul flights have required high fares for a while now.
Oh, and Gary is suggesting that Delta might be moving rather quickly down this path; I think it is related to the unpublished fares thing. I suppose we’ll see.
Does this mean the end of distance-based programs is near? Hardly. It will be several years before the transition is complete. But it is coming. You can see it on the horizon. It will mean a change to the way we play this game. Probably a change for the worse for me personally, but not so much that I’m willing to throw in the towel quite yet. I still have a few good years left, I think.
UPDATE: The fare is gone but the giveaway continues. And now there’s a GPU valid through the end of 2012 available, too. So if you could use that toss your comment in below.
Seems to be a bit of a fare war going on out there on transcons right now. These aren’t the best prices ever, but a sub-$250 round trip right now is a pretty good deal these days. Virgin America, Delta, US Airways, American Airlines and United Airlines are all in on the deal and inventory is reasonably decent across a wide range of dates. JetBlue has joined the party, too, but at $5 more than the others.
Here’s a search for one-way flights in October:
Like I said, lots of inventory open right now. Oh, and it works from LaGuardia, too, if you want a few extra miles on the connection. This fare is loaded through the end of the schedule (or maybe only mid-December; I’m having trouble parsing conflicting fare rules from different sources), with a limited number of dates (mostly holiday weekends) excluded. Here’s the limits from United:
TRAVEL IS NOT PERMITTED ON 14OCT 12 OR ON 21OCT 12 OR
16NOV 12 THROUGH 17NOV 12 OR 24NOV 12 THROUGH 26NOV 12 OR
19DEC 12 THROUGH 23DEC 12 OR ON 26DEC 12 OR 28DEC 12
THROUGH 30DEC 12 OR ON 02JAN 13 OR 05JAN 13 THROUGH
06JAN 13 OR ON 15MAR 13 OR ON 17MAR 13 OR ON 22MAR 13 OR
ON 24MAR 13 OR ON 29MAR 13 OR ON 31MAR 13 OR ON 05APR 13
OR ON 07APR 13.
So, about that free upgrade…
Turns out that I have an RPU valid for a one-way upgrade on United which I’m not going to be able to use. It expires on October 31 and you must complete travel by that date. If you have an itinerary with a transcon segment and there is award inventory available (look for the “R” bucket on your reservation) then leave a comment below. Even if it doesn’t have award inventory go ahead and leave a comment, but priority will be given to those which will clear immediately. I’ll pick a random itinerary to win the upgrade on Friday at noon EDT and we’ll go from there.
Virgin America has upgraded their Elevate frequent flyer program, announcing today the introduction of a tiered elite status system. The changes add two tiers, Elevate Silver and Elevate Gold, to the program and add a number of nice benefits for customers. The program benefits will take effect on August 8, 2012.
Much like the rest of the program, the qualification for Elevate elite status is based on spend with the company. The silver tier requires 20,000 status points to qualify which is the equivalent of $4,000 in spend on airfare. Gold status requires 50,000 status points. Customers carrying a co-branded credit card can earn up to 10,000 status points for spending $25,000 annually on the card as well, making qualification a bit easier, though cards without an annual fee earn only 5,000 status points at the $25,000 spend mark.
The benefits of the program will vary based on status but the underlying concepts are pretty consistent. All elites will be permitted to check in using the first class line at airports, use priority security screening lines where available and board the plane earlier than other passengers.
Elites will also be able to check bags for free. Silver elites get one free bag and gold elites get three. Similarly both will earn bonus points for their flying. Silver elites will earn a 25% bonus and gold elites a 100% bonus on flights. These bonus miles are only earnt on Virgin America flights, not on Virgin Atlantic or Virgin Australia travel.
Both Silver and Gold elite passengers will also be able to select Main Cabin Express seats (designated seats at front of the cabin) at the time of booking rather than waiting until check-in. Elites will also be eligible for free upgrades to Main Cabin Select (extra pitch, free food & drinks) on a space-available basis. And elites will have early access to first class buy-ups on the day of departure. These discounted upgrades will be available to gold elites starting 24 hours out and to sliver elites 12 hours out.
Finally, there is one benefit that Virgin America is offering which will be hard for any other program to match: A trip to space!
The passenger who earns the most Elevate status points (i.e. spends the most cash with the company) between August 8, 2012 and August 7, 2013 will win a trip on Virgin Galactic. Out of this world!
The program is obviously targeted at folks spending a good chunk of cash with the airline. Not much of a surprise there as the business side really wants the be rewarding the those customers who actually are contributing to the bottom line more than those who have figured out how to scheme the system. And, while it would be nice to see a few freebie upgrades to First Class for the top elites, the cabin has very few seats and easier access to those is certainly better than not.
With more than 200 new narrow-body aircraft on order American Airlines had the opportunity to make a big move in terms of aircraft interior configurations and passenger experiences on board. The airline announced their move today, with plans to be at the front of the pack in many ways. Eventually.
All seats will have power – both 110V and USB – as well as in-seat IFE systems. The planes will have in-flight internet connectivity. No real surprises with those announcements; the carrier is mostly just keeping pace with this move. The real surprise comes in the announcement of a dedicated A321 fleet for transcon service, replacing the 767s currently flying those routes.
That there is a dedicated transcon fleet makes sense. United Airlines has a similar approach and Delta uses their international configured 757s on the routes. The surprise comes from the fact that American is actually going to keep a first class cabin on these planes. Even while pulling the first class seats out of most of their long-haul aircraft they’re installing it fresh in the A321s running the transcons. United is the other carrier currently offering a transcon first class product (I consider the Virgin America option to be business class for several reasons) and that is going away later this year or early next as they reconfigure to a two cabin product.
The new AA transcon first class cabin will be nice, filling the forward zone on the A321 with 10 seats in a 1-1 configuration. The 10 seats matches the number currently in service on the 762s.
The business class cabin will be smaller, with only 20 seats rather than 30, in a 2-2 configuration. These seats are pretty much the same as those United will be putting on their 757s plying the same route. It won’t be hard for American to market their offering as noting that the best United can offer is a product they consider mid-tier.
And, all the way at the back, the American A321s will have 12 rows of seats in a 3-3 layout for economy class passengers. The section will be split between Main Cabin Extra and regular economy. Half of the seats will have the extra legroom and the other half will not.
These are the Recaro Slimline seats which many other airlines have been installing. Lufthansa has two different versions, one for short-haul and another for long-haul and the experience is quite different between the two. It will be interesting to see how American equips those seats.
With only 102 seats in the new configuration versus 168 on the planes there will be a significant drop in capacity in these markets unless additional frequencies are added. This could result in prices increasing as inventory is pressured when the new aircraft are deployed.
These aircraft will be joining the fleet starting in late 2013 with deliveries continuing through 2014. As exciting as the announcement is customers will be waiting at least a year before these configurations show up in the fleet.
American committed to in-seat IFE and a 3-cabin first class product for domestic flights. They did this in the face of other carriers (and even themselves) cutting 3-cabin service on longer routes and investigating device-based streaming media rather than in-seat. Sheer brilliance or denial of industry trends? I suppose we’ll find out soon enough.
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.
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.
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 JSON 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.
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.
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:
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.
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.
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.