My little post on evolving frequent flyer programs lovingly entitled “Is the Dog Finally Wagging the Tail?” didn’t do much in comments, but I got a few cute emails about it. One especially heartfelt tome reminded me of the 10s of bazillions of dollars airlines make selling miles for our consumption for everything except actually flying on an airplane. Point taken, and in fact, this was something I intended to write about this week. Gary alluded to this towards the end of an excellent piece on Monday that is worth a read.
I have maintained for sometime that continuing the status quo is not going to end well for any of us. Awarding the same amount of miles for the same things airlines have historically done will not work in an era of 85 percent and higher load factors. On the surface, one might think that 15 percent of seats are flying around empty, and in the broadest sense, that’s true. But the total truth is that at 85 percent overall, the flights that people really want at the times they want them, are likely 100 percent full while the Tuesday night flight to Tuscaloosa is a little under 85 percent. Of course, there is more going on than high load factors and too many miles chasing too few seats.
All these big credit card bonuses haven’t been minted out of thin air, they were purchased by the banks in one way or another, and the cash flowed into airline coffers. While the fact that Delta, and now United, have offered an “out” if you will in forthcoming spend requirements for elite status in their programs at least tacitly acknowledges some customer value in card spend, that does not resolve a bigger problem. The fact is that the largest amount of miles are now earned through credit card spend, and the large majority of those spending mileage earners rightfully expect something in return. I would speculate that most of them aren’t looking for free television sets but instead to realize the dream of “free” travel. Will those free-spending dreamers get bit? More soon.
-MJ, July 2, 2013