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Puckinflight

An all things aviation blog

Category Archives: loyalty program

You may not have heard about Mlife, but you know their properties. Mlife is the casino loyalty program for MGM. Mlife members who link their Soutwest Rapid Rewards number will now earn 600 Rapid Rewards points for each stay at any of the 12 MGM properties in Las Vegas. Those properties include: the Bellagio; Mirage; MGM Grand; Luxor; Excalibur; Mandalay Bay; Aria; Vdara; New York New York; Circus Circus; Monte Carlo; and Railroad Pass. Also Mlife members will receive some sort of bonus for take Southwest flights. What exactly that bonus will be is not clear yet. Finally, Mlife reservations booked this month will get double Rapid Rewards points.

Happy Travels!

Colpuck

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Cute title aside US Airways is giving out bonus miles for people who purchase US Airways miles for the month of May. It is up to a 100% bonus on miles purchased, but is it a good deal?

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The transportation business has been fraught with fraud since the time it came into being. Ever since there were commercial sailing vessels there have been people unable to pay who tried to stowaway on the ship.  Of course in ye ol days, stowaways would get tossed overboard at least there was the deterrent factor of a watery death to dissuade people from stealing a ride. With the invention of airlines fraud came as well. Apparently, it used to be easy, or at least purported to be. Helen Hays plays the part of an airline stowaway in the 1970 film “Airport”  and goes into great detail about how to stowaway on airlines. In addition to stowaways there are other ways to defraud airlines through their loyalty programs.

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In the age of decreasing benefits and angry elites (how many times has UA been sued over benefits?) one airline is bucking the trend. ANA has tweaked their program providing some awesome benefits for Japan based flyers. First, for middle and top tier (Gold and Platinum) they will get unlimited upgrades to premium economy on international flights. Even though this benefit is contingent on availability at boarding it’s available on any fare class. NH’s product isn’t just UA’s Economy Plus, it’s an actual premium product, NH’s premium economy product has the same pitch as United’s domestic first and only slight less with 18.5in v 20in. Either way on a 10hr flight I’ll take it.

The less sexy but fundamentally more interesting addition, are the “Super Flyers” credit cards. These credit cards which are only available to mid and top tier elites grant a sliding scale of benefits based on the annual fee. For about $120.00/year the holder gets Star Gold status (lounge access), international premium economy upgrades, and 50% bonus redeemable miles. Seriously, this is greatest travel credit card ever made. Of course the catch is you have to be elite to apply, but not to renew every year.

My suggestion to any Japan based flyers is to get status one year, then get this card. Then it doesn’t matter if you fly or not, you still have basically the best mid-tier airline status in existence.

 

Happy Travels!

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So it is starting to become old news that Delta is adding a minimum spend requirement to the SkyMiles elite tiers for 2015. I am a bargain basement mileage runner looking to get status at the lowest possible cost. In short I am the person Delta is looking to eliminate from its elite rolls. CNN Money to did a cogent review of the change, http://finance.fortune.cnn.com/2013/01/23/delta-frequent-flyer/.

CNN’s argument is this, let’s say I am going from Phoenix to Orlando, before the change since I have status of Delta, I would take them at equal or pay a slight premium to fly Delta. Now that I will not have status, I will only take Delta if they are at best equal with other carriers. So here is the question that needs to be asked, does this change make me wan to spend money on Delta? Easy answer is no. Does it make any flyer want to spend money on Delta? I don’t think so, the people who will be elite under this scheme will be the business flyers and they don’t care since it is not their money.

What CNN fails to consider though is this. People generally see frequent flyer programs as equal. If you look on surface, Delta, American, US, and United all have very similar programs. All offer trips for 25K miles, all offer credit cards, all allow rewards with partners. What people do not see is the fact that all the programs are different. Critically here is the value of a SkyMile. A SkyMile is worth less compared to an AA, US, or United mile. It is worth less because their miles are generally difficult redeem at the 25k level, and there are few partners to redeem on. Without elite status the SkyMiles program is of little benefit reward wise. However, the average elite traveler will not notice this, well until they find themselves earning at a lower level.

Delta is trying to polarize their program. Delta wants to attract the high revenue flyers even if they are high cost. Delta doesn’t care if they are spending 10 cents a mile on a flyer if they are getting 30 cents mile from that flyer. Also Delta wants as many people as possible in the SkyMiles program. The person who doesn’t travel and just has the credit card to redeem for the occasional trip to Orlando. This flyer represents very little cost to Delta and the revenue from the credit card and the occasional ticket that is redeemed or sold outweighs that low cost. Delta thinks by implementing this program they will eliminate the high cost low revenue flyer that I represent. The question remains what revenue will replace the albeit limited revenue I generate.

CNN’s review is a cogent review of the new program and why it will fail. That being said, I think it will succeed the push to a revenue based model is to strong.

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Yahoo.com is reporting that Delta has confirmed the revenue requirement for their 2014 SkyMiles program.

http://finance.yahoo.com/news/delta-updates-skymiles-medallion-program-140000338.html

This is disappointing, mostly because I travel on el-cheap fares, but it is not unexpected. I suspect if this sticks, UA and AA will join them. That being said, the changes only apply to US and US Territory members. So those wishing to avoid this need only to have a non-US address.

http://www.delta.com/content/www/en_US/skymiles/about-skymiles/news-and-updates.html

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JetBlue and Southwest have done it, is it time for a legacy to do it? Delta released its changes to the 2013 Skymiles program. In addition to the normal downgrades that have become standard for airlines a little something extra was thrown in.

For 2014 in addition to normal EQM requirements members in the United States and US Territories will be measured by Elite Qualifying Dollars (EQD) the spend requirement to attain status will be $2,500 to $12,500 depending on level. This can be waived if the member has a Delta Skymiles Amex and has an annual spend of $25,000 on the card.

This according one Flyertalker was posted on Delta.com and then removed. So right now it exists as unconfirmed rumor. These revenue based models have been rumored for sometime. One aviation blogged declared in 2011 that the United 2012 program would be based on the same lines as outlined above. That rumor was proved false.

However, with the general increase in the amount of outstanding redeemable miles and the ability of airlines to track members activity, it seems like it is only a matter of time before this happens.

I personally believe that it really is only a matter of time before revenue models come into existence and replace the traditional EQM model. It is one reason why I am looking to get a lifetime’s worth of travel done as soon as possible in order to avoid being excluded by revenue programs.

Assuming this idea really does exist lets look at the actual numbers.

The price listed is $2,500 to $12,500, so figure $2,500 increments for each level.

Silver, $2,500 (25k Miles)

Gold, $5,000 (50k Miles)

Platinum, $7,500 (75K Miles)

Diamond, $12,500 (125K Miles)

Delta is setting minimum spend at 10 cents per EQM. Most mileage runners shoot for a goal of 3.5 cents/EQM, when applied to 125k miles is $4,375. So a mileage runner that made Diamond this year would be Silver come Jan 2015. (status is good for a year after earning it)

That seems a little high to me. The revenue based model will certainly exclude unprofitable travelers, I think the loss would not be made up by the increase in revenue by people driving for status. Think about it, Delta could get a 50% bump in revenue by setting the spend levels at 5.25 cents per mile or a 100% bump in revenue at 7 cents per mile.

At 5.25 cents per miles

Silver would be $1312.00 up to diamond at $6562.50.

The logical conclusion would be that this program is not designed to drive revenue but to cull the herd of elites to manageable level. The problem is Delta doesn’t have a huge number of elites to begin with. A Gold member on Delta will likely be upgrade most of the time, where a gold member on United gets the upgrade far less often. So, why is Delta trying to cull the elite rolls, where there are not that many to begin with? It is that question alone that makes me question whether or not this is really going to happen.

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Airline miles are huge business. In some of the darker times airlines were solely supported by their frequent flyer program. Originally, a person took a flight and got miles equal to the distance of the flight. Now, a person can get miles from eating out, dry cleaning, hotel stays, rental cars, credit card spend, and even online purchases. Let’s look at how this works; an airline sells miles to a company or an individual at set rate. Then the program members get miles for doing business with the purchaser.

A specific example should clear this up. We’ll use online shopping. An airline sells miles to an online shopping portal. The online portal lists a bunch of online merchants. When the consumer goes through the portal to make a purchase, the online merchant pays a commission to the portal. The portal tells the airline to issue the consumer some miles and the portal pays the airline with the commission they get from the purchase. The portal gets its profit from the margin between the commission and the cost of the miles.

So there are two agreements at issue here. First, there is the buy/sell agreement between the portal and the airline. Next there is the commission/services agreement between the portal and the merchant. Now there is a lawsuit that was filed in a Massachusetts’ court over this type of deal. The complaint can be found here. I’ve surfed around and tried to figure out what is going on with this. Resident ethicist Wandering Aramean has basic commentary here. Here are the facts near as I can tell. Over the summer a web hosting company ran a promotion with two airlines (US and HA) that for new accounts a person would get X amount of miles. The company the web service hired to run the promotion and purchase the miles mistakenly described the promotion as any transaction. The result was the plaintiff’s made a large number of micro-transactions which earned millions of miles. The web hosting company canceled some the transactions citing fraud, and the promotion company is refusing to award the miles.

This case is going to turn on what the agreement was between the hosting company and the promotion company. Notice I didn’t say airline. While the airlines are pleaded as defendants they are not going to be liable here. Why? Mostly because they couldn’t care less about how many miles the promotion company buys and how they award them. All the airlines see is note that says please issue X miles to Joe Cool, and here is a check to cover the cost. If the promotion company got the agreement right, then web hosting company will have to pay the promotion company for the miles. If the promotion company got the agreement wrong they are going to have to cut the airlines a huge check.

This lawsuit is morally bankrupt. I agree with Wandering Aramean that the plaintiff’s here have gone too far. While legally, someone may be liable for this mistake, these plaintiff’s actively took advantage of it. Now it looks like not one but two companies are at risk of going out of business through having to pay for the miles a poorly worded advertisement said would be issued. I like flying and I like the challenge of collecting miles, but this is too much.

Happy Flying!

Colpuck

Ahh the age old adage spoken by political partisans all of the United States this time of year. If the other guy wins then you are on the first plane out of the United States. Well, we say that but do we really mean it? Well, it’s time to find out JetBlue is running a put-up or shut-up marketing campaign called Election Protection. When you sign up you select a party that you want to win, and if you lose than you get entered into a drawing for two free tickets to anywhere JetBlue flies outside of the country. There will be 1,000 winners, err losers, err it’s too hard to tell. Either way if your guy loses then these tickets if you win will surly salve the burn.

I entered, and I selected the person I thought most likely to lose the election. I guess that makes me guilty of JetBlue “voter fraud.” I chose to go to St. Marten, because I have always wanted to go there. Interestingly enough, the site breaks down destinations by choice. Republicans are planning on going to the famous Caribbean tax shelters of Grand Cayman and the Bahamas, while the democrats are headed to Columbia and Cancun. I guess we know which party parties harder.

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John Nicholson of the Huffington Post publishing an article today proclaiming America’s need for a five star airline. http://www.huffingtonpost.com/john-nicholson/america-needs-a-five-star-airline_b_1823666.html In this article he proclaims need for better loyalty programs and better on-board service. He states that compared to international carriers US Airlines provider generally inferior service and an inferior product. He writes from the position of being one of Delta Airlines “Diamond” members. Diamond is the top tier of Delta’s loyalty program. His argument is that US carriers should strive to become more like the foreign carriers like Singapore Air, and that the regulatory system in place, is a detriment to US commercial aviation.

He is both right and wrong.

Loyalty programs are interesting. The US airlines have the most generous frequent flyer programs. Let’s compare John’s program of choice, Delta Skymiles. With Skymiles John gets complementary upgrades on domestic flights, discounts or no fees at all, upgrade certificates, lounge access, bonus miles. Compared to Lufthansa Delta’s program is beyond generous. Lufthansa’s Miles and More program doesn’t provide complementary upgrades, limited bonus miles, and limited upgrade opportunities. But it is not the miles on the ground that concern me, it is the benefits in the skies. Even if Lufthansa gave out complementary upgrades it would be upgrades to a coach seat with slightly better food. The plush seats that John likes so much do not exist on most short haul flights.

John’s point though is well taken. Ask any frequent flyer, who would they fly long haul, an American carrier or a non-American carrier and you would get non-American carrier every time. Why is that? Well service and seats tend to be better on non-American carriers. However, there is no incentive for American carriers to provide better long haul service. Most US Airlines are in agreements with European carriers to share all revenue on long haul flights. This means that while Delta and Air France charge the same amount and split the revenue, the lower cost structure of Delta’s service means they make more money. Oddly, the most innovative US carrier in premium cabins has been US Airways, and they are not in a revenue sharing agreement with anyone.

John’s next point is that loyalty programs have been devalued. No shock there. US Airlines see loyalty programs as a revenue center, not a cost center. Airlines make huge amounts of money by selling miles to banks, credit cards, hotels, and shopping partners. The problem is the same with countries, the more miles issued the less each mile is worth. Airlines have countered this problem by reducing the amount of available seats and increasing the cost of awards. As John knows he would be very lucky to find domestic reward sets for 25,000 miles. Now, most seats on Delta go for 40,000 miles. This is basic inflationary pressure. Non-US airlines tend to limit the amount of miles issued through non-airline partners and through bonus miles as part of elite service.

So what can US Airlines do? Well, like John said US Airlines need to rededicate themselves to service. It is ok for airlines to provide peanuts or sell meals if the service is good. It is beyond me in the age of increasing dissatisfaction with airlines; the airlines can use service as a way to differentiate themselves. However, the service personnel are fighting any change that would require them do work. American started to provide PJ’s to their long haul first class passengers. The union that represents American’s flight attendants fought the change saying it would impact security. I have been on flights with downright atrocious service. Maybe the glamor is out of air transportation, maybe it is not. US airlines need to make these changes in order to be successful, it is just a question of will they.

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