The State of Frequent Flyer Programs

I was reading a post in the blog At The Gate concerning thoughts on the State of Frequent flyer programs.  The post suggested that somehow the onerous changes in programs like Delta’s Skymiles were due to greed by ffers or were a make up for all of the tricks that bloggers had provided that allowed ffers to maximize the benefits of ff programs.  This is my response.

Frequent flyer programs were never about loyalty from the customer. Customers were never required to be loyal to an airline. Loyalty is faithfulness to something or someone to which one is bound by pledge or duty. Airlines never expected or required that its FFers not fly with other airlines or even primarily with one airline, or act in the best interests of the airline. FF programs never involved any duty or relationship of trust. At least not on the part of the customer anyway.

Airlines promise ff benefits. They tell customers (who are also stakeholders) after you meet certain conditions, you will receive certain benefits. It is a breach of trust, loyalty and fundamental fairness when after expending money and effort to meet those conditions, airlines tell customers the promised benefits are no longer available or are available at a much higher price than was promised. That is why customers are angry. Customers irrationally expected the airlines to keep their promises and treat them fairly when airlines are under no legal obligation to do so and they can make more money (short term) by reneging..

You seem to think that customers are upset because they can no longer exploit the airlines ff programs and that customer exploitation of ff programs was a significant factor in the airlines previously poor financial performance. Bloggers are the ones developing and advertising ways to take advantage of or maximize the benefits of ff programs. Even with people like you doing their best to minimize the value of ff programs to airlines, that still is not the reason most airlines could not make money. Few of the tens of millions of ffers take advantage of the tricks you advertise. On the contrary, I assert that most of those in ff programs fail to take full advantage of the benefits they have earned. Letting miles expire and booking award flights at levels higher than potentially available are two examples that come to mind. I’m sure you can think of others.

Southwest has been able to maintain a ff program and turn a profit for decades. The airlines that were losing money hand over fist did so because their costs exceeded their revenues. Simple. The primary culprit for decades of airline losses was high costs due to the absurdly generous level of employee wages and benefits and overly restrictive work rules that the legacy airlines brought with them from the era of regulation coupled with the inability to raise fares because of competition and excess capacity. The business model of being all things to all customers helped keep costs high, too.

Consolidation in the airline industry has eliminated much of the competition and made it easier for the industry to control capacity. Although fares have come down in recent years industry wide, the fares for legacy carriers have actually increased. Plus fees have exploded.

Furthermore, because a business or industry lost money in the past provides no economic justification for making more than a reasonable rate of return going forward. Today’s record profits are not benefitting the shareholders, customers, employees, communities and creditors who suffered or lost money in the past because of the airlines’ mistakes.

As long as airline management continues to reap multi-million dollar bonuses from listening to the consultants and analysts who see further ways to raise earnings guidance for the next quarter, ffers, employees and customers will continue to be the victims of greed.

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