United Airlines Unveils Changes to 2015 MileagePlus Program
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WorldTraveler
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this is precisely what happens as a result of consolidation in the industry. Companies don't need to incentivize customers who they are going to carry anyway.
and AA will do the same eventually. Chances are high that WN will make some of its own changes as well.
and AA will do the same eventually. Chances are high that WN will make some of its own changes as well.
Admittedly I have always believed SkyMiles was a weakness for DL (compared to AA/UA) in terms of mileage awards, international upgrades, and partner airlines. But I think given this change-especially depending on how things play out at AA-you will see people defect to DL given the better operational performance, superior on-board product and overall better experience. SkyMiles Medallion is great for domestic travelers PM and DM are regularly upgraded, phone support is about equal to AA (EXP/CK line quality has degraded considerably since Tuscon office closed in 2012) and IRROPS protection is great in my experience as GM and PM.
WN transitioned to revenue (from segments) in 2011, but recently changed the redemption multiplier, requiring more points for Wanna Get Away (low bucket) awards.
Josh
WN transitioned to revenue (from segments) in 2011, but recently changed the redemption multiplier, requiring more points for Wanna Get Away (low bucket) awards.
Josh
WorldTraveler
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AA and DL will benefit again from UA's problems precisely because lower tier MP members had an incentive to stick with UA because of better mileage awards. yet, DL's revenue has not taken a hit as some suggested it would but DL is running a more reliable operation with better amenities across the board than UA.
AA is benefitting from the historic overlap and competition between AA and UA and the fact that AA so far is doing a far better job of merging than UA did - and has avoided some of the bigger issues such as obtaining labor agreements.
Yes, many think that Skymiles is weak for DL but the fact that DL has led the industry in revenue growth says that it is rewarding the right people while not overrewarding people who won't use the reward to make a difference in revenue for DL.
that is the very same reason why DL has smaller int'l premium cabins and more stringent upgrade requirements - and why they extended that policy to the transcons.
With capacity in the industry controlled by a handful of rational companies and choices diminished, the perks across the board will not be what they were in the past.
If AA doesn't make the change, AA could be at a disadvantage in mileage redemption for the highest value customers where DL and UA might be preferable choices for those customers.
It will be a lot harder to figure out who wins and who loses with UA adopting it if AA doesn't.
AA is benefitting from the historic overlap and competition between AA and UA and the fact that AA so far is doing a far better job of merging than UA did - and has avoided some of the bigger issues such as obtaining labor agreements.
Yes, many think that Skymiles is weak for DL but the fact that DL has led the industry in revenue growth says that it is rewarding the right people while not overrewarding people who won't use the reward to make a difference in revenue for DL.
that is the very same reason why DL has smaller int'l premium cabins and more stringent upgrade requirements - and why they extended that policy to the transcons.
With capacity in the industry controlled by a handful of rational companies and choices diminished, the perks across the board will not be what they were in the past.
If AA doesn't make the change, AA could be at a disadvantage in mileage redemption for the highest value customers where DL and UA might be preferable choices for those customers.
It will be a lot harder to figure out who wins and who loses with UA adopting it if AA doesn't.
I agree the program reforms have been long in the making and much easier to implement in the current economic environment and following the industry consolidation. DL has said the distance is no longer a good proxy for fare/revenue as airfares aren't strongly correlated to distance but rather capacity, competition and other market dynamics. Programs for foreign carriers have long been structured this way and the US carriers are only catching up.
Unlike DL, UA has said partner accrual will remain distance based however it is unknown if the earnings rates will change, which I expect they will. Elites already don't earn MQD/PQD on other carriers tickets which undermines the value of the alliances and other partnerships in place. Although for many years now DL wouldn't award MQMs for travel on KE. I'm also not sure how well DL restricting upgrades JFK-LAX/SEA/SFO will turn out. Many Medallions are not happy. I could understand requiring a regional upgrade for those routes but a global upgrade is beyond ridiculous IMO, especially when they could be used for Asia/Europe/etc.
Josh
Unlike DL, UA has said partner accrual will remain distance based however it is unknown if the earnings rates will change, which I expect they will. Elites already don't earn MQD/PQD on other carriers tickets which undermines the value of the alliances and other partnerships in place. Although for many years now DL wouldn't award MQMs for travel on KE. I'm also not sure how well DL restricting upgrades JFK-LAX/SEA/SFO will turn out. Many Medallions are not happy. I could understand requiring a regional upgrade for those routes but a global upgrade is beyond ridiculous IMO, especially when they could be used for Asia/Europe/etc.
Josh
eolesen
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I wouldn't make a bet either way on AA following. They could just as well remain the differentiator, and keep the distance based formula, or they could just follow the other two.
They don't gain much by following, but it's also not a given that they'd lose by staying where they are.
oneworld wins me over by not having to worry about whose metal I'm on, while DL lost all my business last year for making it an issue.
They don't gain much by following, but it's also not a given that they'd lose by staying where they are.
oneworld wins me over by not having to worry about whose metal I'm on, while DL lost all my business last year for making it an issue.
True, AA has held out on a number of industry wide program changes. I think merger or not, there were going to be changes to AAdvantage. As it is now the sAAver and partner award levels haven't been changed since November 2008. I think if AA eventually migrates to a spend based model they will somehow incorporate partner spend much like they are the only carrier to include partner miles flown in lifetime status.
Josh
Josh
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Correct me if I am wrong, but DL does extend int'l upgrade benefits to AF/KL. KE is not a JV partner and a major source of the friction between DL and KE has been because KE has used DL codeshares and FF reciprocity to undercut DL in core markets which both compete in - DL via Japan or nonstop from the US and KE over ICN.
The fact that KE flies double daily ATL-ICN sometimes on the 380 while DL flies a single 744 indicates that the relationship is out of balance.
The difference between DL and AA and UA is that DL has made carrier specific exceptions based on what DL perceives to be best for DL; with a properly created JV, it is a whole lot harder for one carrier to benefit at the expense of the other.
If UA and DL both offer better mileage earning opportunities for the highest revenue passengers, they could well gain an advantage if AA doesn't do the same.
Of course AA could respond by sweetening benefits for their elites without knowing the revenue/cost benefit and end up diluting the AAdvantage program but AA really can't do nothing without having an impact.
OTOH, AA has the current advantage of pulling customers off of UA so how the two things intersect remains to be seen.
The fact that KE flies double daily ATL-ICN sometimes on the 380 while DL flies a single 744 indicates that the relationship is out of balance.
The difference between DL and AA and UA is that DL has made carrier specific exceptions based on what DL perceives to be best for DL; with a properly created JV, it is a whole lot harder for one carrier to benefit at the expense of the other.
If UA and DL both offer better mileage earning opportunities for the highest revenue passengers, they could well gain an advantage if AA doesn't do the same.
Of course AA could respond by sweetening benefits for their elites without knowing the revenue/cost benefit and end up diluting the AAdvantage program but AA really can't do nothing without having an impact.
OTOH, AA has the current advantage of pulling customers off of UA so how the two things intersect remains to be seen.
I was referring to Medallion Qualification Miles (MQMs) which are not earned on any Korean Air fare-including unrestricted First and Prestige/Business Class. The new systemwide upgrades introduced last year for Diamonds as part of choice benefits are redeemable on AF & KL, however there are considerable fare and inventory restrictions. In practice, I doubt very many people redeem much like the old DL systemwide upgrades that excluded most fares. UA allows Global Premier Upgrades (GPU) to be used exchanged for a paper voucher that is valid day of departure on LH. AA similarly offers upgrade awards for BA and IB (with miles only, not eVIPS) however they must be ticketed on AA 001 stock and have many restrictions, so in practice I don't think there are very many redemptions.
DL and KE aren't currently in JBV so not sure why you feel the capacity isn't appropriate, they are partners but still are competitors. Personally I have had great flights in KE Prestige and quite enjoy traveling with them. Don't believe DL currently operates ATL-ICN (I actually was traveling through the E concourse on the day of the inaugural in June 2007), isn't it currently just DTW & SEA?
Josh
DL and KE aren't currently in JBV so not sure why you feel the capacity isn't appropriate, they are partners but still are competitors. Personally I have had great flights in KE Prestige and quite enjoy traveling with them. Don't believe DL currently operates ATL-ICN (I actually was traveling through the E concourse on the day of the inaugural in June 2007), isn't it currently just DTW & SEA?
Josh
WorldTraveler
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No, DL does not fly ATL-ICN but the point is that NRT is a larger destination, DL is the hometown carrier, and DL and KE provide the only passenger service from ATL to East Asia. It should be obvious that KE is significantly undercutting DL in order to fill its planes.
If it isn't obvious, I can tell you the names of a number of friends who travel from ATL to Asia and who choose KE because their fares are lower - and in many cases a lot lower.
It isn't just about ATL though. DL dialed back the relationship with KE because the relationship was very much imbalanced in favor of KE.
ICN is a pretty small market compared to the amount of capacity that KE offers. It is obvious that KE's business plan is built around high volume connections using their geographic advantage - not unlike what the ME3 do.
Given that DL has reported 25% profit margins on the Pacific during the peak season and have remained profitable when all other carriers have lost money in Asia, DL knows what is in their financial interests and what is not.
It is also worth noting that with the addition of DL's SEA-ICN service, DL is the only US carrier with two ICN transpac flights on its own metal and also has 1 1/2X the capacity to ICN as any other US carrier.
the relationship between DL and KE is still being developed and is not representative of DL's overall mileage program.
You are right that DL has more restrictive upgrade restrictions on partner airlines but they also have more restrictive upgrade policies on DL metal. DL simply does not give away as much of its product as part of incentive programs and yet DL has had the fastest growth in revenue among the legacy US airlines over the past 5 years and is strongly profitable. IN many comparable markets, including across the Pacific, DL has average fares and total onboard revenue that is at the top of or on par with what the highest revenue carriers get. Remember also that a business class seat takes up the space of 3-4 coach seats. If DL has an 80% plus chance of filling those 3-4 coach seats at fares that are close to the average that DL can get for the flight, an upgraded passenger would have to be paying a fare 2.5 or more times the average fare for the market in order for DL to make more money off of one upgraded passengers vs. several coach passengers. Fares of that level for business class are typically available on a confirmed basis.
For a passenger, that might not be what you want to hear. but it is exactly the word that stockholders and employee profit sharing participants want to hear.
If it isn't obvious, I can tell you the names of a number of friends who travel from ATL to Asia and who choose KE because their fares are lower - and in many cases a lot lower.
It isn't just about ATL though. DL dialed back the relationship with KE because the relationship was very much imbalanced in favor of KE.
ICN is a pretty small market compared to the amount of capacity that KE offers. It is obvious that KE's business plan is built around high volume connections using their geographic advantage - not unlike what the ME3 do.
Given that DL has reported 25% profit margins on the Pacific during the peak season and have remained profitable when all other carriers have lost money in Asia, DL knows what is in their financial interests and what is not.
It is also worth noting that with the addition of DL's SEA-ICN service, DL is the only US carrier with two ICN transpac flights on its own metal and also has 1 1/2X the capacity to ICN as any other US carrier.
the relationship between DL and KE is still being developed and is not representative of DL's overall mileage program.
You are right that DL has more restrictive upgrade restrictions on partner airlines but they also have more restrictive upgrade policies on DL metal. DL simply does not give away as much of its product as part of incentive programs and yet DL has had the fastest growth in revenue among the legacy US airlines over the past 5 years and is strongly profitable. IN many comparable markets, including across the Pacific, DL has average fares and total onboard revenue that is at the top of or on par with what the highest revenue carriers get. Remember also that a business class seat takes up the space of 3-4 coach seats. If DL has an 80% plus chance of filling those 3-4 coach seats at fares that are close to the average that DL can get for the flight, an upgraded passenger would have to be paying a fare 2.5 or more times the average fare for the market in order for DL to make more money off of one upgraded passengers vs. several coach passengers. Fares of that level for business class are typically available on a confirmed basis.
For a passenger, that might not be what you want to hear. but it is exactly the word that stockholders and employee profit sharing participants want to hear.
Not sure about their pricing or fare dumping, but IMO I prefer KE metal over DL metal all things equal especially if it's A380. Yes DL has a competitive C product but I generally prefer foreign carriers with a few exceptions. The product and in-flight service is just more polished and consistent. I have no problems with the program changes towards revenue provided the airlines are transparent and communicate the changes in advance which is exactly what DL has done.
I disagree though DL does give away plenty of upgrades and product-not meaning to argue-but seriously the vast majority of the domestic system is eligible for complimentary upgrades. DL liberalized international upgrades last year (around the same time the cabins shrunk), but as a customer they do give away plenty. Lately they have been selling many cheap restricted F tickets which can be had for as little as $100 over a Y seat in some markets. I'm not challenging their revenue performance simply saying that in most domestic markets Medallion upgrades are still the primary means for filling seats and are valuable benefit to many Medallions.
Josh
I disagree though DL does give away plenty of upgrades and product-not meaning to argue-but seriously the vast majority of the domestic system is eligible for complimentary upgrades. DL liberalized international upgrades last year (around the same time the cabins shrunk), but as a customer they do give away plenty. Lately they have been selling many cheap restricted F tickets which can be had for as little as $100 over a Y seat in some markets. I'm not challenging their revenue performance simply saying that in most domestic markets Medallion upgrades are still the primary means for filling seats and are valuable benefit to many Medallions.
Josh
WorldTraveler
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you are far from the only one that has voiced the same preference for foreign over US carriers.
When you consider that US carriers hire FA with the expectation that they will be employees for life. Asian carriers particularly do not think that way - and their wage scales are lower to begin with.
It's not hard to offer a superior product when your labor makes far less.
It to me is no different than giving preference to a local store vs. a chain when you can or buying a domestically made car vs. an import. I'm not saying it is a hard and fast rule that I don't or wouldn't buy an import but no one should complain about weak US carriers if passengers continually choose foreign carriers.
And whatever weakness the US carriers have in product, they more than make up in the size of their home market which means they are better able to bundle intl and domestic services together for contract fares. KE can't sell seats solely within the US which means companies that want to get a decent fare on domestic flights have to be willing to give their int'l business to US carriers.
Yes, I am aware that DL offers both discounted business class fares as well as allows domestic upgrades just like AA and UA do. But given that the demand for upgraded seats far exceeds the supply, it is apparent that only the elite get upgraded or passengers who want to be up there pay for it - and DL does offer fairly reasonable upgraded first fares. DL also revenue manages discount availability and the fact that there are a smaller number of seats means that there just aren't that many discounted seats to be had. And other airlines, including the Asian airlines, offer discounted business class fares.
bringing this back to UA, DL and UA both have fairly balanced global and domestic route systems which puts them in the position of being able to reset the US frequent flyer systems - which you note are significantly disconnected from that of foreign carriers.
The biggest risk to UA in all of this is that they are doing it at the same time that they are clearly losing premium passengers because of their service levels which are below that of AA and DL.
When you consider that US carriers hire FA with the expectation that they will be employees for life. Asian carriers particularly do not think that way - and their wage scales are lower to begin with.
It's not hard to offer a superior product when your labor makes far less.
It to me is no different than giving preference to a local store vs. a chain when you can or buying a domestically made car vs. an import. I'm not saying it is a hard and fast rule that I don't or wouldn't buy an import but no one should complain about weak US carriers if passengers continually choose foreign carriers.
And whatever weakness the US carriers have in product, they more than make up in the size of their home market which means they are better able to bundle intl and domestic services together for contract fares. KE can't sell seats solely within the US which means companies that want to get a decent fare on domestic flights have to be willing to give their int'l business to US carriers.
Yes, I am aware that DL offers both discounted business class fares as well as allows domestic upgrades just like AA and UA do. But given that the demand for upgraded seats far exceeds the supply, it is apparent that only the elite get upgraded or passengers who want to be up there pay for it - and DL does offer fairly reasonable upgraded first fares. DL also revenue manages discount availability and the fact that there are a smaller number of seats means that there just aren't that many discounted seats to be had. And other airlines, including the Asian airlines, offer discounted business class fares.
bringing this back to UA, DL and UA both have fairly balanced global and domestic route systems which puts them in the position of being able to reset the US frequent flyer systems - which you note are significantly disconnected from that of foreign carriers.
The biggest risk to UA in all of this is that they are doing it at the same time that they are clearly losing premium passengers because of their service levels which are below that of AA and DL.
WorldTraveler
Corn Field
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and not entirely surprising given that Skyteam and Star are both larger than oneworld and also contains a number of joint ventures inside of the alliance.
from a customer perspective, you may want the most bennies you can get. From a mgmt. and investor standpoint, the airline wants the greatest profit and return on investment.
talking about cutting FF benefits is like the 3rd rail of politics - but it was bound to happen and the carriers that are most confident of their ability to increase their revenues and reduce their cost will move most aggressively to change the system.
Since DL started the megamerger era of the industry and has a fully completed merger, it isn't surprising they went first. UA had no choice but to go or they ran the risk of DL pulling the highest value passengers off of UA's network esp. in NYC and the west coast and to Asia.
AA would undoubtedly like to match if they were further along with their merger and may now be forced to do workaround policies to keep from losing valuable customers. OTOH, AA might be a more attractive option at least in the short term for the lower tier passengers who will lose elite status on DL and UA.
The trend is unmistakable, though. Freebies won't be as plentiful as they once were.
from a customer perspective, you may want the most bennies you can get. From a mgmt. and investor standpoint, the airline wants the greatest profit and return on investment.
talking about cutting FF benefits is like the 3rd rail of politics - but it was bound to happen and the carriers that are most confident of their ability to increase their revenues and reduce their cost will move most aggressively to change the system.
Since DL started the megamerger era of the industry and has a fully completed merger, it isn't surprising they went first. UA had no choice but to go or they ran the risk of DL pulling the highest value passengers off of UA's network esp. in NYC and the west coast and to Asia.
AA would undoubtedly like to match if they were further along with their merger and may now be forced to do workaround policies to keep from losing valuable customers. OTOH, AA might be a more attractive option at least in the short term for the lower tier passengers who will lose elite status on DL and UA.
The trend is unmistakable, though. Freebies won't be as plentiful as they once were.
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