Article on FFPs: Applies to KrisFlyer?

[N_Architect]

From y'days WSJ.com

http://online.wsj.com/article/SB122877921525689525.html

[More geared towards the U.S. air industry FFPs, useful info nonetheless]

"Plunging Value of Fliers' Miles Saps Loyalty"

The percentage of online buyers who say they are loyal to particular travel companies fell to 25% this year from 31% in 2006, according to a recent Forrester Research Inc. survey. Customer loyalty for airlines, whose mileage programs once often swayed ticket-buying decisions, are worse than for hotels and cruise lines. And travelers buy tickets based on price and schedule more than ever instead of choosing to fly a particular airline.

Virgin Atlantic gives frequent fliers points based on ticket prices, not mileage.

"Airlines are shooting themselves in the foot," says Henry Harteveldt, Forrester's principal analyst for airlines and travel. "Their loyalty programs are just not worth what they once were to consumers."

The biggest force driving the erosion of loyalty is the loss in value of frequent-flier miles. Historically travelers could get about two cents per mile in value from frequent-flier programs. But that has fallen over the years to only about 1.2 cents per mile now, estimates Tim Winship, publisher of FrequentFlier.com. Airlines have raised the price of awards and tightened availability of the cheapest award levels, forcing travelers to jump to more-expensive mileage levels to claim seats. If you have to spend 50,000 miles for a $500 domestic coach ticket, for example, you're only getting one penny per mile.

In addition, with a flood of miles earned on credit cards, car rentals, mortgages, restaurants and a plethora of other businesses in circulation, there are more miles chasing available seats, making it harder for consumers to ever claim an award.

To be sure, frequent-flier programs still drive loyalty for some road warriors, with elite-level perks like first-class upgrades and priority boarding. And they still make lots of money for airlines, which sell miles by the billions at about one penny per mile. UAL Corp.'s United Airlines, for example, reportedly had $800 million in revenue from selling miles to partners like credit-card companies in 2007; AMR Corp.'s American Airlines was estimated to be above $1 billion in sales of miles.

The programs have grown more profitable as airlines have made it more difficult to cash in miles and added fees and surcharges to awards. And while airlines are under continued financial pressure, few expect many breaks for mileage mavens.

"Airlines have zero motivation to go in and refresh as long as banks are buying billions of dollars worth of miles," said Virgin America Chief Executive David Cush, who was formerly a senior executive at American. On some flights, he said, a frequent-flier ticket "may be the most profitable ticket on the airplane."

Not surprisingly, research from International Business Machines Corp.'s Global Business Services unit shows growing dissatisfaction with mileage programs, from higher frustrations and cost to redeem awards to increasing commoditization among airline programs. Only 48% of customers in IBM's survey said they were satisfied with the value they got from frequent-flier rewards -- low compared with other loyalty programs -- and 76% of customers surveyed said additional fees to redeem reward trips were "rip-offs."

Some airlines are addressing these flier gripes and revamping their programs. Virgin America, the San Francisco-based startup, gives frequent fliers points based on ticket prices, not mileage. While one customer who paid $139 for a cross-country ticket and another who paid $679 would earn the same mileage, "that didn't seem equitable," said Mr. Cush of Virgin.

In October, the airline rolled out a unique redemption program as well. Instead of set mileage redemption prices -- 25,000 miles or 50,000 miles for domestic coach tickets at most U.S. airlines, for example -- Virgin's price in points fluctuates just as the cash price does. One point usually converts to something more than two cents.

A $429 round-trip ticket for travel next week between New York and Los Angeles priced yesterday at 18,976 points, for example, or 2.26 cents per point. Since you earn five points for every dollar spent, you'd earn a free trip after about nine $429 tickets, but faster if you flew on higher fares or found a cheaper ticket to redeem with points.

Virgin America says it can raise the conversion rate for points to pay fares at peak travel periods like holidays, or lower it on flights that aren't selling well. Thus reward seats are available without any capacity restrictions or blackout dates. "What we hope is that customers see a more effective way of using their points," said Mr. Cush.

Another innovation earlier this year: Delta introduced a "pay with miles" set-up for Delta frequent fliers who also have American Express Co. gold or platinum SkyMiles cards. Miles can be converted to dollars to pay for fares at a rate of one cent per mile. That's not a particularly good conversion price, but the advantage of the program is that there are no capacity controls or restricted inventory of seats -- if you see a fare, you can use your miles to buy it.

Mr. Winship of FrequentFlier.com says that as Delta has merged with Northwest Airlines Corp., it has generally made consumer-friendly choices in rules for the combined frequent-flier program. Last week, for example, Delta said it would allow its customers to qualify for elite SkyMiles levels by number of flights as well as miles, something Northwest allowed but Delta didn't previously offer.

Mr. Winship says he has some hope that the Delta moves, including eliminating the fuel surcharges that it and Northwest imposed on frequent-flier tickets earlier this year, will signal a bottom in the degradation of frequent-flier programs, and airlines will move more to enhance the value of their miles after years of chipping away at them.

"The net effect of the Delta changes is positive instead of negative, and these days that's revolutionary," said Mr. Winship.

Industry watchers say it may be risky to continue to degrade frequent-flier programs. If miles lose too much luster, customers will opt for other rewards and banks will end up buying fewer frequent-flier miles. Cash-back credit cards that pay one cent to two cents back on every dollar spent and hotel reward cards that offer free accommodations or favorable conversions to airline miles can deliver richer rewards than airline-linked credit cards.

Mr. Harteveldt of Forrester says airlines need to re-examine if they have squeezed frequent-flier programs too tightly. He says airlines have ignored trends in other industries where loyalty programs are stronger, and made their rewards more expensive and more difficult to redeem than other loyalty programs.

"Airline passengers get whacked by a lot of sticks, but there are not a lot of carrots out there for them," he said.

Bruce Speechley, who leads IBM's hospitality and leisure consulting practice, thinks airlines need to reinvigorate their customer-service efforts across the board, improving service at the airport and on board aircraft. He also thinks frequent-flier programs could be more valuable to airlines as stronger drivers of loyalty if carriers revamped their confusing and frustrating redemption schedules, and gave consumers better benefits for purchasing loyalty.

"The idea of trying to reward people for loyalty is good," he said, "but it has become too complex and frustrating in the airline industry."

[HUGE AL]

Virgin Atlantic gives frequent fliers points based on ticket prices, not mileage.

WSJ is kinda funny sometimes. It should read, "Virgin America..." as the picture is of a VX plane. VS bases their program on distance.

[kkjay77]

And why would anyone use 25,000 mile for US domestic flight is beyond me.

I've only redeemed my UA miles for NYC-SIN/BKK on quality airlines like SQ, NH and OZ in F or C/J.
It's far far better use of miles at 90K UA miles (until next year) for C or 120K miles for F.

[jjpb3]

And why would anyone use 25,000 mile for US domestic flight is beyond me.

Different strokes for different folks, right?

Consider an infrequent flyer who accumulates miles from flying and more importantly, on partner spending (miles which until recently didn't expire and even now expire only after a period of inactivity); whose vacations are mostly taken domestically (the US is blessed with amazing topographical variety, for example); and who likes to use his miles to treat relatives to a free trip.

For such a traveller, the 25,000 miles needed for a domestic flight aren't such a bad deal.

[DeltaFlyingProf]

And why would anyone use 25,000 mile for US domestic flight is beyond me.

I've only redeemed my UA miles for NYC-SIN/BKK on quality airlines like SQ, NH and OZ in F or C/J.
It's far far better use of miles at 90K UA miles (until next year) for C or 120K miles for F.

Different strokes for different folks, right?

Consider an infrequent flyer who accumulates miles from flying and more importantly, on partner spending (miles which until recently didn't expire and even now expire only after a period of inactivity); whose vacations are mostly taken domestically (the US is blessed with amazing topographical variety, for example); and who likes to use his miles to treat relatives to a free trip.

For such a traveller, the 25,000 miles needed for a domestic flight aren't such a bad deal.

I might ad that people using 25,000 miles for a domestic US flight are good for us who want to use our miles for long haul premium tickets! It means they are not competing with us for those few award seats. So keep telling everybody that they should use their miles for that kind of award!

[cawhite]

Different strokes for different folks, right?

Consider an infrequent flyer who accumulates miles from flying and more importantly, on partner spending (miles which until recently didn't expire and even now expire only after a period of inactivity); whose vacations are mostly taken domestically (the US is blessed with amazing topographical variety, for example); and who likes to use his miles to treat relatives to a free trip.

For such a traveller, the 25,000 miles needed for a domestic flight aren't such a bad deal.

Very good point. The same could also be said for those who have an abundance of miles in their accounts and 25k is just a drop in the bucket (leaving more than enough miles to utilize for long-haul awards).

[N_Architect]

http://online.wsj.com/article/SB122938527117608795.html

How Savvy Fliers Make the Most of Their Miles

Airlines say the most-frequently used frequent-flier award is the basic domestic coach ticket. But that's also the award with the lowest value per mile for consumers.

Savvy travelers do better: The secret is to upgrade.

On average, experts say, consumers are getting only about 1.2 cents per frequent-flier mile when they cash in awards. But you can stretch your miles and get four times as much value or more out of your frequent-flier account by getting out of the coach cabin.

At most major airlines, a domestic upgrade costs 15,000 miles each way, or 30,000 miles round-trip. Several airlines have added $50 fees each way as well. But consider the cost of buying a first-class ticket, and you see the value of the miles.

For a New York-San Diego trip next month, for example, you can find a coach ticket as low as $319 on AMR Corp.'s American Airlines, and the cheapest first-class ticket is $2,029. Use miles to upgrade instead of buying first-class tickets and, even after paying $100 in fees, you get more than five cents for each mile.

International upgrades pay off even more. For a Chicago-Frankfurt trip next month on UAL Corp.'s United Airlines, you can buy a coach ticket as low as $697 or a business-class ticket for $5,624. Instead of paying nearly $5,000 more for the business-class seat, you can spend 60,000 miles for a round-trip upgrade. The cheapest coach fare eligible for that upgrade is $1,001, so you have to spend $304 more on the ticket. But even after factoring that in, the savings you get through miles work out to nearly eight cents per mile.

The lure of a business-class seat is so great that some travelers find ways to barter miles from people with more miles than they will likely use.

United will add co-pay fees to its upgrade awards starting July 1. Those fees -- which are also levied by other airlines -- can be hefty. At American, an upgrade between North America and Europe costs 50,000 miles round-trip -- cheaper than United's price, but you have to pay $700 round-trip in co-payments to upgrade most discounted coach tickets. At Continental Airlines Inc., an upgrade to Europe from the U.S. costs only 40,000 miles round-trip, but the co-payment fees can run as high as $1,000 round-trip. The value you get for the miles can still be strong, however.

The upgrade strategy works particularly well now because premium seats should be more available: Companies have restricted travel expenses and forced more business travelers to ride in the coach cabin, so airlines are selling fewer business-class and first-class seats. That should leave more inventory of upgrade awards.

Still, travelers often complain about the scarcity of available upgrade awards. The best strategy for booking a cushy seat with miles is to be flexible: Travel at off-peak times, perhaps on less-popular flights, and be willing to take connecting flights instead of non-stops.

Getting better value for your miles often requires a significant shift in your travel mindset. Many travelers want as many trips as possible out of their miles and chase as many discounted coach trips as they can squeeze out of their mileage accounts. But since the cost of an upgrade is often about the same as the cost of a coach ticket, or less, many travelers find they can use miles to vastly improve their travel experience. Quality over quantity matters in airline travel.

The lure of comfort is so strong that road warriors with fat frequent-flier accounts try to buy international business-class seats with miles straight-up. Russ Wiley of Colorado Springs, Colo., flew on Delta Air Lines Inc. from Denver to Brussels and back last month for 95,000 miles instead of paying more than $7,000 for the ticket. That's more than seven cents per mile.

He recently transferred 270,000 points from his American Express Co. credit-card account to Delta, which gives a 30% bonus on such transfers. With those miles he purchased two business-class tickets to Capetown, South Africa, from Denver -- tickets that usually cost about $10,000 each -- again collecting more than seven cents per American Express point. "It takes a little planning, but if you work at it, it's not too hard," said Mr. Wiley. "A little flexibility helps."

The lure of a business-class seat is so great that some travelers find ways to buy or barter miles from people with more miles than they will likely use, then cash them in for nice awards. Such schemes can attract the wrath of airlines, which usually prohibit the sale of miles, although they do allow people to book award tickets in anyone's name.

One buyer of miles who asked not to be named for fear American would cancel his account pays about 1.3 cents per mile to "friends" he finds through Internet postings, then uses the miles for business-class tickets between China and the U.S. worth about six cents to nine cents per mile.

"I call it airline miles arbitrage," he said. The scheme, which produces business-class tickets for coach-ticket prices, does require lots of trust for the seller to book an award for the buyer after receiving payment.

If you're trying to book awards far in advance, remember that most airlines open booking for seats 330 days before departure. (Upgrades may open up later if premium seats don't sell.) One tip: A Web site called AwardGrabber.com has policies for different airlines, and can calculate when you need to start trying to book for your specific travel date.

There are also ways to get the most value out of your frequent-flier points even if you do decide to use them for domestic seats. The key is to use your miles for pricey last-minute tickets for funerals, family emergencies or surprise visits, instead of for long-planned vacations. Last-minute tickets can run $1,000 to $2,000 for domestic trips and buying those tickets with 50,000 miles yields better value.

Airlines offer myriad other opportunities to spend miles, though few are a good value. Frequent travelers can buy memberships to airport clubs with miles, for example, but often at prices that convert to less than one cent per mile.

An annual membership at United's Red Carpet Club costs $500 for non-elite members of its frequent-flier program, or 70,000 miles. For gold-level members of Delta's SkyMiles program, an annual membership to Crown Room Clubs costs 50,000 miles or $350.

Merchandise and gift cards can be an even worse value for frequent-flier miles. Through Points.com, American, Delta, US Airways and many other airlines offers gift cards and merchandise. But a $50 Best Buy gift card will cost you 13,059 American miles, significantly less than one penny per mile. A $50 FTD.com gift card for sending flowers costs 9,412 AAdvantage miles, a lower price but still not a great deal for your miles.

Yet the low redemption rates are OK with consumers like Carl Gehr of Cincinnati, who prefers to buy his airline tickets so he qualifies for elite status on Delta, which gets him frequent free upgrades and priority status for rebooking when things go wrong. (Tickets bought with miles don't count toward elite status.) Instead, he uses his miles to give tickets to relatives, pay for his annual Delta Crown Room membership and purchase gifts for family.

[Rejuvenated]

Different strokes for different folks, right?

Consider an infrequent flyer who accumulates miles from flying and more importantly, on partner spending (miles which until recently didn't expire and even now expire only after a period of inactivity); whose vacations are mostly taken domestically (the US is blessed with amazing topographical variety, for example); and who likes to use his miles to treat relatives to a free trip.

For such a traveller, the 25,000 miles needed for a domestic flight aren't such a bad deal.

May I also add that not everyone is so fussy about traveling on premium cabins that they would collect their miles for many years so they can cash an upgrade or reward in that cabin.

There are tons of budget travelers out there. So for example say someone living in the west coast who flew SFO-HKG rt twice in the last two years (once per the last two years) will have accummulated more than 25K miles (provided booked in the qualifed fare bucket). By the time the third year arrives, will have enough miles to redeem a free ticket to visit his/her mother who lives on the east coast.

I guess what I'm trying to say is that people use their mileages for different needs. I am one that will cash them for F or J rewards/upgrades and not into U.S. domestic flights but should I see someone else that uses them for the latter, I would not consider them as out of the ordinary. Not everyone is blessed nor has the time and/or purchasing power to fly many times like some of us, so a simple say award ticket in the back SFO-ATL-SFO can mean a lot to them.

[Lobster]

Another reason is for people to be stupid idiots like me. Recently flew TLV-FRA-LHR. I wanted to upgrade my TLV-FRA leg from Y to J as it is only 15,000 miles and you get the full intercontinental J seat and service. But I managed to click on the FRA-LHR segment by mistake so spent 15,000 miles upgrading to inter european business class. Although I could have cancelled it I just decided to spend another 15,000 to upgrade the TLV-FRA flight as well.

[dttj0069]

NW perks

Recently, I went to Tokyo and was able to redeem 5 tickets for my family on NW. It cost 50,000 miles per person and we got SIN-NRT on economy and NRT-SIN on business. While I would prefer to fly SQ to NW, I was very happy with NW. Firstly, the ability to claim 5 free tickets (and you do not need to name the nominees in advance, thus no charges to amend this list too). Secondly, it costs less in terms of miles than what SQ would charge. Thirdly, the airline/airport suircharge was also much less than SQ charges. NW charged below S$200 per pax for surcharges whereas SQ, while I did not check, I am certain would have charged a lot more. In fact, does anyone know what formula SQ use to levey surcharges as it is certainly more compared with other airlines.

I still like SQ as a carrier but more and more, I realize other airlines do much more to encourage you to fly them as opposed to SQ who do not treaure loyalty much and are only about dollars, cents and yield. It's just that based in Singapore, you still need SQ.