[FoRK] useful mplus analysis

Rohit Khare < rohit at commerce.net > on > Wed Apr 26 19:19:02 PDT 2006


The Friday-night frequent-flier massacre
Big companies and politicians often bury bad news by releasing it on  
Friday because it means that the unhappy tidings first appear in the  
seldom-read Saturday newspapers. When they have particularly bad  
news, companies announce it after the New York markets close at 4  
p.m. And when they have unbelievably rotten information to own up to,  
they release it on a Friday before a major holiday when they think no  
one at all is paying attention.
Earlier this month, United Airlines announced a new package of fees  
and higher award levels for its Mileage Plus frequent-flier program.  
At 5:10 p.m. on Good Friday.

Since we know what United thinks about the annoying new fees and  
jacked-up reward levels by the timing of its release, there's no  
reason for us to waste any space formulating an analysis of the  
specifics. As you can see for yourself in United's announcement, the  
changes are at least as horrible as the airline's tortured attempt to  
bury them would seem.

We're better served by discussing what the changes say about United  
and Mileage Plus in particular and about the increasing devaluation  
of Big Six frequent-flier plans in general. Herewith some thoughts  
about those very topics.

The big airlines think you're gullible

With their total seat capacity down sharply since 9/11 and paid  
travel demand roughly back to year 2000 levels, the Big Six airlines  
have precious few seats available for frequent-flier redemption. And  
judging from the howls of protest from fliers who never quite  
realized that the Big Six were serious when they said the cheapest- 
priced awards were "restricted," the airlines are gearing up for a  
summer of discontent about restricted-award availability. But rather  
than own up to the shortfall, United Airlines said this in its Good  
Friday press release: "United has reserved a percentage of Saver  
Award [restricted] seats on every flight to every international and  
domestic destination."

What's the percentage? United doesn't say. How many seats on each  
flight are we talking about? Again, United is mum. But let's do a  
little math: A United Airbus A319 in domestic service is configured  
with 120 seats. If United reserves just two of those seats for  
restricted awards, that would be a "percentage" of 1.66. A United  
Boeing 747-400 in international service is configured with 347 seats.  
If United reserves just four of those seats for restricted awards,  
that's a "percentage" of 1.15. See how easy it is to manipulate the  
"reserve a percentage" game when you don't commit to something tangible?

Learned your lesson about 'mileage banks' now?

If you look at United's new award chart, which goes into effect on  
October 16, you'll see that most of the award levels have increased.  
An unrestricted first-class ticket to Hawaii, for example, will cost  
190,000 miles, up from the current 160,000 miles. That's an increase  
of 18.75%. An unrestricted first-class award to Australia has jumped  
to 270,000 miles from 200,000 miles, an increase of 35%. An  
unrestricted domestic coach award will cost 50,000 miles, up from the  
current 40,000, or a 25% jump.

It's useless to try to compute the "average" Mileage Plus award cost  
increase because no one claims the "average" award. But one thing we  
can say: Any United miles you have in your Mileage Plus account are  
going to be devalued by around 20% when the new award charts become  
effective. So now do you understand why I've been telling you for  
years not to treat your frequent-flier accounts like bank accounts?  
There simply is no, er, "percentage" in allowing miles to sit unused  
in a Big Six frequent-flier account. Use them now or watch them  
continue to devalue like a third-world currency.

What a difference 50 miles makes

United's Good Friday night massacre makes much of its so-called Short- 
Haul Saver Awards. Introduced by the Big Six for limited periods in  
recent years, these awards have typically required just 15,000 miles  
for a restricted roundtrip on routes of up to 750 miles each way. But  
in extending its program through 2006, United capped the applicable  
routes at just 700 miles. What purpose is served by looking petty and  
knocking 50 miles off the 15,000-mile award? Plenty. A slew of routes  
are no longer eligible for the "short-haul" award, including those  
from United's Chicago/O'Hare hub to New York/LaGuardia (731 miles),  
Newark (717), Montreal (745) and Winnipeg (706).

New surcharges spring up

Come October, United will charge a fee of $50 if you book an award  
seat less than 14 days before departure. Book within six days of  
departure and that fee jumps to $75. These surcharges won't apply to  
United's ultra-frequent customers (Mileage Plus 1Ks and Global  
Services members), but all other elite fliers and regular travelers  
will pay. What rationale can United have for these fees other than it  
is an opportunity to beat more revenue out of customers who have  
already paid for the right to claim the award?

Forget loyalty

Finally, this must be said: The new fees and award levels that United  
is imposing are not onerous if you compare them hypothetically to the  
fees and award levels charged by the other Big Six carriers. Mileage  
Plus award levels and fees starting in October will generally be in  
line with other big U.S. airlines. (And those huge new mileage  
increases for Australia awards are designed to put United on a par  
with what Qantas charges its frequent fliers for free seats.)

United has traditionally kept Mileage Plus somewhat richer and  
somewhat less expensive than the competition. But now the airline is  
sticking it to their best customers, the very flierss who stuck with  
them through the 2000 meltdown and the three-plus years of bankruptcy.

Joe Brancatelli is editor and publisher of JoeSentMe.com, a website  
for business travelers. He is also the former executive editor of  
Frequent Flier magazine, travel advisor of Travel Holiday and  
contributing editor to Travel + Leisure. He can be reached at  
travel at usatoday.com.

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