[TiredOldHack]

Ian_from_HKG: I think there’s a bit more to it than simple revenue. It’s a two-way street.

I only really got into premium travel a few years ago. As someone said: “Once you’ve turned left on entering an aircraft, it’s very hard to get back to turning right.” After a couple of years of acquiring cheap, and sometimes free, upgrades, I developed a taste for it, and actively started to seek it.

Now, there is absolutely no way I would have got to Silver, never mind Gold, status if the TPs were based on money spent. So what would have happened? Well, I’d have probably shuffled between various other airlines, as I suggested in my earlier post.

So BA has actually hooked me as a loyal customer. And the point is that it would not have got me any other way.

I will fly BA on every available occasion, and on the occasions when I can’t, it’ll still be on a OneWorld airline (I’m off to China in three weeks, with FinnAir, but the next long-haul, to Chile, will be BA and LAN).

If BA were to switch to a purely revenue-based system, it would have to calculate how many ‘loyal bargain hunters’ (like me) it would lose and how many ‘money no object’ travellers (like RussShaw6) it would attract. And whether it would lose money or earn more money in making such a switch.

I suspect there are many more like me than there are like RussShaw6 (the ratio of First to CW seats would confirm that!) but I admit I am only guessing.

[Bath_VIP]

Surely it is possible to cater to both? I suspect people are confusing REWARD with STATUS. Reward seekers can be served through cashbacks (or points) that allow them to reduce the cost of flights or get free flights. Status seekers are after extras such as lounges, separate check-ins etc.

If someone spends £10k through 3 business class returns and someone else spend £10k through 40 economy class returns then a cashback scheme would give both the same reward. The former would get greater status merely through purchasing business class tickets that give access to the lounge, etc but that is independent of extra status that an airline may choose to give.

For myself, reward is more important than status but clearly this will not be the case for everyone.

[canucklad]

Bath_VIP, you have succinctly made my point.

I eventually found myself in the former profile, flying weekly and loyally sticking to BD & then BA.
100 hours flying time per annum = struggling to maintain Silver and loyalty looked down at.

A colleague who travelled to India 3 times in the same year in “ C” easily maintained Silver and is lauded over.

Who should the airline value more ?

[IanFromHKG]

Quite right, Bath_VIP, and some schemes already do this for status. For example, on CX it is possible to rise through the status tiers on the basis of sectors OR miles (but not a combination of both). I have seen arguments in the past to the effect that a passenger flying the same airline short-haul every week is showing more loyalty than one flying long-haul once a month. I can see both sides of the argument.

However, I still feel that a ticket costing four times as much (or more!)should arguably generate rather more than a 25% uplift in recognition (be that in terms of rewards points or status).

[TiredOldHack]

Bath_VIP: Yes, you’re right, there’s a difference between reward and status.

I think they need to be linked – for instance, the lounge access etc is (a) very nice, thank you, and (b) saves having to pay inflated airport prices.

I was thinking more of TPs than Avios, but they are linked – Silver and Gold holders earn more TPs than other card holders. (Edited – meant to say that premium cabins earn double TPs, and once on the ladder, it’s easier) As we know, it takes quite an effort to get from Blue (or is it Bronze now?) to Silver, but once there it’s easier to stay there.

Which is, of course, the core of a good loyalty scheme.

[Bath_VIP]

ToH,

Are you confusing TPs and Avios? Silver & Gold card holders do get an avios bonus but I don’t think they get more TPs than Blue for the same flight?

[TimFitzgeraldTC]

It is a good question and difficult to answer. If you are at the top of the spectrum, like perhaps IFH then it is a benefit if it moves to revenue as you’ll have even higher status comparatively to other “Golds” out there as I imagine the number of people in the top status diminish on a scheme like BA for example. Rightly it seems ludicrous that Business on some schemes only earn 25% more than those sat on an economy ticket that is anything between 3 and 10 times cheaper on most occasions. This is perhaps where KLM/AF get it right in that Economy miles are 25/50/75 or 100% depending on the booking code which corresponds with fare level – and more for Premium/Business/First Travellers. I guess the argument is that Business Class passengers should get more miles / status than a mere 25% uplift.

Personally I imagine there would be a lot of people who would forget chasing status (the “Marginals” we could call them) who only scrape Gold/Silver each year. These are the people who the airlines want to get to fly with them who probably take 1 / 2 more flights a year on a given carrier when there are better options out there. If the “Marginals” aren’t going to get the status they want to attain then what loyalty there is will be lost. If airlines lose all the “Marginals” then this could be the difference between turning a profit and loss for an airline (the number of times I have clients fly less optimum times / routes just to earn a few points is significant). All this is hypothesis – I have not had a chance to conduct a full survey myself on this but only give an opinion on what I experience with my client interaction!

An example of 1 client I have is someone who rarely goes Business Class, but often travel Economy and sometimes back from US in Premium (or other long overnight sectors). He tries to keep to BA and OW to maintain status and now has Gold attained after 11 months of flying since I enrolled him into BA. He often travels on full fare BA (though not always) due the timings he flies and now gets occasional Operational Upgrades – which he is happy about (though if they made it easier to use Avios – all of these could have been points used – lost opportunity for BA there). If it went revenue based I doubt he would make Gold though depending on Spend Requirements – and then I guess the impact on BA Revenue would be greater if he switched to United / Delta for example as technically his company policy is to use cheapest option where possible – though they allow slightly higher fares if you have status so you can use lounge or get upgrade on Avios points or possibly an Operational Upgrade.

1 thing from a TMC side – how will they credit “Nett” fares as at the moment on a mileage distance based / tier point scheme it has no impact. As nett fares in many instances are not meant to be seen by clients – how would they allocate miles on this basis?

[TiredOldHack]

Bath_VIP – sorry, you’re right, you get more TPs if you’re in a premium cabin.

[MarcusGB]

I wonder if the comments on this thread would change if you took out who pays for the travel?
If your Company pays, in some, they collect the miles for The Company.

I think those that fly and pay for it themselves, should be differentiated from those who are paid for by others.
Would you pay from your personal pocket, for travels that you take?

There are plenty of Leisure travellers who do pay for frequent travel for personal reasons.

Personally, I think if i take the 30 flights myself a year with one Airline to retain a Gold, and pay myself, it is well deserved. Equally one Airline for my Long haul travel.
Very few Business travellers continue to fly Business Class these days short haul within Europe, many going to the back. Yet the people in the premium seats, are more likely to be Travellers on holiday.

I see this often on London (few airports) to Amsterdam, and on flights to/from Middle East, and flights down to Australia.

I think in this respect, The frequent Flyer program is better for self paying travel.

But all the FFP’s around the world have decreased the miles we earn when we fly, and put up those needed to redeem. Even then, with a few hundred thousand miles, unless they are listed at a reduced rate, they give you very little!

The programs are certainly Not what they used to be for sure.

[Bath_VIP]

Marcus,

You are touching on the elephant in the room here! Namely, miles earned whilst on business (and paid for by business) and then being used for personal benefit. The taxman hasn’t come after this yet but I am sure they have been tempted. Since I own my own company and thus pay for all my travel, it isn’t really an issue for me but if I am paying for my employee’s travels I might have a different view. Of course this is where programs like BA’s OnBusiness would work well.

[Charles-P]

Bath_VIP & Marcus.

The issue around the taxable benefit of loyalty schemes was raised by the French tax authorities in 2009. An executive with Renault who had accumulated a good number of flight and hotel miles used them to take his wife and children on holiday to the Caribbean. He mentioned this to a another Frenchman who was there at the time who happened to work for the tax office and perhaps because he was annoyed at having paid his own fair he instigated an investigation when he returned to Paris.

It was ruled that no taxable benefit had been received because it was the airline that had given the award not the employer and no employment contract existed between the passenger and the airline, it was ruled to be a retrospective discount on the cost of the ticket paid.

[TiredOldHack]

Fascinating. And it makes sense so entirely fair.

[Bath_VIP]

Charles,

Very interesting Still doesn’t answer the question (more from a moral point of view) as to who is entitled to the retrospective discount given by the airline. I feel it is the employer who has paid for the fare who should get this rather than the employee.

[TiredOldHack]

And that assumes that frequent business travel is something to be enjoyed rather than endured. Sometimes it’s fun, granted, but as well know, there are many times when….

[Charles-P]

‘Bath_VIP’ – Yes I fully agree. I am only aware of one organisation who has entered into an agreement with an airline whereby they received better pricing as a result of their staff not receiving air-miles. The scheme was abandoned after two years because the staff took a much more ‘by the book’ attitude to flying than in the past. For example people refused to fly on a Sunday afternoon saying their working days were Monday to Friday.

In my company we would never dream of doing it regarding it as a small ‘thank you’ for the time we ask our staff to be away from home on business.

[Author]

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