Opening Remarks – June, 29 2004

Opening Remarks – June, 29 2004

Greetings.

We think you’re in store for some very entertaining and relaxing reading this month.

Here in the Northern Hemisphere, we are enjoying the throes of summer and that usually means two things: no real news going on among frequent flyer programs (not enough business travel to entice), and more time to relax and read.

With this in mind, we opted this month to publish an interview issue. As it is, members don’t often get a chance to ask direct questions of their programs, and they’re even less likely to receive direct answers. But the overwhelming majority of the questions we posed to the various program executives came straight from the mouths (or keyboards, as the case may be) of members. In the 23 years these programs have been in existence, real good dialog between members and their programs has been woefully inadequate. Hopefully this issue, and this magazine, can serve in some small way to remedy that situation.

Frankly though, we were disappointed in the answers provided by one or two programs — far too canned and PR for our taste. Our readers will quickly smell the offenders out and we must say, the types of responses you’ll see here mimic the way in which these programs are being run.

But there were some who were refreshingly open and honest as well. Among those who the staff thought were the most ‘credible’ were Air Canada, Zevez, Capital One, Qatar and Iberia.

By asking members to create the questions, we learned firsthand that the concern about award availability is very real. Granted, we feel there is a huge misconception with regard to this issue, but it’s certainly on the mind of members of all programs. In fact, the concern was so predominant, we used it as the theme for this month’s Exit Row cartoon. While programs have done a fairly good job of addressing the issues of award changes, upgrade availability (still unresolved), elite changes and Elite Qualifying Miles Revenue, there’s little doubt that the biggest challenge facing the industry — and one that requires action — is the issue of award availability.

First of all, it should be noted we actually feel the industry overall has done a great job in managing the supply and demand of award redemption. The difficulty the programs are facing, as we see it, isn’t a supply and demand issue so much as it is an issue of perception — and by the looks of it, the programs don’t have a clue how to deal with it.

This was never made so clear to us as when we read the comments from Joe Graziano, the Corporation Founder of Zevez. Graziano states that, in doing research on the Zevez business plan, potential clients could readily see how value could be created from accounts payable via the use of reward programs, but their big concern was whether or not they would actually be able to use the miles and points earned.

That kind of pessimism does not bode well for this industry.

This perception, or misperception if you will, is all the more interesting given the fact the industry actually set new records for award redemption last year, with over 20 million free tickets doled out. And this doesn’t count upgrade awards.

Clearly the industry is facing a Perception/Reality problem. The perception is “I can’t use my awards,” but the real statement behind that statement is “I only want to redeem awards for 25,000 miles.” The perception is that there are no free seats available. The reality is that every seat on every major carrier is available for award redemption every day. I repeat, every seat on every major carrier is available for award redemption every day.

First and foremost, there needs to be an initiative in the industry to understand they could kill the golden goose if this is not addressed. As it stands right now, there isn’t a partner in this industry that doesn’t get heat from their customers about not being able to use their frequent flyer miles. In fact, I would wager the hotel guest programs would validate that far fewer of their points are being converted into frequent flyer miles. Why? Because people don’t think they can use them.

Here’s what I would suggest; for starters, these programs need to review their absolutely asinine response to the government’s admittedly stupid CustomersFirst program. CustomersFirst was originally developed in response to public outcry about the lack of award availability, but the government let the programs off the hook. Sure, the programs had to publish slightly more information about their award redemptions, but the numbers have been skewed and jumbled about to a point where it didn’t help at all.

I think the industry (or at least one or two major programs) should voluntarily adopt a policy whereby they set aside a minimum of 10 percent of their seats on daily flights for the ‘Saver’ type awards — and make this public. This would let members know they do, in fact, have a legitimate shot at using one of these saver awards. Right now, with no published threshold, members assume, right or wrong, that none are available.

Would 10 percent represent a hardship for the industry? Not really. Heck, over nine percent of Delta’s passengers are already traveling on award redemptions. Setting aside 10 percent of available seats for saver-type award travel, and adopting a more upfront policy with regard to member communications would go a long way to narrowing the gap between perception and reality.

But what do I know? I only listen to the program’s members and partners every single day.

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