Opening Remarks – November, 28 2005

Opening Remarks – November, 28 2005

I was thinking…

that I am a little worried about the fate of the one million plus members of the Independence Air iClub. While it is not headline news in most papers across the nation, the fact that this airline recently entered into a Chapter 11 bankruptcy is something different. Apparently, the officers of the company have called for an auction of its assets. Its a little early for that, given that they just entered the protection of the bankruptcy court, but this airline and Delta Air Lines seem to have something in common — both were targeted by airline industry analyst for bankruptcy long before they ever got there, thus wasting valuable time and assets to try and make things fly right. Sometimes such efforts are noble, but there are times when you’ve really got to stop and ask yourself — do we really know what we’re doing? Independence Air is a bit tricky for me, since I do not have a great feeling about their eventual fate. As many of you know, I’m the industry optimist, and fairly good at predicting the outcome for many of the current airline and especially frequent flyer program situations. I was reading a story about Independence Air and was amazed that some of the “experts” in the story were saying that even if the airline did not make it, some other airline would likely honor and take over their frequent flyer program. In other scenarios, I would and have agreed in the past. I can’t agree this time. Actually, there’s not that much liability in the iClub program for another airline to match and honor, but the structure of iClub is difficult to merge. First of all, the program (much like Southwest Rapid Rewards) does not have any blackout dates or seat restrictions. Now, who the heck could honor that? Surely not United Mileage Plus or US Airways Dividend Miles. Second, the program is based on air fare paid. Currently there are no competitors that run their program the same way, so converting iPoints into miles could be tricky. It could be done, though. Any reader know how? Simple: The original America West FlightFund program was air-fare based and later that program converted its fare-basis liability into miles. I can pull out my trusty back issues of InsideFlyer for that formula if we ever get to that point with Independence Air. But the real tricky part is that iClub was only a 12-month program. Your iPoints expired after 12 months if you did not spend at least $1,500 in air fares with them — that’s a lot of $49 trips, if you ask me. Also, its award structure is based on award distance. Fly up to 1,500 miles on 1,500 iPoints, or over that distance on two awards. Very unlike today’s no-distance, 48 contiguous states awards, huh? But this is a very unique and interesting frequent flyer program which has earned some of my respect, which is why I’m having a difficult time dealing with what may be its demise. Here’s my favorite two parts to the program: When you go to book a trip with them, the system reminds you that you have an award to use instead. Is that pro-member or what? Also, I truly loved their rules -“No jacket or law degree required.” Can you imagine your frequent flyer program having terms and conditions that easy… and even better, a refreshing attitude like that? Well, frankly, I can’t either.

Bottom line for Independence Air — I don’t see it working out, and I think the members are going to be disappointed. It could be that United or US Airways battle it out in bankruptcy court to purchase the membership list of iClub — not the liability, just the membership list.

OK, on to other things. By the time you read this, it is likely that Starwood will have made a final decision as to their acquisition of the Le Meridien hotel chain and more specifically, its frequent guest program-Moments. While I don’t know officially (or unofficially for that matter), my guess is that Starwood Preferred Guest will convert the points from Moments into the SPG program at a favorable rate and thus run a single loyalty program throughout their system. In comparing the two programs, there already exists a lot of similarity — no blackout dates, points & cash awards, elite level, etc. There are really only three things that are different in Moments: Elite members are guaranteed a room at a sold out hotel within 48 hours of the stay, Moments members can actually buy points toward any award redemption if they have at least 50 percent of the points required for the award, and Moments members can redeem points for 2-for-1 dining at hotel restaurants. If Moments members can get past the loss of these three things, I think their new membership in the SPG program (with far more hotels with which to earn points and redeem awards) will be worth it. As for me, last month I stayed at a Le Meridien hotel, hoping to get a favorable exchange rate for my Moments points. Truth be told, there were no hotel chains in the city I was staying in except for Le Meridien and Sofitel, and keeping in mind the potential future of the Moments program, I opted to stay there and join the program. Remember, reading InsideFlyer can alert you to these types of strategies.

And finally, my favorite topic these days — Delta SkyMiles. Yes, I got notice of their decision to discontinue the Crown Room Club membership for their Platinum Medallion members. The decision is put forth as part of the “financially stronger” effort. I just can’t buy it. SkyMiles now has lost two elite benefits in a row (the Frequent Flyer Medallion award chart being the first) with nothing to balance this out. I don’t think they are understanding that the world is give and take. There is nothing left in the current Medallion program that isn’t already being offered by other programs that elite flyers can make a different decision to join. As for the financial decision for the Crown Room, sure, they will likely get some of the members to pay for that privilege now, but there are other airlines in the world that are profitable that still provide free airport lounge memberships to their top tier members. If it was costing them too much to provide the service, limit or eliminate access to the club room by other airlines customers, not their own. OK, I’m done pouting, and no, you can’t walk to Atlanta on my lower lip.

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