Randy Petersen's Opening Remarks – December, 28 2006

Randy Petersen's Opening Remarks – December, 28 2006

All together now: “Happy New Year.” OK, for the cynics: why be happy? Well for one thing, in just over a month your bright and shiny new elite-level membership credentials will be arriving in your mailbox.

Seriously, I’m glad to greet each and every reader of InsideFlyer for another year — a year in which there will be no lack of drama among your miles and points. There will be success stories for using your miles and unfortunate stories when you can’t. So let’s get started.

The recent issue of Inc. Magazine contains an “In Memoriam” for the great entrepreneurs who died this past year. I was extremely pleased to see the list honor the passing of Sir Freddie Laker with this: “Sir Freddie Laker, 83, aviation pioneer, in Miami. Laker revolutionized the airline industry when he introduced low-cost transatlantic flights. Though Laker Airways went under in 1982, its influence in terms of branding and pricing lives on in the success of Laker’s protege, Richard Branson, who christened one of the first planes in Virgin’s fleet the Spirit of Sir Freddie.”

Speaking of Sir Freddie, you are reminded that the 19th Annual Freddie Awards begin its balloting to honor the best of frequent flyer programs around the world on January 15th. You can either link in from your favorite program (most programs provide balloting links on their Web sites) or directly at http://www.freddieawards.com — Thank you for your support in acknowledging those loyalty programs who exceed your expectations.

Daily passes have been part of airport lounge membership for a number of years and it just may be that the practice will soon creep into reaches of elite level membership. During a recent investors briefing held in Chicago by United Airlines, CEO Glen Tilton mentioned that the airline was considering selling daily passes to its Premier elite level program much in the same manner in which they originally offered Economy Plus Access on a per flight basis.

My advice to Mr. Tilton and any other airline executive — save the time you are spending on this project to better manage the airline. Leave the Premier program as it is — something earned and rewarded. The continued attempt to monetize every aspect of United Airlines flies in the face of the goodwill you have earned from loyal customers of the airline. In years past, the airline was able to document record profits without resorting to such lowbrow tactics. Beware of the old adage of cutting off your nose to spite your face. One might argue, even reasonably, that the selling of daily elite passes is no different in concept then introducing credit card EQMs and double EQMs for a fee. Each are simply designed to make it easier for good members of Mileage Plus to qualify, requalify, or otherwise enjoy the benefits of Premier status. But reasonable or not, I don’t believe that the million dollars or so that this program could and would generate is worth the message it also sends to Mileage Plus members. Enough said … for now.

We love the fact that Aeroflot Bonus sends a Christmas gift of 500 miles to every member of their program. Just thinking out loud: Aeroflot’s lowest level award ticket is 15,000 miles for a roundtrip coach ticket from Moscow to the Russian cities of: Anapa, Astrakhan, Ekaterinburg, Kaliningrad, Krasnodar, Mineralnye Vody, Perm, Samara, Saint-Petersburg, Sochi, Tyumen, Ufa and Volgograd. These same 15,000 miles can also be redeemed from Moscow to the European countries: Austria, Belarus, Denmark, Finland, Germany, Hungary, Latvia, Norway, Poland, Romania, Ukraine and Sweden.

At a rate of 500 bonus miles per year, this would take 30 years of Christmas to earn a free ticket without ever flying. Something worth thinking about and … nice touch Aeroflot.

And finally, to address the many requests for my thoughts on these mergers: unlike most everyone else, I don’t necessarily think they are all bad. The gist of what I’ve read from others is that they will lead to higher fares, and if one merger happens everyone will merge and it will lead to fewer seats. Higher fares? If you’ll notice, both Southwest and JetBlue have raised their hands indicating they are buyers for routes that would be spun off from any mergers to gain approval. Sounds like the low-cost carriers will supply the balance to higher fares that we need. As well, if there is cash for these mergers to happen, there is more cash for other start-ups and expansion of the low-cost carriers we already have. The domino effect of mergers? Excuse me, but did anyone notice that when TWA merged with American Airlines, no other airlines matched that merger. Singular mergers can happen in this industry without everyone else needing to follow. And as for the fewer seats, with codeshares, reciprocal frequent flyer programs, so what. While the shortsighted critics point toward Delta shrinking by 10 percent, they somehow missed the fact that with reciprocal frequent flyer alliances with Continental, Northwest and Alaska Airlines, they are nearly 208 percent bigger than they were before 9/11. And of course I have good faith in the management of most airlines that they will overexpand again. Look at the history of this industry, it’s almost always underserved or overserved. This time, history is on our side. There is something I do not like about any of this merger talk — the people. There is little doubt that additional airline employees will find themselves out of work. After all the givebacks they have suffered through, life isn’t fair at this point, but maybe it is if you talk to the golden parachute senior executives at some of these airlines.

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