Pro's & Con's of allowing non-frequent flyers to earn lifetime status

Discussion in 'American Airlines | AAdvantage' started by MyTravels, Jun 9, 2011.  |  Print Topic

  1. MyTravels
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    MyTravels Silver Member

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    Okay, rather than hijacking the "Possible Changes to AA's Lifetime Status?" tread, I'll just pull a quote from it and start a new thread:
    With all this accumulation by non-frequent fliers, does allowing non-frequent flyers to earn lifetime status actually attract or detract from AA's bottom line?

    Pro's
    *As occasional FF'ers they really don't impact road warriers "perks" much
    *Potentially making a typically price-sensitive customer less price sensitive (which was the original purpose of loyalty programs)
    *Lots of 3rd party miles sales (the most of any airline?)

    Con's
    *Waived bag fees
    *Waived standby
    (typically one or the other, as its hard to go standby with a checked bag unless they clear you ahead of time)

    AA used to report that AAdvantage was the largest Frequent Flyer loyalty program - I guess we don't know the final numbers on CO/UA as they're not sure of the % of overlap - but being larger than the combined DL/NW (and how freely DL passes out SkyPesos) was quite a feat, and would guess that lifetime status probably helps them on that journey.
     
  2. NYBanker
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    Not entirely the same, but I'm 1,700 miles short of Gold (top) status on Aegean. Never flown 'em, never even been to Greece!

    (These are from BIS miles...just in someone else's seat.)
     
  3. kyunbit
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    kyunbit Silver Member

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    you mean you got miles for some else's flying?
     
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  4. Tenmoc
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    NYBanker means they've been flying other airlines and crediting the miles to Aegean.
     
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  5. Pizzaman
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    Personally, I don't think it detracts from AA's bottom line. I can't imagine it's a huge plus, either. People who are pushing that type of spend to AA to achieve lifetime status would seem to have SOME loyalty to the brand. If they hated the product, why would they want the status or want to burn the 1MM or 2MM miles they might have accrued to get lifetime status?

    And, if they get the status and don't travel heavily, that's got to be a winning proposition for AA (probably more in the infield single range than home run, IMO).
     
  6. HaveMilesWillTravel
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    Well, I assume they burn the miles on award travel, and if that's on partner carriers, it may cost AA some $($$). 1.55 million miles gets you quite a few award tickets.
     
  7. MyTravels
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    The more miles you have, typically the less price sensitive you are about award redemption cost (especially if you don't travel often) & probably more likely to redeem for non-air rewards
     
  8. MyTravels
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    I agree that if you dislike AA, you probably won't earn 1mm or 2mm, but if you're indifferent it definitely carries a lot of weight. One frequent recommendation for high spenders is on these boards are to earn lifetime on AA first, then worry about everything else - regardless if the poster showed any preference to AA or OW.

    There was actually a thread the other day about a high spender that flies CO & earns CO miles via AXP Membership Rewards & wanted suggestions on what to do post October & at least one of the recommendations was get lifetime status on AA - even though the post was about earning CO miles.
     
  9. Tenmoc
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    Assuming you just get the miles on AA and don't know the ins and outs of OW and given that AA's website will not allow you to redeem on partner flights yet, I would think many people waste the miles on what AA offers and that's it.
     
  10. Pizzaman
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    I think it's more along the lines of what Tenmoc says. The people who frequent MP are among the minority in terms of people who redeem awards internationally and at good exchange rates. For example, I just had a friend that was ready to burn 90K miles per ticket for coach tickets to Hawaii that would have cost him $600. He didn't see the value in the AA miles, just figured he would burn them up for his family vacation. I'm sure there are people that win at this game, but I suspect the number of "winners" is far outweighed by people making less valuable redemptions.

    Absolutely agree, but not sure how much AA would actually lose if a non-AA flier earned 1MM on AA. They'd actually have to use those benefits in the future (like free checked baggage) for AA to lose any revenue, in theory. And, if that person would have otherwise booked their ticket on CO except for the lifetime status, then AA never would have gotten the incremental revenue from the mileage accrual. Not saying it's a home-run, by any means, but I suspect it's not a big item one way or the other.
     
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  11. Wandering Aramean
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    Indeed. We in the educated group often forget that there are a ton of people out there who do not know how to find award seats or get the good value. If they all did then we'd have fewer seats for ourselves.

    Yeah, it will cost AA some money in partner redemptions, but not nearly as much as they're bringing in with the sale of the miles and such. Remember that they get to set the price point on all this stuff. It is highly unlikely that they're setting the price at a loss and hoping to make it up in volume. ;)
     
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  12. Pizzaman
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    Gotta agree with Seth here. Although it is worth noting that if there were any industry where a company could employ a flawed strategy such as the one outlined above, the legacy airlines have to be pretty high on that list. :p
     
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  13. HaveMilesWillTravel
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    I think once you charge yourself into lifetime status territory, you're probably likely going to spend at least a bit of time educating yourself about the program you "invest" into. Not everyone, of course, but I think the average million miler is probably a bit more of a sophisticated frequent flyer program member than the traveler who makes 2-3 trips to grandma a year. Another way to look at it: I think there are probably more people who are at least semi-educated in FF schemes who decide to Of course, if you never fly AA or OneWorld and just buy dozens or hundreds of toasters with your miles, you're a profit center for the airline.




    Precisely. Most companies don't seem to employ a long-term strategy these days. They'd rather sell a billion miles to partners now to satisfy Wall Street in the short term and deal with the potential fall-out later (or leave it to the next guy in charge). :) Then again, maybe that's the right strategy... but looking at the overall industry profitability, they certainly aren't where I'd invest my money.
     
  14. Wandering Aramean
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    More sophisticated? Absolutely! So much so that they have figured out things like partner awards and such? I think you'd be surprised. The programs are purposefully complex. The airlines are happy to sell the idea of great awards and folks still seem to be buying it, even if they never do figure out how to actually make it work.

    Does it cost incrementally more to service the larger elite population? Again, absolutely. Maya was rather blunt about that when asked during the Executive Travel Summit in April. But it takes a lot of $30 bag fee waivers to make up the costs of selling all those points to Citi. And it keeps the actual fare spend on AA where it might have gone elsewhere if not for the status, including potentially paying more for the fare because of the status.

    Most elites - regardless of how they got there - are profitable to an airline. If they weren't the system would change.
     
  15. Vik Murthy
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    Just to clarify because the quote that the original poster pulled from one of my posts on another thread was provided out of context. I've added roughly 730,000 miles to my account since the beginning of the year, none of which were BIS (Citi AA promotions, BankDirect, Fidelity, Starwood transfers, etc.). The 820,000 miles I started out with were all BIS miles accrued over 20 years of flying.

    The key metric to determining my profitability to AA is the difference between its marginal cost per flight mile (domestic and international) and their realized per mile price on miles sold to credit card, banking and hotel partners.
     
  16. SuzanneSLO
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    I have to wonder whether LT status makes sense for the airline even for frequent travellers, at least if it is based on total lifetime miles. I see lots of FFers mention that because they have LT status on airline X, they fly more BIS miles on airline Y because they need to qualify for elite status each year. It makes me wonder if LT status is actually pushing away those who will fly more than 25,000 but less than 100,000 miles each year.

    If, on the other hand LT status was based on earning elite status for X number of years, then it might provide the kind of "soft landing" for when former FFers are no longer flying as often.

    I am a non FFer who is more loyal to AA than I would be if I didn't have LT status. I only fly about 10 -15K miles BIS (4-8 segments) per year, so elite status from flying will never happen. For many years now, those miles have all been on AA. While I probably don't cost the airline much, I do take resources from other FFers, as all my BIS miles have been earned sitting in FC or exit rows on AE. With less than 14K miles left to earn to make LT Plat, it is likely that I will continue to be in FC on future flights. - Suzanne
     
  17. Tenmoc
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    The people who are flying someone else to qualify who already have LT status on one airline are not costing that airline that gave them LT anything. They're not flying them.
     
  18. DestinationDavid
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    I think the idea is that having achieved LT status, SuzanneSLO sees many elites switching their business to airlines they do not have status. For example: I'm LT PLT on AA, so I fly UA to maintain status in two programs.

    They aren't costing AA $, but AA is losing $ that it would have earned had they not given LT status. So by giving out LT status, AA is losing potential revenue.

    There's a lot to be said on how accurate that assertion might be, but that's how I read SuzanneSLO's response.
     
  19. Tenmoc
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    I understand that, but I do not believe it is more people than those driven to AA because they are giving the "easiest" LT status. Its just another factor in why people choose individual plans.
     
  20. DestinationDavid
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    I agree with you, but the brevity and focus on flying in your initial response lead me to believe we might have confusion on what SuzanneSLO was saying. :)

    Edited to Add: LT status is a nice concept but it's never had any influence on who I choose to fly. AA's mileage redemptions and top class EXP benefits (IMHO) are what have driven my loyalty. I might change my tune once I start seeing a bleeker travel landscape in my future though!
     
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  21. MyTravels
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    It cuts both ways, if you have Lifetime Gold you may fly AA well beyond making Exec Platinum thresholds to earn Lifetime Platinum. Once you have lifetime Platinum then you'd have to fly at least 50k on another airline for parity & that's when you have the decision to make if it's worth the effort and potential need for a mileage run, when the alternative is to sit back and enjoy your lifetime perks and not worry about making thresholds for the year.

    Lifetime status is more likely to cause travelers to front-load the miles with you before seeking status elsewhere - and since a year down the road travel frequency can change a lot, betting on the bird-in-the-hand makes sense.
     
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