Who should be at the top of the upgrade list? Full fare or top elite?

Discussion in 'General Discussion | Miles/Points' started by Wanaflyforless, Feb 12, 2011.  |  Print Topic

  1. Wanaflyforless
    Original Member

    Wanaflyforless Silver Member

    Messages:
    34
    Likes Received:
    79
    Status Points:
    180
    A) What is the better business practice?

    B) What do we MPers want our airlines to do?

    C) Do we care more about our personal benefits from our FF program in the near term (this year, next year) or the long term ability of our airline to make profit enabling them to keep flying and raise more money to improve the quality of the products they offer us (fleet, safely, customer service, lounges, etc)?
    Would we want the airline to be more generous to us for our personal short term benefit even if it means the airline will go bust in the future?
    -------------------------------------------------------------------------------------------------------------------------------

    Should a US airline that offers its elite customers complimentary upgrades consider it more important to upgrade person A or person B? There is only one first class seat left, who gets it?

    PERSON A) Last minute frequent flyer who buys full fare $1000 economy tickets 10 times a year, earning enough miles to maintain low level (25Kmiles/year) elite status.

    Or

    PERSON B) Advance purchase value conscious top level elite flyer (125K miles/year) who buys a $350 ticket 50 times a year?
    ------------------------------------------------------------------------------------------------------------------------------

    - Total revenue from A is 10 x $1000, so $10,000 total.

    - Total revenue from B is 50 x $350, so $17,500 total.

    - Most US airlines have an average cost per seat mile in the neighborhood of 15 cents per mile flown

    - Person A flew 25,000 miles, costing the airline approximately $3,750 (25,000 x $.15)

    - Person B flew 125,000 miles, costing the airline approximately $18750 (125,000 x $.15)

    So:
    Person A contributed $10,000 and cost about $3,750 (using average seat cost).
    Person B contributed $17,500 and cost about $18,750 (using average seat cost).

    ---------------------------------------------------------------------------------------------------------------------

    Airlines loose money from me.

    United Airlines, for example, will upgrade me as a 1K on a $100 ticket before they will upgrade a 2P on a $1000 ticket.

    I think United should upgrade that full fare $1000 ticket passenger before me.

    Do you agree?
     
    resipsa99 likes this.
  2. Wanaflyforless
    Original Member

    Wanaflyforless Silver Member

    Messages:
    34
    Likes Received:
    79
    Status Points:
    180
    Considering the divide between what the last minute inflexible flyer and advance purchase flexible flyer need to pay for their tickets, could the legacy airlines be wrong? Considering how much money these same airlines have been loosing, couldn't they be wrong?

    AA added legroom to its entire fleet (2000-2003?) and advertised "More room throughout coach" on TV, travel sites, on Expedia, everywhere. Only to add more seats later considering the program a massive failure, concluding travelers chose their tickets based on cost alone. Over and over again we have heard from our airlines they have to cut bankets/pillows/food/amenities/etc to cut costs because the flying public chooses to pay for their tickets based on cost of ticket (not product or FF program). If the majority of passsengers choose their plane tickets based on price alone, and only a minority of passengers allow FF miles to influence their purchasse choice, but the arilnes have to give FF miles to the majority of passenger none the less, have FF programs failed?

    I like the legacies and their premium cabins and I don't want them to go bankrupt and be replaced by the likes of WN.

    I don't think upgrades should be granted "solely to the travelers who have paid the most for that particular flight."

    I do think a US airline would benefit from providing a greater incentive to buy full and high fares (on their airline making them different from the pack).

    One change they should make is give all paid first, business, and full fare (published Y and B) economy ticket holder free lounge access, priority security, and priority boarding. When the infrequent flyer pays $1000 for a Y ticket, they shouldn't be asked to pay more for these perks. Rather they should be given a lounge pass and told they will get free lounge whenever they buy a Y or B ticket. This would make them feel valued rather than nickel and dimed.

    This could be especially effecitive if only one of the legacies does this - making them standout from the competition. While the last minute ticket purchaser values schedule very very much, in cities like Chicago WN, AA, and UA often all offer similar flight times to the same destination. If UA, for example, were to consistently offer amenities that that WN and AA do not, the passenger might over time start to notice and tell his travel arranger to choose UA so long as the UA schedule is also good.

    ---------------------------------------------------------------------------------------------------------
    For upgrades, using United Airlines as an example:

    UA's fare hierarchy is: Y, B, M, E, U, H, Q, V, W, S, T, L, K

    Perhaps the UA upgrade priority list should look something like this:

    1) Any GS regardless of fare paid (GS is United's revenue based top level status)
    2) Any elite on a Y or B published fare (prioritized by elite status, then prioritized by fare class within each status level)
    3) Any non-status passenger on a published Y or B fare (prioritized by fare class)
    4) Top level elites on M, E, U, H fares (prioritized by fare class)
    5) Mid level elites on M, E, U, H fares (prioritized by fare class)
    6) Top level elite on Q, V, W, S, T, L, K fares (prioritized by fare class)
    7) Low level elites on M, E, U, H fares (prioritized by fare class)
    8) Mid level elites on Q, V, W, S, T, L, K fares (prioritized by fare class)
    9) Low level elites on Q, V, W, S, T, L, K fares (prioritized by fare class)

    ----------------------------------------------------------------------------------------------------------------------

    This would increase how much the high fare passenger likes their UA experience versus WN (and other compeitiors provided they don't match UA policy) and encourage them to buy full fare on UA rather than WN/AA/DL/US/AS/B6/F9 next time. If UA were the only legacy to offer this benefit, full fare, repeat full fare customers would start noticing who upgrades them for free (and who does not) after a year or two and become loyal (schedule permitting) to UA instead primarily considering schedule/price irrespective of airline as they do now.

    Elite status should matter a lot, but so should fare paid.

    Is modifying the FF program part of the long term solution to the broken legacy business model?

    Legacy airlines have lost $$,$$$,$$$,$$$ more than they have made over the last decade.
    10 years ago, we had TWA, American, United, Continental, Northwest, Delta, America West, and US Airways.
    Since then, 6/8 of those companies went bankrupt.
    8/8 have merged with another carrier.
    Yes, reasons are many, but don't tell me they have proven their business model works. [​IMG]
    Some would argue they have proven their business model does not work.

    ----------------------------------------------------------------------------------------------------------------

    Y-up fares are very often not available at the last minute.
    Many other last minute purchasers have a travel policy that dictates no purchase of first class (including Y-ups).
    "Person A" will however be buying 10 very expensive tickets per year. What airline will they choose? How do we stop this less frequent high revenue last minute flyer from choosing WN next time?
    Offering them something WN cannot offer seems like a good solution to me.

    US Airlines (unlike Air Canada and most international airlines) routinely upgrade their top elites for free as a published benefit of elite status on domestic flights, subject to seats being available close to flight time. UA, CO, DL, US, AA, and AS all do this. Do non-US ailrines have a better business model than US legacies when it comes to ugprades?

    How does the UA model of giving me, the cheap 1K, the upgrade instead of that last minute $$$$ ticket the upgrade create loyalty from the last minute traveler? An airline needs to attract all last minute frequent flyers who buy $$$$ tickets, not just those very very few who fly every week. How should they pursue this aim?
     
    BondAir007 and eightblack like this.
  3. Eric
    Original Member

    Eric Silver Member

    Messages:
    119
    Likes Received:
    308
    Status Points:
    435
    Loyalty drives almost all business. Imagine if that reduced fare, fifty time a year FF lowered his business to only 10 or 15 more convenient flights a year instead of going out of his way to always fly on that particular airline because of the status he/she has earned and the perks that come with that. Huge loss to that airline.

    I say that as someone with no status on any airline. I have zero problem knowing people are getting upgraded to F because they have flown 50 times on that airline that year and I have flown 5 or 6. It just makes sense, IMO.
     
  4. Scottrick
    Original Member

    Scottrick Gold Member

    Messages:
    2,586
    Likes Received:
    4,078
    Status Points:
    2,570
    First, just because the average cost per mile per person is 15 cents doesn't mean that is the marginal cost. Without a cheapskate FF like you or I, United may have left that seat empty, so they aren't necessarily losing money.

    Second, just because you or I cost United money doesn't mean that losing our business necessarily saves them money. Our loyalty allows them to keep fares higher. Why else would I choose to pay $300 to fly SEA-SFO-SEA when discount carriers offer the same trip for $250 or less? Without loyalty, even from the cheapest passengers, the fares would have to go down.

    If United wants to start giving upgrades to people with more expensive tickets but lower status, then what's the point of loyalty? They have to remember the goal of a loyalty program. If maintaining that loyalty through UDU is too expensive, then maybe they should modify the terms slightly. For example, if the alternative was top priority for high-fare, low-status passengers, then I would prefer going to back to the old certificate model, ensuring a that a low-fare, high-status passenger may not get upgraded all the time, but will at least be upgraded on a certain minimum number of flights per year.
     
  5. Wanaflyforless
    Original Member

    Wanaflyforless Silver Member

    Messages:
    34
    Likes Received:
    79
    Status Points:
    180
    Finding customers to replace our cheap seat purchases shouldn't be too difficult; cheap seats are easy to sell to Joe flyer. Expensive seats are much much harder to sell. A small increase in expensive seat sales would more than compensate for a small drop in cheap seat sales. I suggest the drop from top elites would be small, see below for reasoning.

    Legacy airlines like UA need loyal passengers. But would we really leave UA just because we moved down the upgrade list (and still get upgraded much of the time, just less than today)?

    "Why else would I choose to pay $300 to fly SEA-SFO-SEA when discount carriers offer the same trip for $250 or less?"

    Answer:
    - Free baggage allowance with status
    - Free E+
    - Free 100% RDM bonus miles (earn free high value travel much faster on UA than any carrer we do not have status on)
    - Free CR1 advance upgrades
    - Free SWU international upgrades
    - Free priority Check in/Security/Boarding
    - Free priority irregular operations handling
    - Free club access when we fly international
    - Free priority access to MUCH better phone agents
    - Free chance of upgrade on UA (even with UA upgrade system changes I propose)
     
    BondAir007, gomike and travelingmore like this.
  6. Scottrick
    Original Member

    Scottrick Gold Member

    Messages:
    2,586
    Likes Received:
    4,078
    Status Points:
    2,570
    But of those things, how much go to lower tiers? Baggage and E+. The RDM bonus is negligible for 2Ps. Priority for IRROPS is not going to be that great when you have a bunch of 1Ks and 1Ps around. No U Club access for 2Ps. Phone agents aren't that much better until you get higher up.

    Obviously, part of this is due to the gradual addition of benefits as you improve in status. But my original point was only that providing upgrade benefits doesn't necessarily have to be a choice between fare paid and status. You can use a combination, or even track total fares paid, to come up with a more complicated but also a profitable and fair policy.
     
  7. Rambuster
    Original Member

    Rambuster Silver Member

    Messages:
    323
    Likes Received:
    221
    Status Points:
    445
    full fare top elites of course !
     
  8. diver90
    Original Member

    diver90 Gold Member

    Messages:
    1,162
    Likes Received:
    3,250
    Status Points:
    1,970
    Well, if someone pays full fare Y at the last minute and doesn't have the neurons to find out how much F would be or if there is an upgrade, and there are seats available in F, I would say, "Tough Noogies". Give it to the elites, who if they are not a "DYKWIA", will truly appreciate it.
     
  9. Wanaflyforless
    Original Member

    Wanaflyforless Silver Member

    Messages:
    34
    Likes Received:
    79
    Status Points:
    180
    And if their company travel policy does not allow them to purchase F (as is so often/most often the case), you will still assume they don't have "have the neurons to find out how much F would be?"
     
  10. diver90
    Original Member

    diver90 Gold Member

    Messages:
    1,162
    Likes Received:
    3,250
    Status Points:
    1,970
    I work for a large company with a VERY restrictive travel policy (Must be the lowest direct or fewest connections fare anywhere in the world, within an acceptable time frame) and have never had a problem with booking an upgrade to F on my own dime after the initial ticket is purchased. If it was a Y fare it's full refundable so no change fees would be involved either.
     
  11. Wanaflyforless
    Original Member

    Wanaflyforless Silver Member

    Messages:
    34
    Likes Received:
    79
    Status Points:
    180
    What incentive does the "PERSON B" profile have to fly your airline instead of a competitior if they have to pay for the upgrade?

    Someone whos work policy requires refundable economy tickets (due to frequent changes) and who routinely needs to buy at the last minute is often stuck with Y and B fares. They often do not desire to spend their own money to upgrade.

    (I put a lot of time into my original posts in this thread and did address why someone may not usually be allowed to buy F class. ) :)

    Edit: I am trying to be nicer. Sorry diver90 if I offended you. I appreciate your input/perspective here. I am not agreeing with your point but glad you mentioned people paying for upgrades themsselve on company tickets. It is a good point that I wanted to respond to.
     
  12. diver90
    Original Member

    diver90 Gold Member

    Messages:
    1,162
    Likes Received:
    3,250
    Status Points:
    1,970
    OK. I'll just back out of here slowly. So Sorry.
     
  13. gleff
    Original Member

    gleff Co-founder

    Messages:
    3,616
    Likes Received:
    6,793
    Status Points:
    4,670
    What an airline really wants to incentivize is decision-making at the margin, incremental business. Dollars - now matter how many dollars - that they are going to get regardless of their elite / upgrade program aren't what they want to incentivize with such a program. Fare really doesn't tell you much, it's how do you get the business that would have gone to someone else?
     
    Wanaflyforless likes this.
  14. ag51
    Original Member

    ag51 Silver Member

    Messages:
    102
    Likes Received:
    93
    Status Points:
    325
    An unpopular view from a non-US resident perhaps, but why not follow the example of BA and not upgrade at all? (unless you have to, because you have oversold Y - then I think BA base operational upgrades on status rather than fare paid). It might encourage more people to pay for F fares - good for the airline, if not for the frequent flier.

    I travel a lot on domestic AA, and can't remember the last time I saw an empy seat in F. It would only work if all airlines followed suit, of course, or you would just switch to someone who gives upgrades (on whatever basis - and to answer the original question, I think the airline should favour frequent fliers based on status rather than people who pay the most. I say that as a BA Gold who always buys the cheapest ticket [​IMG]).
     
  15. PanAm
    Original Member

    PanAm Silver Member

    Messages:
    342
    Likes Received:
    465
    Status Points:
    545
    Interesting question and one that I hadn't even thought about until recently, as my elite & upgrade experience had been all on UA. After a status match to DL GM I was surprised to see I'd get a confirmed upgrade at ticketing for my full fare Y ticket, advancing ahead of a Diamond Medallion purchasing a lower tier who isn't confirmed until I think, 5 days out from departure. (As I was about to actually purchase a full fare Y ticket on DL, and F was wide open, this was good news to me!) I just hadn't realized there were different approaches out there.

    I'm not sure what I think...certainly I don't personally understand airline costs and financials enough to know which works better on the balance sheet. From my own perspective I could see pros and cons each way...whatever keeps the airline's overall level of service, pricing, and benefits in solid shape is best in the longrun I think.

    Wannaflyforless' idea of free priority access, lounge access, etc for premium cabin and full far pax is intriguing. Actually it made me think for a moment about the bennies I value as an elite. Not to stray off topic but what if you could choose your benefit(s) each year as an elite? On UA at least, I often travel RJ heavy and/or short hauls for work. Unlimited Domestic Upgrades are nice but rarely of much real benefit to me. Leisure travel is usually with the family on international trips so UDU isn't a factor. I would however love to have free RCC access as it seems I often have time to kill connecting. I'd be willing to trade no UDU for this year in exchange for RCC access.

    I suppose the logistics of tracking who gets what benefits (and maybe lounge space limitations in the US) would make the above not really feasible in practice.
     
    Wanaflyforless likes this.
  16. Punki
    Original Member

    Punki Silver Member

    Messages:
    755
    Likes Received:
    1,196
    Status Points:
    825
    Back in the day (a couple of weeks ago) whe we were both 1Ks, I would have said that we should be at the top of the upgrade list, right after UGS. Now that we are lowly MM Premier Executives, we will be very careful never to book a flight where we can't get first at the time of booking, realising that we are now just common peons. :(

    Amazingly, our last upgrades cleared on our last day of enjoying 1K status. That was cool.

    We all have to be very realistic and cunning when playing the upgrade game, or else we will sit in coach. EEEEK! A fate worse than death for the truly spoiled. :)
     
  17. dayone
    Original Member

    dayone Silver Member

    Messages:
    579
    Likes Received:
    824
    Status Points:
    795
    Giving some priority to full-fare would make the most sense to the airline, even though it would penalize me.
     
    Wanaflyforless and aitchly like this.
  18. Wanaflyforless
    Original Member

    Wanaflyforless Silver Member

    Messages:
    34
    Likes Received:
    79
    Status Points:
    180
    Exactly.

    I would suggest that most 5 and 10 times a year last minute full fare flyers have little or no loyalty.

    If this person started to get upgraded to first class when they flew a certain airline (and not other airlines):
    - Would they notice?
    - Would they change their purchasing pattern to prefer that airline?

    What if the 5 and 10 time a year last minute full fare flyer was given free lounge access, priority security, and priority boarding and told by the agent at check in this was a benefit they will get everytime they buy a full fare ticket on their airline?
    - Would they notice?
    - Would they change their purchasing pattern to prefer that airline?
     
  19. aitchly
    Original Member

    aitchly Silver Member

    Messages:
    469
    Likes Received:
    1,083
    Status Points:
    820
    But over time, you would still get the benefits of being elite. In the OP example, Person B is still likely upgraded 4/5.

    Airlines need to increase revenue, if they can turn PersonA into an elite (who is always paying full fare) or a more frequent traveler, their job is well done, so giving them bennies at every turn makes sense.
     
    Wanaflyforless likes this.
  20. Wurm
    Original Member

    Wurm Silver Member

    Messages:
    843
    Likes Received:
    1,232
    Status Points:
    825
    This is a subject that really defies a simple A - B answer. A lot of the "art and craft" of this type of marketing involves balancing the many audiences and decision makers.

    Here's one example: Say a manager works for a multinational pharmaceutical company, a company which has an exclusive deal with one of the big airlines; that traveler doesn't have any real choice to choose his/her carrier. However, that manager might well move to a different company, where s/he does have a choice. It's a variation of beer and tobacco companies targeting teens to ensure future loyalty: if the traveler flew, say, AA for three years and learned the ins and outs of AAdvantage, when s/he moves to their next job where s/he has choice of carriers, AA has (IMO) a leg up on retaining that traveler as a customer.

    That's just one random example of why designing a loyalty program needs to take into account many factors other than just "raw" spend. Another example: who is more "profitable", the full-fare flyer whose corporate travel department booked her/his two full-fare flights in 2010, or the top tier flyer who earned status via BIS flying, and who also carries the company's co-branded credit card, and who evangelizes (there's that word :) ) in favor of the airline amongst his friends, family membrs and co-workers?
     
    Wanaflyforless likes this.
  21. CubsGirl
    Original Member

    CubsGirl Silver Member

    Messages:
    44
    Likes Received:
    50
    Status Points:
    240
    Although I work with all sorts of financials, I find them hard to focus on here.

    I simply want them to give the seat/upgrade to me!
     
    gomike likes this.
  22. Wanaflyforless
    Original Member

    Wanaflyforless Silver Member

    Messages:
    34
    Likes Received:
    79
    Status Points:
    180
    Well of course, you are CubsGirl, so you should be at the top of the list!

    Whoever says otherwise doesn't know who CubsGirl really is!

    "Do you know who...."

    ;)
     
    gomike and dcpatti like this.
  23. Wandering Aramean
    Original Member

    Wandering Aramean Gold Member

    Messages:
    28,221
    Likes Received:
    61,767
    Status Points:
    20,020
    So long as you are elite, yes.

    CO did this and their policy strikes the correct balance between long-term loyalty (status) and short-term financial value (Y/B fares) IMO.
     

Share This Page