Why Not Release Last Minute Awards More?

Discussion in 'American Airlines | AAdvantage' started by robertw477, May 18, 2015.  |  Print Topic

  1. robertw477

    robertw477 Silver Member

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    I was wondering why dont most of the airlines including AA release last minute premium space at at low level? It gets miles off the books with seats not taken for cash? I guess you can make a case the same as for cash to try to get the desperate person to pay the most. But 24-48 hours out especially on overseas travel, it just seems to me as an easy way especially on their metal to clear points of the books on unsold space anyway?

    Any thoughts on this?
     
  2. Wandering Aramean
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    Wandering Aramean Gold Member

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    This:
    The liability on the "books" is mostly irrelevant and the occasional sale of the walk-up fare is, over the long term, much more profitable to the company.
     
  3. NYCUA1K

    NYCUA1K Gold Member

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    While I agree with this:
    the following
    would make it tough to explain why I get bombarded every day with emails from every loyalty program that I patronize offering me gazillion ways to spend my hotel points or airline miles, many of which do not even involve booking a hotel stay or an airline ticket.

    Rather than "irrelevant", I would say that the relentless attempts by loyalty programs to have members spend their points/miles is because these are a "liability" that prevents them from taking credit for the full sale of a hotel room or an air ticket due to the fact that a portion of the associated revenue will need to be paid back to members later in the form of rewards. Therefore, as long as the liability remains on the books [i.e. as long as awarded points/miles have not expired or been redeemed or forfeited], honest accounting and income statement purposes require a company that runs a loyalty program to reduce their revenue by the estimated cash value of their point/mile liability...

    The quickest way and least popular way to decrease liability is, of course, to devalue the points or miles! :eek:
     
  4. Wandering Aramean
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    Wandering Aramean Gold Member

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    That's actually very easy to explain. Redemption works - on average - as a profit center for the company. Consumers who redeem points are inclined to be more engaged in the program, to earn more points faster and to seek out more different partners through which those points can be earnt. So the average consumer who figures out that 10,000 points can be redeemed for a $100 gift card may not seem like the ideal user to you or me, but the airline loves that member. That's the member who will go out of their way to use the co-brand CC or partner promotions where the loyalty program is likely making more money on the distribution of the points than it is costing for the redemption.

    And if you don't believe me here's a quote directly from a UA MileagePlus executive talking about the topic at a recent industry conference:
     
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  5. NYCUA1K

    NYCUA1K Gold Member

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    The goals are not mutually exclusive, so I am with you on this as I have no trouble believing that UA would push that line since it allows them to kill two birds -- one of which is to decrease their liability -- with a single stone. The scheme, in fact, is not limited to UA. Recently, HHonors ran a targeted promo in which they rewarded members who redeemed their points extensively the prior year with even more points. After redeeming some 700K points down to under 20K points at the end of last year, I was targeted to receive 100K points as a "thank you for requalifying" for HH Diamond, and then to receive for every stay between early February and April 30, 2x bonus points for weekdays and 3x bonus points for weekends, which turned out to be truly lucrative. As a result, I am truly psyched and encouraged to be even more engaged in the program, which, again, achieves what every loyalty program would like to achieve -- a dynamic in which they award points/miles that are redeemed almost as fast, thereby limiting their liability.
     
    Last edited: May 18, 2015
  6. robertw477

    robertw477 Silver Member

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    So my flight yesterday LHR-MIA went back with 10 empty seats in First. Are there many walk ups for a one way fare like that where AA wants thousands of dollars? And 10 seats available?
     
  7. Wandering Aramean
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    Wandering Aramean Gold Member

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    There doesn't need to be a lot of them. Just enough to cover the fare difference compared to selling the 10 at fire sale prices. And I'm betting that, on average, that works out in the airlines' favor most times.

    Also consider that there are passengers who would otherwise buy in advance because they know that's the price who might try to play the game a bit more and hold out for a last-minute drop. That would likely be net negative for the carrier. Ultimately the carriers want to maximize revenue but also have some stability and visibility to what the future bookings will look like. If it all shows up last minute that's bad, too.
     
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