Would VS moving to a revenue based rewards be bad??

OK, so the title is a little flaming....

I have just been having a conversation, when I say conversation, think more shouting over desks, with two colleagues, one was trying to find VS reward seats for certain dates and moaning out loud "VS this, VS whats the point of collecting all these mile, etc, etc" all negative your understand.
My other colleague then popped his head up and stated that "If you flew more than once a year you would have a right to complain. Stop being a credit card flyer", his term, not mine

It then got me thinking, is he right or wrong in his mindset?
I get 99% of my miles by flying and having issues, like us all, finding reward seats. If VS were to cut back on miles from all other ways would that benefit people that fly and put money in to the VS coffers plus make the reward scheme a true reward scheme for flying with VS?
I don't even admit to understand how the business side of getting VS miles works when you purchase this, that, use a credit card etc, but does collecting VS miles and just having people using them for reward seats bring the payback VS are after??

Do the reward scheme members that collect non-flying miles fly VS when they have to pay or do they just go with the lowest cost option?? Again, not saying that's a bad thing, we all have financial limits, just what it is. Its about the loyalty scheme as it is now.

I guess the most important point on this conversation is would it make reward seats easier to redeem for members that spend time in the air against the value VS get back from the scheme and the ability to get miles in the ways they have now.
With DL changing to this type of scheme it may happen sooner or later.....

What are your thought and please, before I get hung, drawn and quartered, then tared and feathered - This is just a discussion I thought that my educated and esteemed partners on V-Flyer would enjoy, perhaps over a cocktail or wine, not my opinion.

I'm not going to even pretend I know exactly how the whole system works, but Amex take a charge around 4.5% of the purchase price for each transaction and a certain percentage of this will go to Virgin Atlantic for sending Amex the business. VS then awards FC miles based on this revenue, and they'll hope that many of these miles will never be used by their members and will expire.

So Amex are an important source of revenue for VS and (devils advocate) why should they be treated as 2nd class citizens? But I see what you mean, they should make it easier for tier points holders to book reward flights.

Gold BAEC members get reward seats that aren't available to others.

But of course BA has far, far more inventory than VS which only has a handful of routes, most of them once daily and on some aircraft there are only 14 seats in the UC cabin.

I suspect it just wouldn't be feasible to start offering tiers of reward availability when on some flights there may only be one or two UC seats available in total.

I also suspect the people who moan are predominantly those who check once, can't find any availability and promptly give up. If V-Flyer's taught me one thing, it's that patience and persistence are key to getting reward seats because they can, and do, pop up at any time.

Do the reward scheme members that collect non-flying miles fly VS when they have to pay or do they just go with the lowest cost option??

Speaking as one such, yes we do and no we don't (respectively).

Credit card/bank reward airline miles programmes (i.e. the most common non-flying form of miles earning) are some of the most lucrative lines of income for airlines. The figures are staggering. Moreover they provide cash stability in times of airline sector volatility.

To get an idea you just need to look through US carrier SEC filings. VS can't be significantly different in this regard to their US counterparts.

Remember that airlines sell their miles to partners for vast sums. Take AA, for example: 60-70% of their miles in total are awarded by partners, not AA. There are around 200 billion AA miles issued each year, so around 120-140 billion are issued by partners (having been sold to them by AA).

As for the sums themselves, just to Amex alone, for example, DL sells around $700 million worth of miles every year.

So degrading the value (i.e. ease of redemption) of miles earned by non-flying partners would be extremely unlikely, I think.

As for VS moving to a revenue-based system, it would be very hard, I think, for a relatively small airline flying only limited medium/long-haul international routes to move to such a system for attaining status.

DL's pax are predominantly domestic (something like 80% of DL enplanemets are domestic versus 20% international), which translates to lots of smaller trips.

DL pax fly more regularly than VS pax and stand a better chance of attaining status by regularly apportioning their business over the course of the year in smaller increments.

VS pax, on average, might fly only once or twice a year, making incremental achievement of status based on VS-only expenditure impossible. And the danger comes (in terms of incentivizing airline loyalty) when the goal of higher status seems pointless or 100% unattainable for the majority of pax.

Yes the airlines do sell their miles to their various partners who then dish them out e.g. by credit card spend/bonus or hotel stays etc etc

Perhaps that was the start of the downfall of frequent flyer programmes when you could earn more miles from non-flying activities than from sitting in a plane?

What they hope of course is that a good number of these miles expire so they in effect get to keep the cash without having to supply a flight.

Part of the rewards 'problem' is many people - like your work colleague - have unreasonable expectations about how the system works and who don't want to put in the effort to search properly for reward seats or to look at different options or be flexible - fly on a Friday or a Sunday instead of a Saturday for example.

People have a mental block on these things - We must fly on X day and blame the airline for apparently not delivering.

They don't think outside the box either.

A long time ago I suggested that a family who wanted 4 rewards to I think MCO that they might want to split into to parties and get separate flights that would arrive within a couple of hours of each other. They hadn't even thought of doing that but it did mean that they did get the rewards seats they wanted.

How many times have we suggested on here that people might want to look at rewards to LAX instead of SFO and vice versa or MIA for MCO?

So reading this so far it seems the airlines are the real winners.
By pushing their miles to whoever wants them they get revenue and make the hunt for reward seats even harder, perhaps even getting some to pay for a seat that cannot be found via rewards.

After posting this I went a finding info on the new Delta setup. Its not as bad as I thought. Provided you fly, normal flights, not just a someone that is looking for miles runs, cheapest offers etc you should still hit the values from what I can see.

I do like the idea of the BA Golds getting access to seats. Perhaps VS should bring that in, but then I would

It would be interesting to see if there is anyone on the other side of the fence out there........There must be one

All good questions, LovingGold.

I'm not sure the airlines are winners, but it does create much-needed non-fluctuating cash income. Airlines sell every aspect of the card's perks to the bank or network who puts out the card.

Not only miles are sold, but access to lounges, expedited boarding, free checked baggage etc, are all sold for a fixed fee.

DL, for example, wants to know exactly how many hundreds of millions it is to receive from Amex and for what. These are not usually calculated on a per-customer basis, but rather a fixed fee (often on 3-5 year contracts). Amex then has to go out and drum up customers (i.e. offering signing-up bonuses, which Amex - not DL - structure).

But, above and beyond that, the perks must have value with the customer for these cards to be in desire.

Nobody's going to be signing up to, say, the Bank of America Black VS card if those VS miles and TPs become harder and harder to use, and status more and more elusive. BoA has the power to remind VS of this fact (as Amex does to DL): "Hey, we're paying you for these perks on behalf of our customers, and we're losing business because you're making it harder for them to use their miles. Stop it, or we'll take our business elsewhere..."

Actually there is a darker side to this. Not only does Amex remind DL of the above, and not only do they buy hundreds of $millions of miles, but they also provide DL with - literally - one massive corporate credit card which has a credit limit of about $600 million. Now that's quite a big stick...

I do like the idea of the BA Golds getting access to seats. Perhaps VS should bring that in, but then I would

Yes BA Golds do get access to 'extra' miles seats.

But you have to book 30+ days in advance

And they cost double the usual amount of miles needed.

I have only ever reached Silver which I am going to be one point short of retaining now that I am no longer flying up to Scotland for visits to parents.
So I am your once a year credit card flyer.
I have my UC to MCO booked for 2015
I have enough miles for our 2016 flight.
I'm happy with the way things are.
Dick D

Even though DL receives considerable income from selling mileage it is moving to a revenue based reward system, with mileage accrued at different multiples based on your ticket price and your status within Skymiles. This is happening from January and it isn't the first to do that. It could well be a pointer - and it isn't unknown for VS to think similarly; if you're invited to become a Uniq it is rumoured that spend is an element in the decision, although the formula for that is kept to VS itself.

That said, I think this would not work for VS. Firstly I think it would be counterintuitive culturally, it would begin to creates levels of exclusivity above openness and that doesn't fit the brand IMO. Secondly it would be difficult to implement, as has been mentioned where a route has a once a day flight and only X maximum reward seats available (say 2 or 4 and even sometimes less) how would VS manage it successfully without either pissing off a) everybody or b) elites themselves. Thirdly, how would partners that deliver revenue to VS consider themselves if their members' miles were devalued. I can see how this works on an airline of DL's scale, I can't see how it would work successfully at VS. Better to have an open playing field.

So, I hope this is one area in which DL's influence does not migrate.

Agreed, Slinky, and all very good points - but in a way, I think it comes back to the same thing.

If you split miles earned into two categories: 1) flying and 2) non-flying, DL has effectively devalued 1) with the new system, whilst - in context - increasing the value of 2).

In other words: one crucial aspect of the DL move to a revenue-based system for 1) is that 2) - the earning ratio for miles via credit card/bank partners - is unchanged.

Considering, in terms of number of miles awarded, 1) is always smaller than 2) for US airlines, if anything, DL's move looks like reinforcing/increasing the value of non-flying partner miles-earning with the new system.

Status is a different matter, I agree, but I would not be surprised to see certain cards offering status with DL in 2015...

I am sorry about this but is it possible that a MOD can edit Slinky09 post and remove the offending swear word that is in the post.
I do feel that there is no need to insert words like that in any post.

I agree that it may make one feel like it however there are other words in the dictionary that would be better than a swear word.

Lightbodyae

[honey lamb]

I am sorry about this but is it possible that a MOD can edit Slinky09 post and remove the offending swear word that is in the post.
I do feel that there is no need to insert words like that in any post.

I agree that it may make one feel like it however there are other words in the dictionary that would be better than a swear word.

Lightbodyae

Sorry, but no, I won't.

I can think of much more offensive epithets than the one slinky used and I, who am of the "delicate" gender and am advanced in years and thus shocked by the lowering of standards in language, do not consider it a swear word. Therefore I am not going to edit it and I think the other mods would agree with me. Sorry.

Like HL I am also of a more advanced age than many contributors and of the delicate gender and I have to confess that I had read Slinky's comments and am horrified that I didn't even notice the offending word - a sign of the times ! I had to go back and re- read it carefully.

But , even more worrying, initially I had read lightbodyae's post and thought the poster was making a funny ,even subtle , amusing remark and that the offending word was either Uniq or Elite !!! Then I read HL's reply and realised that I had got it all wrong ......

I too am one of the delicate (?) older members and like hiljil had to re-read Slinky's post and am still looking for anything I'd consider a swear word. Thank you HL for your robust response.

I do like the idea of the BA Golds getting access to seats. Perhaps VS should bring that in, but then I would

Yes BA Golds do get access to 'extra' miles seats.

But you have to book 30+ days in advance

And they cost double the usual amount of miles needed.

Not the whole story... being BA Gold opens up additional reward inventory at regular miles-cost.

It's often the domestic connections that get opened up to give a better connection timed flight.

When you search for reward seats as a gold member, a message usually appears at the top of the screen that"additional reward seats have been made available to you as a gold member " or words to that effect.

I am sorry about this but is it possible that a MOD can edit Slinky09 post and remove the offending swear word that is in the post.
I do feel that there is no need to insert words like that in any post.

I agree that it may make one feel like it however there are other words in the dictionary that would be better than a swear word.

Lightbodyae

Possibly the word you disagree with is used in a different context in some geographies?

I have to agree: "r*venue b*sed r*ward system" is truly one of the most vulgar phrases I've seen on this board, and has no place on a v-flyer.

What an interesting topic.

I know far less about this than most posting here, but if the financial model of issuing loyalty points/miles is so lucrative, i would suggest that airlines were tinker with it at their peril.

The whole structure of status as well is something that is fascinating to me. Just how many of us strive to maintain our airline status, even to the extent of taking an extra, semi-invented flight to maintain status? Status in turn brings flying bonuses in mileage as well as other perks - if I were an airline CEO, I'd certainly be very cautious about doing anything too radical too quickly...

I am sorry about this but is it possible that a MOD can edit Slinky09 post and remove the offending swear word that is in the post.
I do feel that there is no need to insert words like that in any post.

I agree that it may make one feel like it however there are other words in the dictionary that would be better than a swear word.

Lightbodyae

Sorry, but no, I won't.

I can think of much more offensive epithets than the one slinky used and I, who am of the "delicate" gender and am advanced in years and thus shocked by the lowering of standards in language, do not consider it a swear word. Therefore I am not going to edit it and I think the other mods would agree with me. Sorry.

As the moderators are unable/unwilling to remove offensive language from forums posts, therefore they will need to remove my membership from v-flyer, as I do not have any intention to be associated with a forum that allows offensive/swearing language in their posts and that the moderators refuse to remove the offending word or words.

This will be my last post here.

Lightbodyae.

P.S. Virgin Atlantic has lost a customer, I will take my business elsewhere.

This will be my last post here.

Lightbodyae.

P.S. Virgin Atlantic has lost a customer, I will take my business elsewhere.

So on a independent forum that isn't related to VS in any way, because you took offence to a 'light' swear word, you won't be flying VS ever again?

Wow...

In other news, to see how much Loyalty programs can be worth, Qantas's FFP has constantly been floated as potential opportunity to be sold off.

http://www.ausbt.com.au/could-qantas-se ... er-program

For AUS$1.5-2.0 Billion!! In reality it's likely not to happen but Concorde is right, CEO's know the value of such programs and are likely to carefully balance any changes against potential loss from customer kick back.

This will be my last post here.

Lightbodyae.

P.S. Virgin Atlantic has lost a customer, I will take my business elsewhere.

So on a independent forum that isn't related to VS in any way, because you took offence to a 'light' swear word, you won't be flying VS ever again?

Wow...

Gosh, the law of unintended consequences in action!