Have YOU Become Irrelevant to Travel Companies?

“With the reduction in seats on flights due to downsizing the fleets and the return to higher loads, the airlines are telling us loud and clear, they don’t think they need our business”, Rick Ingersoll of Frugal Travel Guy wrote in an article called Have You Got the Message Yet? “They have successfully raised prices numerous times with fewer fallbacks and we are paying more for much less these days when it comes to air travel.”

If I know one thing about Rick since I first met him years ago, he is usually quite blunt about his thoughts and — in this case — I completely agree with him. In fact, I believe those thoughts should be expanded to include lodging companies and rental car companies — although they are arguably not as egregious about the perception of the lack of value of a segment of their customers as airlines.
That segment is the frequent traveler who is in the “game” — as Rick calls it — of earning and using frequent travel loyalty program miles and points.

Let’s face it — this “game” is not as much fun as it used to be, as a number of FlyerTalk members have posted over the years. Extracting as much value out of frequent travel loyalty program miles and points has generally become more challenging than ever. However, we must take an admittedly cursory look as to what has happened over the years — and much has happened to understand why it seems to be far more difficult to earn and use frequent travel loyalty program miles and points these days.

Consolidation. Airlines — primarily those based in the United States — have significantly consolidated operations. That consolidation will be further strengthened by the recent settlement of the Department of Justice of the United States pertaining to the completion of the merger of US Airways with American Airlines. Gone are the days where you had your choice of such airlines as Eastern Airlines, Continental Airlines, America West Airlines, Northwest Airlines, Trans World Airlines and Pan American Airways — whose long-defunct brand for the most part was purportedly purchased by All Nippon Airways at a price of $139.5 million. There are now only a handful of airlines based in the United States with little competition when you eliminate the overlap of flight routes which include a “hub” or “focus” airport.

Reduction of Capacity. Flights seem to be packed full of passengers more than ever as airlines optimize their schedules. The likelihood of having an empty seat next to you is all but obsolete these days. You may be more likely to have a “passenger of size” or a crying baby seated next to you than an empty seat.

Ancillary Fees. The introduction and proliferation of ancillary fees in recent years has been nothing short of a lucrative “gold rush” for airlines, as they reportedly collected $27.1 billion in fees alone in 2012 — even though the number was originally projected to be $36 billion for airlines worldwide. Although some creative new products and services have been introduced in recent years where many people would not have a problem paying extra for them — such as baggage delivery services, for example — there was a time not too long ago when the thought of paying extra for a meal or a checked bag would have been considered ludicrous. The reality is that passengers are paying ancillary fees for products and services — some of which used to be included in the airfare — and as long as that continues, ancillary fees will never disappear.

More Miles and Points for Fewer Awards. Due to certain strategies — credit card “churning” is only one example — there are apparently more frequent travel loyalty program miles and points floating out there; but with fewer reward opportunities on which they can be redeemed. Inflation of the “currency” occurs as a result — which has led to the seemingly rampant occurrences of perceived devaluations by frequent travel loyalty programs.

Improvement of the Economy. Numerous reports seem to suggest that the overall economy is strengthening — which translates into more people traveling. It was not all that long ago when airlines were hurting and pleading for your support.
In short, I will be so bold as to say that — unless you happen to travel:

• Frequently in premium class seats on airplanes, lavish hotel suites and luxury vehicles
• Frequently while paying full fares and rates much of the time
• As one of the general masses who travel — even if infrequently — but pay ancillary fees for products and services

…then you might be considered irrelevant to airlines, lodging companies and rental car companies. Oh, sure — they are more than happy to take your money. However, they are generally tightening up on what is the return on investment on that money which you spend. With minimum spend requirements to be implemented by United Airlines and Delta Air Lines — and look for American Airlines to follow suit after its merger with US Airways — gone will be the days of attaining elite level status and enjoying the perks and benefits which come with it for only a few hundred dollars with a “mileage run.”

FlyerTalk members threaten to leave United Airlines. They question as to whether or not it is time to re-think the American Airlines AAdvantage frequent flier loyalty program. To which airline should a FlyerTalk member be loyal if deciding to leave Delta Air Lines?

Unfortunately — with all of the perceived devaluations announced this year alone by frequent travel loyalty programs — there is nowhere to run and nowhere to hide, to quote Martha Reeves and the Vandellas. Although there are some opportunities which still exist, we must unfortunately currently deal with the current climate of the continuing onslaught of perceived devaluations if we are to stay in the “game.”

I have always said that I believe that things run in cycles — and the frequent travel industry is really no different. However, it is also no different that airlines, lodging companies and rental car companies are in business primarily to profit — something airlines struggled to do not too long ago. The convention then was to foster loyalty to the point where you will choose that particular airline to spend your money — even if it were via a “mileage run” or its hotel equivalent: a “mattress run” — and the airlines would have fostered, enhanced and strengthened that loyalty at almost any cost…

…but supposedly not anymore.

Apparently, certain types of loyalty are no longer all that profitable — or important anymore — to airlines, lodging companies and rental car companies. With a quarterly profit of $1.4 billion recently announced, Delta Air Lines is only one example of an airline proving this despite the recent devaluations as perceived by loyal members of the SkyMiles frequent flier loyalty program. How much of that $1.4 billion do you believe was based upon loyalty?

So what will it take for changes to return in favor of the frequent traveler? Well, there is no easily definitive answer to that question — but one scenario is if the economy suffers again and customers opt not to pay for premium fares and rates or pass on procuring products and services which require the payment of ancillary fees. That could cause airlines, lodging companies and rental car companies to sweeten the deal to those who have — or will — demonstrate their fiercest loyalty to those companies.

Disruptive technology is another possible game changer. While not probable for at least a decade — if ever — there is the possibility of traveling between New York and Beijing in as little as two hours by using an evacuated tube transport system, for example. Currently, airlines are the fastest and most efficient mode of transportation for longer distances — although it can be argued that traveling by car, train or bus can be faster, less expensive, more convenient with fewer hassles, and more efficient for shorter distances.

Disruptive technology which challenges the stronghold airlines have on longer routes — such as transoceanic and transcontinental flights, as two examples — could potentially force the airlines to become more competitive and offer benefits to loyal customers once again. The primary problem with challenging airlines with disruptive technology is difficult barriers of entry due to infrastructure and cost, among other things — so companies would be loathe to clamor and attempt to do battle with airlines anytime soon.

A third possibility is to increase competition from new as well as existing airlines — but government regulations are only one of a number of factors which inhibit that from happening. What is that old saying? The way to make a million dollars in the airline industry is to invest a billion dollars?
Then again, there are the so-called “hassle-free” airlines which have cropped up in recent years that one day could threaten legacy carriers — but due to their small size, that may be highly unlikely anytime within the foreseeable future.

Perhaps it is finally time to purchase shares of stock in an airline — long considered a poor investment?

I will leave it up to the pundits to use facts and figures to prove me wrong and to debate what I have written here in this article. However, as a frequent traveler for greater than 25 years — 11 of them as a FlyerTalk member and 7.5 of them as a “blogger” for The Gate since it was first launched — I am simply iterating my thoughts based on personal experience and observations, keeping in mind that they will not be the same for all frequent travelers…

…and that is where you come in: what are your thoughts about the state of the industry of frequent travel miles and points — and how are you affected? What are your plans for the future?