The Effect of Credit Card Signups on Credit Scores

Posted on: March 30th, 2012 by: Gary Leff

One of the most-asked questions about credit cards is how does it affect your credit score, and of course the implied followup, do you care?

I’ve signed up for scores of cards over many years and I still have an excellent credit score, it was nearly 800 FICO on the three major credit bureaus when I went to get my mortgage. In part because of signing up for more cards, rather than in spite of it.

Each time you request credit, and your credit is pulled as a result, your score usually dips a little bit but just on the credit bureau that was pulled. So if an Experian credit report was pulled, the inquiry only shows up at Experian. Requests for credit suggest you might need credit, and lots of requests for credit can be a signal of trouble. But this is a small part of your score.

The average age of your accounts count, even for a period of time your cancelled accounts, so lots of new accounts can shorten that average age.

But on the flip side, having more available and unused credit will help your score – because one important factor is your utilization percentage. We’re not talking how much of a balance you revolve or don’t pay off in a month, rather how much of your available credit you burn through in a month. So if you have $5000 in available credit, and you run up $2000 in charges, you’re using 40% of your total available. If you run up $2000 in charges and have $20,000 in available credit you are only using 10% of what’s available to you — look how responsible you are with credit!

Applying for more and more cards over time has certainly helped with my total available credit, and thus my credit score. So there’s pluses and minuses even to your credit score.

And in fact when I cancel cards, I often try to retain the credit. Chase generally lets you move your available credit from one card (the one you’re going to get rid of before a fee hits) onto another card (that you’re keeping). American Express has frequently offered the ability to move around your credit between cards as well.

I admit I don’t even bother checking my credit anymore before I sign up for cards. I’m not doing 10 at a time. I’m not balancing my inquiries across the credit bureaus, there aren’t enough offers that I either haven’t had or can get again in the near term that I have that luxury. So I’m just balancing my card applications across banks. I’ll try to apply for one card from each of the co-branded issuing banks at a time, subject to decent offers being available

The real hardcore folks will manage the inquiries on each credit bureau, there are forums over at Credit Boards where people list which bank runs credit through which bureau in each state. So if you have too many inquiries on one bureau you can apply only to banks that will pull your credit from another one.

I don’t really get rejected from cards, my credit is good, and I don’t have a major purchase like a house (or a refinance) on the horizon. So I don’t even monitor my credit score closely, I just do irregular housekeeping to make sure nothing is on my credit report that shouldn’t be by mistake.

Credit inquiries also don’t stay on your report more than a couple of years, they have a limited time in which they’ll even effect your score before aging off. For me, the only area where my score even matters much — given that I do have high scores, it would matter more than the sub-700 level for sure — is in the housing market. A score that forced up a mortgage rate wouldn’t be worth the benefit of card signup bonuses. So even in my case, where I was nowhere near that threshold, I took a breather from cards for the year (to some extent) and six months (much more so) leading up to my mortgage.

But a perfect credit score doesn’t really help you. If you have a 760 FICO you’ll qualify for the best mortgage rates. An 800 or higher score won’t get you better rates. So if your score is 800, you’re not applying for enough cards, your credit score isn’t working for you with card signup bonuses.

Now, credit card signup bonuses are available for the most part to folks with good credit scores, so if you don’t know whether that’s you then you may want to check before diving in.

I’m a fan of Credit Karma and Credit Sesame (the latter of which offers a very small referral bonus to me), though as I say I don’t do this religiously and don’t keep tabs on the best offers for credit monitoring.

This game, too, is only for folks who pay off their balances each month. Otherwise the most important thing is getting the lowest interest rate possible,

Deals and Updates for the Morning of March 30, 2012

Posted on: March 30th, 2012 by: Gary Leff

Radisson has introduced Club Carlson points purchase, $7 per 1000 points up to 40,000 points annually. Not worth it for its own sake but useful to top off towards awards at the margin.

Live from a Lounge says Jet Airways is offering 20% off on mileage redemptions through September 30 for awards booked on Jet metal using their website.

Priority Club’s new PointBreaks list, valid through May 31, are now available. The lists are in the process of being updated, e.g. as of this writing the Asia list still shows hotels available through March 31 only, but I’m told that interesting properties in Asia include the Intercontinentals in Manila and Ho Chi Minh City for the new period. PointBreaks offer redemptions at 5000 points per night.

Mommypoints says that the US Airways Debit Card from Bank of America will go away September 30th. Thanks, Dick Durbin!

Booking Air France Business Class Awards with Delta Miles: IT Glitch Workaround

Posted on: March 30th, 2012 by: Gary Leff

For the past few weeks Delta has been unable to book otherwise-available business class seats on Air France. That’s been true systemwide, and their only advice is to try to find Delta flights instead. Good luck with that (even if Delta serves your planned destination, Air France business class availability is generally good, Delta’s very much is not).

Delta Points notes that the Asian call centers for Skymiles are now able to book these awards again, even though US call centers won’t see the availability.

He suggests calling Hong Kong at 011 852 2810 4288. I’ve had good luck in the past with the Singapore call center, English is quite good: 011 65 6336 3371.

Ask them to waive the telephone booking fee because the award cannot be booked online, some folks have been successful with that, although as a matter of policy Delta doesn’t do that. Or create an itinerary on the website reserving any flight, put it on hold, then call to change the itinerary. When the agent sets it up, be on the website and ticket it there, you’ll avoid the phone booking fee that way.

International agents may set up the pricing shell with fuel surcharges because Delta generally charges those on Asia- or Europe-originating itineraries. If you’re originating from the US you may need to correct them.

It’s very strange indeed that an Asian point of sale can access Air France business class availability, but a US point of sale cannot. It’s one more mystery in the ongoing “IT glitch” that has been ongoing, with no accommodations from Delta or projected date for solution, that in the interim is simply saving the airline from cost of redemptions.

Mileage Earning Changes and New Fees for Etihad Guest

Posted on: March 29th, 2012 by: Gary Leff

Etihad, new American AAdvantage partner and new partial owner of oneworld member Air Berlin, has introduced a new mileage earning structure that bases mileage earning on fare class.

Effective June 1, most economy fares will earn only 50% of miles flown. Only H, B, and Y fares will earn 100% miles in economy. Discounted business class will earn fewer miles than full fare business class, and discounted first class will earn fewer miles than full fare first class.

Meanwhile, beginning June 1 any award booked through their service center will incur a fee of $20 or 2000 miles.

Why TSA Airport Security is Actually Harmful, and Not Merely Ineffective

Posted on: March 29th, 2012 by: Gary Leff

Bruce Schneier on why current airport security is actually harmful, and not just mere ineffective inconvenience:

Kip Hawley doesn’t argue with the specifics of my criticisms, but instead provides anecdotes and asks us to trust that airport security—and the Transportation Security Administration (TSA) in particular—knows what it’s doing.

He wants us to trust that a 400-ml bottle of liquid is dangerous, but transferring it to four 100-ml bottles magically makes it safe. He wants us to trust that the butter knives given to first-class passengers are nevertheless too dangerous to be taken through a security checkpoint. He wants us to trust the no-fly list: 21,000 people so dangerous they’re not allowed to fly, yet so innocent they can’t be arrested. He wants us to trust that the deployment of expensive full-body scanners has nothing to do with the fact that the former secretary of homeland security, Michael Chertoff, lobbies for one of the companies that makes them. He wants us to trust that there’s a reason to confiscate a cupcake (Las Vegas), a 3-inch plastic toy gun (London Gatwick), a purse with an embroidered gun on it (Norfolk, VA), a T-shirt with a picture of a gun on it (London Heathrow) and a plastic lightsaber that’s really a flashlight with a long cone on top (Dallas/Fort Worth).

…The humiliation, the dehumanisation and the privacy violations are also harms. [T]he mental harm suffered by both abuse survivors and children: the things screeners tell them as they touch their bodies are uncomfortably similar to what child molesters say.

In 2004, the average extra waiting time due to TSA procedures was 19.5 minutes per person. That’s a total economic loss—in –America—of $10 billion per year, more than the TSA’s entire budget. The increased automobile deaths due to people deciding to drive instead of fly is 500 per year. Both of these numbers are for America only, and by themselves demonstrate that post-9/11 airport security has done more harm than good.

The current TSA measures create an even greater harm: loss of liberty. Airports are effectively rights-free zones. Security officers have enormous power over you as a passenger. You have limited rights to refuse a search. Your possessions can be confiscated. You cannot make jokes, or wear clothing, that airport security does not approve of. You cannot travel anonymously. (Remember when we would mock Soviet-style “show me your papers” societies? That we’ve become inured to the very practice is a harm.) And if you’re on a certain secret list, you cannot fly, and you enter a Kafkaesque world where you cannot face your accuser, protest your innocence, clear your name, or even get confirmation from the government that someone, somewhere, has judged you guilty. These police powers would be illegal anywhere but in an airport, and we are all harmed—individually and collectively—by their existence.

…Increased fear is the final harm, and its effects are both emotional and physical. By sowing mistrust, by stripping us of our privacy—and in many cases our dignity—by taking away our rights, by subjecting us to arbitrary and irrational rules, and by constantly reminding us that this is the only thing between us and death by the hands of terrorists, the TSA and its ilk are sowing fear. And by doing so, they are playing directly into the terrorists’ hands.

…Return airport security checkpoints to pre-9/11 levels. Get rid of everything that isn’t needed to protect against random amateur terrorists and won’t work against professional al-Qaeda plots.

…Recognise that 100% safety is impossible, and also that terrorism is not an “existential threat” to our way of life. Respond to terrorism not with fear but with indomitability. Refuse to be terrorized.

Read the whole thing.

You Don’t Have to Go to Jetsetter for a Discount on Groundlink

Posted on: March 29th, 2012 by: Gary Leff

Via Joey M. there’s a New York City Groundlink offer on Groupon.

Groupon’s deal is $29 for LaGuardia or $39 for JFK or Newark transportation.

And you can get miles, points, or cash back for shopping through your favorite mileage portal, the offers from Chase Ultimate Rewards and from the AAdvantage Mall appear especially lucrative.

Cheap Groundlink Car Service Offer Back on Jetsetter (sort of)

Posted on: March 29th, 2012 by: Gary Leff

The Wall Street Journal yesterday picked up that car service company Groundlink has acquired Limo Anywhere.

That minor piece of news might have escaped me, except that I’m been using Groundlink quite a bit lately, discovering them through a deal posted on Jetsetter back in January, a Groupon-esque offering that gave me a cheap airport pickup and introduced me to the company.

It seems that Jetsetter is offering that deal again.

If you aren’t already a member of Jetsetter, you can sign up with my link and if/when you purchase something from them, in theory I get a $25 credit. I’d love to find out if they’re actually going to honor credits earned through the Groundlink promotion, or at all. (Update: to be clear I wanted to see whether they would honor referrals to me going forward to understand whether Jetsetter had learned anything from past mistakes, I really am not interested in receiving referral credits from them. I have moved my own referral link, and encourage anyone that is interested in these credits to post their own link in the comments.)

If you have a Jetsetter referral link, you’re welcome to add yours to the comments, if someone uses it I’d appreciate it if you would come back to this post and comment on whether Jetsetter honored the offer for you or not.

When Jetsetter last offered these discounts on GroundLink airport transfers they were also offering new customers $25 towards their first purchase. Which made a $29 one-way LaGuardia to Manhattan transfer cost $4. Which was an amazing steal, of course, $4 for a Town Car instead of a $35-ish cab.

Jetsetter learned its lesson on the first go-round with Grounlink. They pulled the deal early. And while new members booking the car service in most cases did get their $4 or $14 airport transfers, some folks that Jetsetter suspected of referring themselves for the deal did not. Jetsetter also decided they didn’t want to pay out the $25 referral credits for the folks that referred these new customers.

My post Why I Don’t Trust Jetsetter set off a social media firestorm, even getting the attention of their CEO.

In the end, my understanding is that they restore credits that were rightfully earned. Please comment here if they didn’t ultimately honor/restore yours. (I think I had $275 in credits at stake.)

But they also shut down the $25 credit for new members. There’s still a credit for the person doing the referring. But they won’t give out $25 which can be used towards this $29+ offer.

(That said, if you’re a Jetsetter member you can still refer a friend, spouse, significant other… they can buy the offer and set up the ground transfer for when you travel together.)

Social media schooled them and they decided not to play anymore. This wasn’t immediately obvious and two popular bloggers posted the Groundlink deal as though folks would get the car service for $4 – $14, only to discover there’s no longer a $25 credit for new members to use.

There are other competing services, I haven’t checked them all out, and there are certainly local services as well. I didn’t have a great experience with Groundlink in San Francisco when I actually redeemed my voucher from the January offer, the driver’s English wasn’t great, he didn’t seem all that familiar with the airport, but I still got a cheap ride in a comfortable car.

But all in all I’ve liked them enough that I plan to use them again, and when making previous bookings I’ve noted that they promote coupon code RIDE2 offering 10% off as well, which may be useful to some.

Update: And it looks like the deal has been pulled again…

Free Hilton Gold Status, the Gift that Just Keeps Giving

Posted on: March 28th, 2012 by: Gary Leff

Every time the December offer of Free Hilton Gold status, instantly, is declared dead… it keeps returning.

Michael Myers, Jason Vorhees, and… the ghost of Conrad Hilton’s mid-tier elite benefits.

The offer was intended for Visa Infinite cardholders, and they asked you to enter the first six digits of your Visa Infinite card to prove you had one. That just unlocked the form, and then the status processed immediately.

Over the course of the next three months there were various changes to the form. Since it was possible to just google what six digit bank identifiers were for Visa Infinite, they appeared to deactive the most popular and easy to find Russian one. Then they started matching account addresses to other bank identifiers, so folks using an Australian six digit number to unlock the form had to sign up for their account with an address in Australia.

Recent reports again were that the offer was dead because they were now requiring a full sixteen digit Visa Infinite cardnumber. Once again, reports of the offer’s demise were… premature.

I speculated in the comments of a previous post that the full credit card number requirement was just testing whether such a combination of numbers was possible, not whether the numbers entered were real.

Personally, I’m just fascinated by the whole thing. It matters not a whit to me, I’m a Hilton Diamond already and have been one for a few years, based on spending $40,000 in a year on the Hilton American Express Surpass card.

Well, reader ThatGuy tried the signup again, it worked, and filed this report in the comments:

Just to update you all: As of 28 Mar this still worked. The 16 digit entry as I suspected is not verifying the actual account exists but that you have a valid account number (it’s easier than querying their massive database for an actual account). That being said you just need to enter a potentially valid CC account number.

This website explains the checksum logic for a VISA cc:

Still use 442394 as your first 6 digits, and then plug in the rest to make a valid acct number using the formula given. It’s very simple to do with an Excel sheet.

You won’t have to add the credit card to your account nor book using the card, so no worries. Also make sure to change your HHonors account address to Australia before hand. Good Luck!


Boggles the mind, but this has been out there for three months now, they’ve tried to clamp down to avoid a few unintended people from grabbing free status, but they do not appear to have tried very hard.

When an Agent Says Award Seats Are Unavailable But You Know They Are…

Posted on: March 28th, 2012 by: Gary Leff

Back in the era of United’s Starnet blocking — programming computers to say that frequent flyer award seats on partner airlines weren’t available, even when those partners were offering the seats, because United didn’t want to pay for the tickets — things got pretty silly.

Agents would say, “I’m sorry, Lufthansa doesn’t fly to Frankfurt that day.” Or, “It doesn’t look like All Nippon flies from Washington Dulles to Tokyo.”

Excuse me? “It’s call ANA flight number 1. I was at the party they held in DC to celebrate 20 years of continuous service.”

See, at one time United’s computers ‘blocked’ award seats by simply not showing the flight existed. In the very beginning, the most common thing to block was Lufthansa seats inside Europe, the connections simply wouldn’t show up. Then Lufthansa transatlantic space, because award availability just got too good. Thai Airways Europe – Bangkok and on some Central Asia routes like Bangkok – Kathmandu. Eventually it expanded to include, at various times, most of their partners.

When you’d explain the seats were available, including as awards on various partner airline websites, agents would say that different airlines have access to different seats and that United must “already have used up theirs.” Which wasn’t entirely wrong but not true either. Certainly Lufthansa and Swiss and Singapore make more seats available to their own members than to partners. And what was really going on is that United had used up…. not all of ‘their’ partner seats, but at least had been expected to use up their full budget for the fiscal quarter for spending on award seats with a given carrier.

I always found that blocking loosened up about a week into February, May, August, and November. They would start off a quarter with inventory controls or ‘throttling’ tight, then spending would be below expectations, they’d loosen the reins, spend out the budget, and block seats again.

In order to combat this, I became practiced at asking agents to “request the seats manually” (I avoided using reservations jargon). By submitting the seats on a “NN” or “need need” basis the seats would then come back confirmed. In other words, they would ask the partner for seats, the partner would confirm those seats, because the award seats were available.

United, though, caught on to this trick and specifically instructed their agents not to do manual or ‘long’ sells of award space any longer.

One of the absolute best things about the United-Continental merger is the abandonment of Starnet blocking. United miles are worth orders of magnitude more than before the merger was announced, simply because the airline isn’t preventing its members from booking those award seats that its partners make available.

And of course award seats are much more bookable online, the new United website (read: the old Continental website) is really quite good at it, though there are sometimes pricing glitches which require a phone call to sort out, the website makes pricing mistakes more than agents on the phone do. Though when it happens with a phone agent, good luck, because Continental trains agents that the computer is always correct.

United, though, wasn’t the only airline which found itself refusing to book partner award seats for its members.

US Airways has historically had one of the most generous frequent flyer programs because of how easy it’s been to acquire miles, how non-existent routing rules have been, and how their agents never seemed to know much about geography so virtually any award would be permissible — such as awards between Australia and Europe via South America and the United States.

But folks with US Airways miles ran into a wall when it became next to impossible to redeem for Lufthansa transatlantic first class award seats. Occasionally US Airways would have special problems with United flights as well, that was usually when United was updating its schedules and it would take about 24 hours for US Airways’ systems to catch up. But Lufthansa transatlantic first class was another issue, their computers simply wouldn’t show the seats as available even when offered.

Business class wasn’t a problem. First class from Germany to elsewhere in the world wasn’t a problem. Just transatlantic first class.

All of my inquiries suggested that it was an IT glitch. I heard it speculated that it was an ‘AVS sync’ issue, that in order to fix could actually take down the entire Starnet booking system if done live (and if done offline, would show false availability, not a pleasant proposition for the airline).

But the problem persisted, and it seemed as if US Airways had no interest in fixing it. Which could be the case, because the problem was saving the airline money on partner award seats, similar to the current issue with Delta being unable to book Air France business class award seats due to an “IT glitch.”

So I became really practiced at asking US Airways for the long sell. US Airways, too, has told agents they shouldn’t do this. So it may take 6 or 8 agents to get them to check, I don’t feel bad though because all US Airways is doing is asking a partner if award seats are available, and if they are, they book those seats for their members.

It’s rarely an issue these days because Lufthansa has been making first class award seats available, for the most part, only within a couple of weeks of travel.

But for booking tickets close-in, it’s still a problem and still a big deal to overcome. One date this morning that I checked availability for saw at least four first class award seats available for Dallas – Frankfurt, albeit less than a week out.

This morning D. emailed me,

Have you had any recent success booking [Lufthansa First Class] using US[airways] miles? I am trying to book LH465 [Orlando-Frankfurt] on [early April date]. United and ANA show it as available while US[airways] claims it is not. I have no problem paying your fee if you can book the following for me..

I replied:

Don’t pay attention to the United website for Lufthansa First Class availability. That’s been showing lots of false positives recently. But if the All Nippon website says it’s available, it is. US Airways has long had issues with Lufthansa first class transatlantic award space.

The only way to grab it is to find an agent willing to do a long, or manual, sell – if they do that, the space will come back confirmed.

However, that’s not something I’m willing to offer on a paid, commercial basis since US Airways agents are specifically not supposed to do that, I won’t take money from anyone to get an agent o break an airline’s rules, if that makes sense.

The only approach is calling up enough US Airways agents with something like “the seats were available just a few minutes ago, I should have held them, but the agent at the time said she had to request the seats manually and they come back confirmed, is that something you’d be willing to try?”

A short while later I get an email back,

Four calls later and I am all booked. That fourth agent is a keeper. She was stunned when seats came back confirmed!

Thanks for the advice.

Congratulations! And enjoy Lufthansa first class!

Three Days Left to Vote in the Freddies — Who Are You Supporting?

Posted on: March 28th, 2012 by: Gary Leff

It’s your last chance to Vote in the Freddie Awards. Balloting ends as the month of March comes to a close (my understanding: 11:59pm on March 31 in the last inhabited time zone — so for many of you, early Sunday morning).

The Freddies are the award in the loyalty industry, honoring the best in airline, hotel, and credit card programs. And it’s the voice of the frequent traveler, voted on by the program’s members which makes it in many ways the most meaningful.

In my experience talking with programs, I’ve learned that they really do want to win these awards, in fact they want these awards the most, and at the margins they do listen to their customers and hear them through the awards, and have made changes or avoided making changes with an eye towards being honored by their customers through the Freddies — and also have mirrored things that the customers’ favorite programs have done as well.

If you haven’t already done so, it’s time to vote.

If you’re not sure whom to vote for, consider what others have to say,
Heels First Travel offers a run down of their favorite picks for voting in the Americas region.

Mommy Points shared her excitement for Freddies voting last month, but didn’t share her votes.

I’d love to know, which programs are you supporting this year, and why?

Around the Forums and Blogs for Wednesday, March 26

Posted on: March 28th, 2012 by: Gary Leff

  • The Points Guy calls out Delta for failing to quickly fix the ‘IT issue’ that is preventing Skymiles from accessing business class award and upgrade inventory on Air France, while not doing anything to assist affected customers such as making more upgrades and awards available on their own product in the meantime. The problem has been ongoing, with little communication from Skymiles about when it might be solved, and one begins to wonder whether they aren’t exactly anxious to fix it (since that would entail higher redemption costs).

  • Deals We Like highlights an offer for 20% off at Starwood hotel restaurants for showing your SPG member card. This is on top of the miles earned for spending at those restaurants. And it doesn’t require you to be a registered guest. Not all hotels participate.

  • Online Travel Review highlights another link for the United Explorer card with larger than usual signup bonus. It apparently works for some, did not work for me, I discuss other ways to get the ‘60,000 mile offer’ (which is really a 50,000 mile offer) in this post earlier in the week.

  • Heels First Travel reminds you to always ask for the priority luggage tags.

  • Matthew Klint violates the Foreign Corrupt Practices Act.

  • JonNYC over at has some interesting details on the evolution of American’s Concierge Key program — that’s the ‘super secret’ level that George Clooney had in Up in the Air. Concierge Key began mostly for corporate travel buyers and folks in their old VIP program, and gradually expanded to individual high revenue customers. This year for the first time it comes with Executive Platinum status for those who don’t otherwise earn it. Outside of granting this status, it’s primarily useful during irregular operations, though if I were LA-based I’d sure enjoy the associated Flagship check-in privileges.

  • I’m very much looking forward to the newly announced Park Hyatt in Siem Riep, Cambodia – thanks to uggboy at for the heads up!

  • Flyalog has updated answers to Audience Rewards trivia good for 6-10 miles with each of Starwood, Delta, and US Airways.

In an Era of Airline Consolidation, Elite Status Matters More Than Ever

Posted on: March 28th, 2012 by: Gary Leff

It’s a rare publication that will listen to me opine endless, and then quote my rants extensively. So I have to give credit where credit is due.

Financial site ran a piece on consolidation in the airline industry and what it means for elite perks and miles.

They quoted me extensively, and began by suggesting that fewer planes in the air, and planes that are more full, makes upgrades more difficult — it shifts those upgrades upwards to only the top elites. (Unlimited complimentary domestic upgrades does this, too.)

Indeed, it’s a simple matter of supply and demand with regards to seat upgrades. With airline consolidations, there are now fewer planes and thus fewer seats on many routes, making upgrades scarce commodities. As such, both Raja and Gary Leff, co-founder of the frequent flyer community,, agree that only the very top-tier of elite flyers continue to enjoy upgrade perks. For lower-tiered elite flyers, upgrades are becoming an endangered species.

The dialogue I had with the reporter began with the suggestion that status no longer mattered, and I made the case that it mattered more than ever now, and that being an elite made the best of a bad situation up in the air (and on the grond).

As for regular passengers with no status, the situation is worse. “Just getting through on the phone to United these days is tough if you aren’t an elite member. [The privilege of] boarding early matters just to get overhead space and not have to gate check your bags. And when you do check bags, not paying is a privilege,” elaborates Leff.

I argued that despite the doomsaying, that mergers have had some real pluses, with all of the disastrous problems from a flyer’s perspective with the combination of United-Continental reservation systems, it’s easy to forget the real benefits that have come as a result of the merger (err, Continental acquisition of United) — don’t forget, we haven’t seen Starnet blocking in a long, long time.

Airline mergers do not always spell doom for customers however, argued Leff, who believes they have been a mixed blessing for frequent flyer programs.

“There has been a general trend at United over the past three or four years to clear upgrades later and later rather than at the 24, 48, 72, or 100 hour windows. But it’s not obvious that’s getting worse. In fact, I’ve seen the opposite – Continental has tended to clear more upgrade seats earlier than United was, and it looks like the Continental approach is prevailing,” he asserts.

“[Also,] frequent flyer redemption has gotten better for Continental members when the airline joined Star Alliance in 2009, and it’s gotten better for United members since the merger was announced.”

Jill Schiaparelli, a senior executive at AxoGen, agreed with Leff’s more nuanced take of airline consolidation.

That said, I’m not sure I buy this

When asked to respond, United spokesperson Rahsaan Johnson said that the United merger with Continental was actually good for frequent flyers because they now give “members more options and improved ability to earn and use their miles.”

“For example, with the merger and the transition to a single reservations system and website, members have consistent access to international upgrades using Regional Upgrades, Systemwide Upgrades, or accessing mileage upgrade awards, regardless of whether they’re on a pre-merger United or pre-merger Continental flight. That’s an important benefit to our most-frequent flyers,” Johnson said in an email interview.

I also argued that pseudo-elite benefits that come with co-branded credit cards don’t really dilute benefits for those earning their status butt-in-seat.

Leff disagreed that these moves made loyalty programs less meaningful, saying that elite travelers still get priority to all benefits.

“Purchased upgrades at check-in are generally offered only after they’ve been made available free on domestic flights to elite members. Credit card holders may get boarding priority, but this generally comes after elites have boarded. And getting a free checked bag for getting a credit card takes nothing away from elite members,” he said.

“If anything, there may be a substitution effect between getting a credit card and reaching the bottom tier of elite status. But this takes away nothing from the very frequent flyer, and underscores the cash value of the benefits they receive.”

In the end, contrary to what I think the reporter expected to find, loyalty is more important than ever before.

“Loyalty matters more than ever. If the travel experience has been degraded, it’s been degraded most for the non-elite, non-loyal traveler. And where it’s been degraded for the frequent flyer, it’s been degraded for the less frequent (ie. 25,000 miles vs. 100,000 miles) traveler,” Leff opined. “Sure, folks who can’t stick to one airline and fly even more miles might give up and throw in the towel. But the benefits of loyalty, and the need for those benefits, have never been greater.”

They reported on my own current flying choices as well:

For his part, Leff’s choice of legacy carriers in 2012 is American.

“Overall, American and United have the best programs. Which one works better for an individual traveler depends on where that traveler is flying from , where they’re going, and what they value most. If I had to give an edge to one over the other, I’d give the edge to American right now, even though my upgrade for [last] Thursday afternoon probably won’t clear. I have an exit row and they not only comp my drinks, but even my buy-on-board snack.”

And carried my comparison of US domestic carriers on several fronts:


How does Gary Leff, co-founder of frequent flyer community,, break down each of the legacy carrier’s frequent flyer programs?

Mileage Award Redemption If you’re like me and you prefer international first class awards (as opposed to even business class!) then American AAdvantage is far and away the best program right now.  If you want business class to South America, it’s American.  If you want domestic seats, again American.  But business class to Asia or to Europe, it’s a slight edge to United by virtue of all of the partners they have.
International Upgrades for Top-Tier Elites American lets their 100,000 mile flyers upgrade internationally on any fare 8 times a year.  United requires buying up to a somewhat more expensive fare to be eligible to upgrade, but United serves more international destinations than American does.  Delta is tough – you have to buy nearly a full fare coach ticket in order to be eligible to upgrade.  So American or United is best, depending on where you’re going.
Domestic Upgrades Here everyone is pretty good.  I think that top-tier elites on American probably are in the best shape.  Delta prioritizes price of the ticket over status (silver elites on a full fare trump their higher tier members).  The new United is going this way, too.  That may be a reasonable policy, but American is more rewarding of loyalty in its method.  A sleeper here is US Airways, their front cabin isn’t great but their elites have a very good upgrade percentage – even their lower tier elites.

$10 for $20 Skype Credit

Posted on: March 27th, 2012 by: Gary Leff

I use Skype for most of my international calls at home (such as the the bmi Diamond Club call centers in India, for which there’s no U.S. number), the quality does vary but it does the trick. I also use it to call from abroad, when I’ve got internet connectivity. (When I’m roaming around I use an unlocked cell with a SIM card from which suits my needs in many countries.) has $20 Skype Credit for $10, one per person.

Your $10 purchase yields a $20 e-gift code that can be deposited at

The site says the voucher expires September 26th, but then in the fine print says it must be redeemed by September 30th. I assume one should redeem it right away, and that the funds deposited are treated as normal Skype credits and expire (or do not) under normal Skype rules.

This deal is only available until 3am Eastern.

(HT: Joey M.)

Update: I happen to have a .edu e-mail address, so didn’t realize the site was specifically looking for that. Joey, who sent the deal, writes: “It says for students but just link a facebook account and you’ll be fine, I just did it.”

Citi Thank You Points Won’t Transfer to BA and Singapore After All?

Posted on: March 27th, 2012 by: Gary Leff

Yesterday I linked to Dan’s Deals reporting that starting April 1, Citi Thank You Points would transfer to Singapore Airlines Krisflyer and to British Airways as well.

I’ve generally found Dan to be reliable, as I noted at the time.

Of course I’m relying on Dan’s Deals here for this information, I haven’t independently verified it yet, but I usually find Dan to be pretty reliable.

I’ve since, however, received comment from Citi’s PR team.

The information posted on regarding transferring ThankYou Points to certain international airlines is not accurate. ThankYou members can redeem points for travel on any airline with no blackout dates in the ThankYou Travel Center. Currently ThankYou members cannot directly transfer their ThankYou Points to an airline.

Currently” seemed like a bit of a weasel word, because of course members cannot currently transfer points to airline miles, and Dan said that would be coming in the future, on April 1.

Online Travel Review followed up with Citi and reports,

I called to confirm that this will not be changing in the future and Citi’s rep said that there are no plans at all to allow transfers to BA or Singapore.

(Emphasis mine.)

Dan provides a bit more information on his previously having confirmed the information with Citi.

I called the Citi ThankYou department myself 3 separate times and confirmed each time that starting in April you will be able to transfer ThankYou points to British Airways and Singapore. I took down names of reps and had them confirm it with supervisors. One rep even read me the exact memo they had about it, hard to make up something like that.

..I get an urgent email from Citi asking me to please remove the post. I asked why and did not receive an immediate response.

.. I receive a call…asking me to pull the post as it is incorrect. I said I could not do that unless she would be able to guarantee me that I was indeed given false information from Citi reps..[She] would not explicitly deny the upcoming changes other than saying my post was incorrect as points can’t be transferred.

..I once again called the Citi ThankYou department..and asked about transferring my points to British Airways or Singapore and was told yet again that I would be able to do so starting in April..this information was confirmed by a supervisor

Strange indeed, and file this one under either there’s a full moon, or Citi is being intentionally misleading in order to keep this one under wraps.

We won’t know, I suppose, until this either does or does not happen, likely sometime in April.

What’s In My Laptop Bag?

Posted on: March 27th, 2012 by: Gary Leff

Last week The Points Guy took Singapore’s all-business class service from Newark to Singapore and wrote about the travel products he took along with him on the world’s largest flight.

Inspired by Brian, and sitting on board a much more pedestrian American AIrliens Pheonix – Chicago run powered by Gogo Inflight internet, I thought I’d share the contains of my laptop bag.

Verizon MiFi. I create my own wireless hotspot, and the speeds are pretty good. 5 gigs of data are included in my plan each month and then I buy additional gigs at $10 each. It’s not for streaming movies, but it does the job with email and websurfing and covers me for uploading photos I want to include on the blog.

Kensington Empower Adapter. Sadly too many aircraft still use the cigarette style outlets for their seat power, and I need to plug in. Fortunately after I got rid of my Samsung Series 9 Ultrabook (which I hated) I’m back to one (Lenovo u300s, which I love) that they make tips for.

Denon AH-NC800 noise cancelling headphones. All the cool kids use Bose QC15s, and I’ve only compared my Denons head-to-head with the Bose QC2s. I like the Denon’s better for music and movies, the Bose better for keeping out the sound of screaming children in the cabin.

Monster Outlets-to-Go power strip. Hotels never have enough outlets and I need to power up several devices at a time, I like a power strip that lets me do that, and it’s best when that strip is compact. I reviewed one of these back in 2009.

Cell phone and charger I still haven’t replaced my 3 year old Blackberry, I’m holding out for that ‘perfect device’ but I’m anxious. On international trips I bring along an unlocked phone with an Estonian SIM from I dial the number I need, it calls me back and connects me, getting low incoming rates in a ton of countries worldwide.

International power adapters. I carry a generic all-purpose one pretty much all the time, but when I’m headed on a long international trip I also bring along of bunch of region-specific power adapters since they’re smaller. Most folks are best off just with the generic ones, but I have a collection of European, Asian, U.K, South Pacific that I throw into the bag before heading to those regions, where I’ll want to be plugging in several items at once.

Canon S95 Camera. Based on reader advice I got the s95, brought down in price with the introduction of Canon’s s100.

Tumi travel wallet. This has all of my travel program cards, my coupons (lounge passes, free rental days, hotel BOGO certs, etc.) And it has a place for passports and I zipper pocket I keep foreign currency in.

Wireless router. I stopped carryin this for awhile, since nearly everywhere I went had wifi, and when I’m not near a signal I have my Verizon MFi. But I’ve been to too many hotels where the signal was virtually unusable, but that if I had plugged into the wired signal I’d have been just fine. So I started packing my six year old D-Link pocket router again, and it’s still a gem.

Also in my laptop bag: the current issue of The Atlantic for when we’re below 10,000 feet, my laptop power cord (oh, yeah, and my laptop – Lenovo u300s with i7 processor), and my freedom baggie (containing purell, chapstick, travel-sized toothpaste, travel-sized deodorant, and that’s it – though I’m messy enough I should probably bring along a Tide stick).

Relatedly, here’s More than Mary with tips for women on packing more efficiently something I know very little about!

What’s in your? carryon?

Another Reason Not to Check Your Bags

Posted on: March 27th, 2012 by: Gary Leff

200 thefts from checked bags. A day. Just at one airport.

Think twice before you check your luggage at John F. Kennedy International Airport…

All Rita Lamberg has left is an empty jewelry drawer and pictures of the $160,000 worth of watches, rings and necklaces that were stolen from her baggage at JFK Airport.

“I am so sick. This is a lifetime, a lifetime of my savings,” Lamberg said.

But Lamberg isn’t alone. Law enforcement sources told Kramer that thefts at the airport have increased at a staggering and alarming rate. There are now more that 200 a day — and that’s every day. Baggage handlers, jetway workers and even security people are all in on the ongoing scam to steal you blind.

“The belly of the airplane has become like a flea market for airport employees. They go in there and go through all the luggage unencumbered, unchecked,” JFK security lawyer Kenneth Mollins said.

…“What we’re seeing out there is that really anything that isn’t nailed down is being stolen and for that matter I would caution, some day, if there weren’t tires missing from an aircraft,” Shea said.

…“It’s really occurring on the tarmac or as it’s being loaded onto the aircraft,” Shea said.

Once they’ve found the goodies, Shea said there are many ways to make off with them.

“Sometimes they get loaded into the back of one of the vehicles out at the airport. They’re searched through. They can be discarded as rubbish. Other times they are leaving the airport grounds,” Shea said.

In other words, thieves steal your bags, but as a passenger you never find that out. The airlines say they are lost in transit.

Even you do check bags, don’t check $160,000 worth of jewelry. And further life advice: don’t invest “a lifetime of..savings” in jewelry in any case.

Still, adding to the chunk out of your life lost waiting at baggage claim, and the risk of loss especially when connecting and especially when connecting between airlines, is the risk of outright theft.

I’m not sure that i’m willing to believe 200 thefts a day, that strikes me as hyperbolic, perhaps there are a handful of thefts and you get to 200 adding up each individual item (a pair of socks is two items?) taken. But items out of your possession are… items out of your possession.

On a two week international trip I’ll check a bag, I don’t bring especially valuable items with me and I certainly don’t check my valuables, just my clothes. I’ve also had generally bad luck with U.S. carriers and outstanding luck with Asian ones. Singapore and Cathay Pacific will proactively verify for me that they have my bags on board, they’ll retag my bags as-needed even while in transit, it’s amazing service I’d never get from a U.S. carrier. Still, I also try to have clothing sufficient for a couple of days in my carryon because there’s always the risk of loss (or, I suppose, theft!).

United’s New Premium Credit Card With Lounge Access and 1.5 Miles Per Dollar on All Spend

Posted on: March 27th, 2012 by: Gary Leff

Back in July some of the best features were taken away from the Continental Presidential Plus Mastercard, the premium Chase card which includes lounge access.

We still haven’t seen a premium United card in the same vein, though it’s long been expected.

A week or so ago I posted on Milepoint that Chase would be introducing a new premium version of their United co-branded credit card which bundles lounge access, the unique selling proposition of the card would be earning 1.5 miles per dollar on all spend.

There’s a whole lot of details now available about the card which we’ll be seeing more of shortly. (And as far as I am aware, I will not receive any referral credits should you decide to get the card.)

The card comes with a $395 annual fee, so not a bad deal for someone who was going to buy United Club membership but not attractive otherwise. Still, there are some spiffy benefits for those who would otherwise be buying club access–

  • 1.5 miles per dollar spent on all spend (2 miles per dollar on United spend)
  • No foreign transaction fees
  • Chip and signature, though not chip and PIN, semi-useful some places in Europe

Simulates First-Tier Elite Status (but how many people without that want this card?)

  • 2 free checked bags (applies also to one travel companion)
  • Priority boarding (zone 4 – hah), security, and check-in.
  • Waiver of close in award booking fees

Like the United Explorer card:

  • Premier upgrades on award tickets
  • Miles don’t expire, but if you’re earning any miles from flying or from, you know, using the card they don’t expire anyway

Brought over from the Continental Presidential Plus Mstercard:

  • Avis President’s Club membership, this is real status and gets a 2-category upgrade
  • Hyatt Platinum status, comes with the Hyatt Visa and means free internet, 2pm late checkout, and usually avoids the room over the HVAC

This card does not offer elite qualifying miles for spend

It’s a better card for earning United miles only than anything else on the market, including Chase Sapphire Preferred. But you’re going to need to be at pretty high levels of spend in order to justify the fee on its own. I wouldn’t touch it if I were going to put less than $40,000 on the card in a year, that’s 20,000 extra United miles being purchased at 2 cents apiece (leaving the value of other benefits aside).

If you’re going to buy paid lounge access anyway, it becomes a tougher decision: 1.5 United miles vs. 1.07 flexible points via Chase Sapphire (Sapphire Preferred is still a better deal on bonused categories, including United spend where it pays 2 points per dollar) vs. 1.25 miles in your choice of programs via Starwood American Express.

I’m still not sure this card wins out, but it’s good earn for people already buying lounge access. For everyone else, probably just give it a miss, especially since it’s not really contributing to elite status. But I do have to say for a road warrior renting cars every week, Avis Presidents Club is no throwaway benefit.

Citi Thank You Points to Become Transferable to British Airways and Singapore Airlines Miles

Posted on: March 26th, 2012 by: Gary Leff

In my December credit card churn I picked up a Citibank ThankYou Premier Card with a 50,000 point signup bonus.

Citibank only has a handful of cards worth getting, I had zeroed in on what I wanted from Chase and from American Express. And I had recently gotten an American Airlines card from Citi right before they pulled their 75,000 mile signup bonus offer. So the Thank You Points were the best option for a bonus from them.

Back in the day of course Thank You Points were worth a ton since they could be used on any flight you wanted (and if it was non-0refundable, ticket cancelled for a big flight credit). They clamped down a bit but you could still get 3 cents per point in value on domestic business class tickets. And I was earning 5 – 12 points per dollar at one point, meaning a 15% – 36% rebate on spending to use on airfare. Back then the preferred partner was Delta since their e-credits were the most flexible.

Citi killed that a couple years back, so when I got my 50,000 points the best possible redemption was for $625 worth of airfare. I used the point right away. And now I regret it.

Because according to Dan’s Deals, on April 1 Thank You Points will be transferable to British Airways and to Singapore Airlines.

Neither is the greatest transfer partner in the world but I’d easily get better than 1.25 cents per point in value using BA or Singapore miles.

BA offers great award availability in premium classes from the US to London (albeit with hefty fuel surcharges), and their miles are well-used on short-haul non-stops on their partners, especially when those partners don’t add fuel surcharges to awards such as between the US and South America. 50,000 points is actually enough for a roundtrip business class award between Miami and Lima, Peru.

Singapore’s award chart isn’t crazy expensive, especially when booking flights on Singapoe and using the online booking 15% discount. They add fuel surcharges to awards, but they also offer better availability in premium cabins to their own members than they do to Star Alliance partners. When booking Singapore – Male for last month, and Tokyo – Singapore a year ago, I used Singapore miles (transferred in from American Express mostly).

What I really like to see is an aggressive play to add value, certainly they’re reacting to Chase Ultimate Rewards. They’re not just doing the one cent in value per point in paid airfare any longer. They recognize that frequent flyer programs are where real aspirational value comes from, and that customers end up disappointed after accumulating ‘credit card miles’ only to find out there’s no reasonable option to redeem for premium cabin international awards. It’s a long-term customer loyalty play in addition to an upfront value play, and it’s good to see Citi getting competitive!

Back in December, my link for referrals provided that 50,000 point signup bonus. It no longer does. But with a bit of Googling I did find an application that was available which still offered 50,000 points after $2500 in purchases within 3 months, fee waived the first year. (To be clear, this link does not provide any referral credit to me if you use it.)

The Citi Forward card also becomes a more interesting niche player in the credit card game as well (note, this card does offer me a referral credit). It has a much smaller signup bonus, just 10,000 point after $650 in purchases within three months and signing up for e-statements. There’s no annual fee. But the key is that it earns 5 points per dollar spent on restaurants, books, movies, and music.

There’s a points earning cap of 75,000 in a year with this card, and they give you 100 bonus points each month you aren’t over your limit and you make your payment on time.

I’d say that 5 British Airways or Singapore miles per dollar trumps 2 United miles or Hyatt points per dollar on restaurant spend earned through the Sapphire Preferred card, though of course it depends on how you’ll use them.

And that probably means I’ll have to pick this card up, after previously arguing it didn’t make sense for me before those points were transferable to mileage programs.

Of course I’m relying on Dan’s Deals here for this information, I haven’t independently verified it yet, but I usually find Dan to be pretty reliable.

Using Two Credit Card Signups to Get Free Business Class Award Tickets Quickly

Posted on: March 26th, 2012 by: Gary Leff

Stephen P. shares his success — two people each signing up for two credit cards, fee waived the first year, giving them about the number of miles needed for a business class award ticket to Europe and almost enough for Asia. He writes:

A few weeks ago you wrote in response to my request about how we can use frequent flier cards to get inexpensive or free business class tickets. I read that post and proceeded accordingly, and I’m happy to say that we’re well on our way to success, getting approved for dual United MileagePlus Explorer and Chase Sapphire Preferred for both of us, so it very much looks like we’ll be introduced to the wonderful world of miles and qualify for business class travel exceptionally quickly. Thank you for your advice!

Even though the Chase Sapphire Preferred card only has a publicly advertised 40,000 point signup bonus now, you can still get the 50,000 point bonus with this link (no fee the first year, bonus after $3000 spend within 3 months). (Update: the offer is now 40,000 miles.)

I wrote last week how the 50,000 point signup bonus appeared to be going away soon, plenty of folks have been jumping on the card offer before it’s too late and the best offer is 40,000 points.

Chase Sapphire points can be transferred instantly to anyone’s United account you wish, and the signup bonus is halfway to a business class award ticket to Europe.

That’s why Stephen was pairing it with the United Explorer card, to top off the same United accounts.

The standard offer for the United MileagePlus Explorer card is 25,000 miles after first use and 5,000 more for adding an authorized user to the account.

However, there are three ways to potentially get a better signup bonus on the United card, the first two thanks to Million Mile Secrets and usually require having some miles in your account.

  • After signing into your United account, go to this link and you may receive a targeted offer for 50,000 points after first purchase. Print copies of the offer to be sure you get it in case you need to fight for the full bonus. This one didn’t work for me.

  • Another strategy for the bigger bonus is to go to this link, log in with your United account information, and see of you’re offered the 50,000 points with first purchase. This one didn’t work for me, either.

  • Or, what in the experience of many works just as well, is to apply for the card using the standard offer. Then once approved just send a secure email through the Chase website saying that you’ve seen an offer of 60,000 bonus miles, including 50,000 miles after first purchase, and could they extend that offer to you? You’ll likely get a response that they can’t but that they’ll just give you the difference in miles (which is the same thing as “yes”). It’s possible they could say no but I’ve only recently heard of successes.

I’ve long had an old-style United Visa Signature, but not the Explorer card, and I’m going to take a run at the third strategy myself.

The real leverage here is in doing the cards for more than one person, two spouses do it and they each are positioned for award tickets just from credit card signup bonuses.

Now, not everyone is going to get approved for two Chase cards at the same time like Stephen did. You usually have to do cards with Chase a month apart, and then for the second one call the reconsideration line, an offer to move credit from one card to another will usually do the trick in getting approved and it helps to have a reason why you want both cards. So some folks will need to wait 30 days (and the more cautious among us, 90 days) to get the second card, or consider applying for a personal card and the Ink Bold Charge Card which offers 50,000 points after $5000 in spend within three months, fee waived the first year, and whose points also transfer to United.

Generally Chase will approve a personal and a small business card at the same time. I’ve had several of the same type of small business cards, using a separate tax ID for each (eg my social security number as a sole proprietorship and my LLC’s tax ID number as well). Some folks are approved instantly, others who wind up calling in to get approved may be asked about their business or to demonstrate that the business exists.

Congratulation, Stephen!

(Note that several but not all of the credit card links in this post will provide me with referral credit. You don’t need to use my links of course, though the Sapphire Preferred link is better than what’s offered to the general public. And of course I appreciate very much when you do!)

Update: the Chase Sapphire Preferred offer is now 40,000 points.

Why Airlines Won’t Charge for Checked Bags or Internet in 10 Years, But There Will Be More Fees Than Ever

Posted on: March 26th, 2012 by: Gary Leff

When I was a kid I was a pretty frequent flyer, mostly New York – Los Angeles (and I became a frequent People Express customer out of Newark). I used to get to the airport super early hoping to get a bulkhead seat. This was before elite seating, the best way to get the seats was to be first.

See, there’s a limited number of exit rows and bulkheads on any given seat. One way to ration them is first come first served, or a modified version of who shows up at the airport first. Then they go to whomever has the lowest value of time.

Another way to ration them is to charge for them, whomever values them the most will pay. And that’s what the airlines are doing now (though in many cases elites don’t get charged, though Delta now offers a fare class that doesn’t even allow their Diamond medallion members to pre-assign any seats, let alone have the best seats free).

Air travel really isn’t 100% a commodity, there are better seats and worse seats, which was the premise of Seat Guru and Seat Expert.

And when there’s a limited supply of something that customers want, it makes sense to charge for it, lots of things are getting unbundled from ticket price.

But then there are things where one customer’s taking advantage of a service doesn’t detract from another’s ability to take advantage of it. And where one more customer taking advantage of the service doesn’t really add any costs to the airline once the infrastructure is in place.

In those cases, it doesn’t make sense to charge, in fact the airlines will make more money by bundling those services into price — except for two current distortions, technology and tax policy, which I anticipate will be short-lived.

Which is why I expect the future to include more unbundling, more ancillary fees than we have today, but for completely different items than we now see them. Ten years from now I do not believe airlines will charge extra for a first checked bag.

Oh, there will still be limitations on checked baggage. There’s limitations on how much a given plane can carry, or a margin at which checked bags trade off with cargo. An airline ticket will not become a free pass to airlift supplies.

But once an airline builds an infrastructure, and airports build infrastructure and build those costs into the fees for landings and gates, and once airlines buy the trucks and other equipment to move baggage and hire baggage handlers, there’s little extra cost for one more bag.

And, for that matter, once an aircraft is equipped with internet and once the ground-based or satellite-based services are in place, an incremental user of onboard internet is cheap (though there are bandwidth limitations, so it may not be free or at least for doing much beyond basic email there could well be a charge for awhile until bandwidth limitations are overcome).

Here’s why baggage charges exist today. It isn’t the traditional story that airlines saw high fuel prices and had to figure out a decent way to eek out more revenue in order to be profitable. Because it either makes sense to separately charge for baggage or it doesn’t, fuel costs don’t really change that calculation.

Fuel costs probably did force airlines out of their complacency. They used to give away things that they really could charge extra for, not every seat is equal but years ago every seat had the same price, or at least once you bought your ticket you could buy any seat 9and then there were some seats that began to get charged for and that’s been expanding over the past decade).

The reason baggage fees exist, and to some extent many other fees as well, is two-fold:

  1. Technology.People buy airfare on price, the major sales venues show you a ticket price but not a total trip priced customized to how an individual will travel. And flights are displayed on the basis of price usually, lowest price first, so stripping things out of base price makes sense in order to generate more bookings from consumers for whom assembling total trip cost is pricey information search. Greater disclosure here isn’t the answer, there’s plenty of disclosure already, it’s search cost and most consumers don’t invest. Eventually technology will shift, sales outlets are looking for a competitive edge (booking engines are to a large extent a commodity product), and that investment will lead to greater transparency. No more fooled consumers.
  2. Taxes. Ancillary fees are generally exempt from the 7.5% excise tax on domestic airfare. So moving $20 away from a ticket and into a bucket of fees means that the government takes $1.50 less. Multiply that out by billions of dollars and it’s real revenue gained through tax arbitrage. My bet is that it’ll take awhile, airlines will give plenty of money to politicians hoping to stave off the excise tax being applied to these fees, but ultimately it’s too big a pot of money for the government to ignore and the tax arbitrage opportunity will go away.

With improvements in technology and closing of tax opportunities, two of the biggest drivers of market distortion that lead to airline ancillary fees will be eliminated.

But that won’t lead to the end of fees.

Bundling makes sense as a revenue-maximizing strategy for airlines and as a consumer welfare strategy for consumers when the services bundled have low marginal cost, like (under certain conditions) baggage fees and onboard internet.

The best analogy here is going to be pay television, cable or satellite. And for this understanding I thank a post at Marginal Revolution. The economics of bundling is often written about in terms of monopolies, though it hardly seems to require such, e.g. even where cable is a monopoly it competes with satellites and satellite services compete and bundle.

Why are consumers forced to buy a bundle? Cable companies claim that choice would require expensive boxes, but few observers believe this claim.

More plausibly, price discrimination is at work. Consider a simple example with two individuals. John values Disney at $100 a year and FoxNews at $10 a year; Sally has the reverse valuations. Without bundling, the cable company will offer each channel for about $99, and sell a channel to each consumer, reaping $198 in revenue (N.B.: I am assuming that the cable company has a good idea of demand in general, although it cannot identify which consumer is willing to pay how much for what.)

In lieu of this set up, sell the bundle for $109 to each consumer, reaping a greater revenue of $218. The company makes greater profit.

More importantly, aggregate welfare is higher. In this case each consumer receives two channels instead of one.

Bundling makes sense where consumers demand various levels of service, will pay different amounts for each service, and the marginal cost to provide services is low. Once the investment is made to be able to to provide the service, the key is to extract as much total revenue from all of your customers as possible.

And this concept of extracting greater revenue from consumers makes sense nowhere more than the airline industry which is capital intensive and where some of the most pioneering work in price discrimination (through revenue management) has been done.

Plenty of people choose not to check bags at $25 apiece, they shove all their stuff into carryons and fill the overhead bins and maybe wind up checking the bag anyway just by getting it through security once the bins fill up. And that stresses departure times as well.

But they might have paid $5 not to have had to deal with the bag post-security, or to bring a bit bigger bag that wouldn’t have fit through the x-ray. And today that $5 is actually left on the table, but the airlines aren’t going to price the bag separately at $5, but eventually ticket prces will be probably $5 higher or a bundle of premium services for $25 might include baggage and seiveral other things that consumers value a little but that in total they value above that $25 price point. The airlines will make more money, and the people who would have checked the bag for $5 will be better off, it’s actually win-win.

In the future it may be that baggage and internet are bundled into ticket price, or just into a premium services package. Today baggage, priority waitlisting and checkin and boarding, amongst other benefits are ‘bundled’ into an elite benefits package that is sold to customers in flying packages (flying a whole lot to earn status) and at some airlines on a day of travel basis.

The future of fees will look very different than it does today, once technology and government distortions change, and as airlines compete over the pot of available ancillary revenue from consumers (the phenomenon is still relatively new). Fees are here to stay, but I’m betting that 10 years from now it will not be $25 a bag.

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View from the Wing is a project of Miles and Points Consulting, LLC. This site is for entertainment purpose only. The owner of this site is not an investment advisor, financial planner, nor legal or tax professional and articles here are of an opinion and general nature and should not be relied upon for individual circumstances.

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