Reader Joe C. sends me to a Flyertalk thread where someone listened to United CFO John Rainey’s talk at the Bank of America Merrill Lynch Global Transportation Conference on Thursday, and reported back that Rainey referred to some members of the United MileagePlus program as “over-entitled.”
Audio of the talk is on the UnitedContinentalHoldings.com Investor Relations page.
The Flyertalk thread apparently went to nearly 200 posts within 4 hours before a moderator decided to shut it down (where it remains as of this writing, but it may be re-opened).
I listened to the audio, and what he said about Mileage Plus members was
We had certain groups in this program that were over-entitled if you will. And now we’ve re-aligned the benefits of that program with what the customers and program participants are actually providing to the program, it’s a good change going forward.
In August 2002, when Ben Baldanza (now running Spirit Airlines) was Vice President of US Airways, he said that customers buying inexpensive tickets (that the airline was offering for sale) didn’t represent the kind of loyalty the airline was looking for, that was a shocking statement and gave birth to the “cockroach” movement.
But this statement from United shouldn’t be surprising at all. A full year ago Randy Petersen Travel Executive Summit I reported that MileagePlus President Jeff Foland made “clear that they value high revenue flyers over simply folks with elite status.”
This is a program, after all, that seriously considered setting minimum revenue thresholds for elite tiers. United issued a non-denial denial (that was almost a confirmation), and I went to great lengths to explain why wallet share is more important than revenue totals for a frequent flyer program. Programs want to generate incremental revenue, not ‘reward’ high revenue. But not everyone understands this distinction.
United didn’t go with the minimum thresholds for elite status, but United’s CFO did seem to say that the changes they have made have effectively been geared towards ending generosity towards the ‘over-entitled.’ And here he may mean changes to upgrade priority — full fare tickets now trump status for elite upgrades, a full fare Premier Silver trumps a discount fare Premier 1K. And a government employee with silver status on a YCA fare trumps that 1K — something that’s a big deal in my home market of DC.
Rainey may not understand the nuance of the MileagePlus upgrade priority such that he’s specifically referring to that change, but he certainly reflects a viewpoint — previously expressed by the head of the MileagePlus program — that they want to make changes to focus on high revenue flyers. They’ve made no secret of that, so folks shouldn’t be so surprised to hear it.
It goes without saying that I disagree with Rainey, since the MileagePlus program has long been the most profitable part of the airline, it seems odd to want to upend that winning formula. And because it’s often the lower priced tickets which are purchased ‘at the margin’ and don’t displace other revenue, that influencing buying decisions on those tickets may be the most profitable investments a program can make for the airline.
But this is also someone who believes that reservation system migration has been a boon to the airline, has worked, and is already enhancing their bottom-line (rather than representing a fundamentally broken cash register for the airline). His example is that Shares has allowed dynamic pricing for Economy Plus, allowing United to charge more for window and aisle economy plus seats than middle seats.
He notes that there are more members of MileagePlus than citizens of France. Lets just hope they don’t govern the mileage program in the manner of the Vichy regime.