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Interesting to note that publicity from KLM/AF did not highlight (or I missed) the changes to Award ticket pricing.
Given the flying that I have done in the past the rewarding process for KLM/AF is less of an issue as I have Platinum for Life, although that was acheived by sectors flown (in Europe) rather than mileage.
I would tend to agree that the airlines will potentially lose customers in the long term.
Personally I am more interested in Tier points which is how you retain membership of the Executive Club. I usually travel world traveller plus so the benefits work for me better than for someone who always travels Club/Business. I never use Avois for flights since I discovered that somewhere in their small print BA don't give you Tier points if you use Avois to buy a flight. I think BA should spend their time and effort on their fleet as they still have many planes in need of a refit.
Long term it may be the wrong decision but engrpas is wrong about the lifetime gold - if you elect to fly at the back - on the ground you enjoy first class check in - speedy security at Heathrow and straight into the excellent BA lounge with - if there nice to you - your luggage tagged for a quick exit the other end - and you flew business class in fine comfort for all those years when BA was the world's favourite airline - and with all the changes the prices are competitive too!
Re Loyalty Scheme - Air New Zealand has been doing this for 13 years, having made a similar change in Nov 2004. It's also one of the most highly rated and profitable airlines worldwide, although it's also had its share of issues in the past.
The only reason the loyalty schemes exist at all is so that people can do a bunch of business miles on an expensive airline then get a free personal holiday from that same airline. It's an untaxed perk which relies on business travellers being willing to redirect their company's money to an airline which they wouldn't necessarily fly if they had to pay for it themselves. We justify this with "I'm having to put up with life on the road, I deserve a perk." but if that's really true, then have the company pay a per diem or demand a higher salary for jobs which require travel.
This is the beginning of the end of that system and I'm glad.
Of course there are some individuals who take the expensive flights when paying themselves but I'm sure those people would prefer to have the discount rather than take part in a complex loyalty scheme.
Industry Executive explaining the justification for the new system. Be aware.
Which industry do you think I'm in?
It's not the airline industry that should have a problem with that system. They get most of the benefit of it, in the form of loyal, highly price-insensitive customers. It's everyone else that pays the price.
Even before these changes the BA frequent flyer points (Avios) from economy fares were all but worthless; I recently flew BA short haul and had the choice of buying a sandwich with credit card (no cash accepted) or Avios. The Avios price was more than the amount of Avios I received from my economy fare so hardly an incentive to fly with them. Maybe I'd be happier if they offered me zero Avios but a free sandwich.
I saw Alex's talk on this at World Travel Market on Monday. More importantly, I travelled back to West London on the tube with him after the event, as I wrote on my website (headforpoints.com).
No major airline, not even the American carriers, have moved to dynamic pricing for all redemptions. It is totally pointless (sic) for various reasons. Dynamic EARNING, yes. Dynamic SPENDING, no.
Dynamic SPENDING pricing does not work. Look at Nectar. Nectar has zero traction as a loyalty scheme amongst customers. If it went away tomorrow, no-one would notice. Why? Because it is dull. One point = 0.5p of value for 95% of redemptions. Customers would rather just have a discount.
BA generates a vast amount of revenue from its Avios partners such as American Express and Tesco. The BA Amex cards have billings of over £1 billion PER MONTH. If an Avios point had a fixed redemption value of, say, 0.5p then all of this revenue would go away. Amex has cashback credit cards paying 1.25% per month - why would anyone want to earn an inflexible (compared to cash) Avios point worth 0.5p instead? No-one would convert Clubcard vouchers from Tesco into Avios if they were only worth a fixed 0.5p.
BA already has something called 'part pay with Avios' where you can get a cash discount - capped, importantly - off a flight using Avios. If this cap was removed, you get the best of both worlds. Someone who absolutely must be on a certain flight can book it using points at 0.5p per point of value, everyone else can redeem for a different flight on a different day using the standard Avios reward chart.
Business and First Class redemptions, under a pure dynamic SPENDING model, would be unaffordable. You'd be looking at 500,000 points for a business class flight to New York compared to the current 100,000 - 120,000 points depending on date. Those seats would remain empty, which is bad business sense for BA - better to fill them with Avios redemptions at 120,000 points and release some of your reserves into the P&L.
BA's alliances and partnerships also mean that pure dynamic SPENDING cannot work. American Airlines, Qatar Airlines, Qantas frequent flyer members would still be able to book BA reward seats using the standard fixed pricing used by those schemes. You would see BA frequent flyers defecting to rival programmes and redeeming via those, and that costs BA real money as they need to pay their partners when flyers credit BA flights to them.
Avios makes £150m per year of profit at a 20% margin for IAG. They aren't going to mess this up.
Rob Burgess, Editor, Head for Points (headforpoints.com)
Spookily 'Editor of the Year', 2017 Business Travel Journalism Awards
I would rather have the certainty and guaranteed convertability of a revenue based mileage system than the fixed mileage system that can never be used. If your flight involves anything other than one leg on economy then it's pretty much impossible to get a BA award flight these days. I once tried to book business class a year in advance on BA using air miles and had no luck. Plus, as public dude mentions below, in most cases you pay so much for taxes and fuel levies you are far from getting a "free" ticket.
So i think this change is not just welcome, but long overdue.
The answer to that last question in the article is a Yes. ("The question that remains is whether BA and other legacy carriers are sacrificing the very thing that keeps their passengers away from the clutches of Norwegian and the like.")
Hmm. I don't see why these changes "may be bad news for budget travellers" - who I would understand to be leisure travellers who don't get involved in tedious loyalty schemes.
I can subsidise my holiday by collecting points over the year from various retailers for example. This enables me to fly cheaper or in more comfort within my budget, so loyalty programmes work in this regard.
I can't say yet how these changes will influence my behaviour.
From what does your confidence derive?
I can see the end of loyalty programs in the coming years, as airlines finally realize that for most people, price is the most important factor when traveling. The anti-competitive consolidation of recent years has resulted in less competition on many routes, and it seems that the creation of route-oligopolies will continue. I now fly Southwest airlines domestically because they usually have the best price (once all the fees are included), and while the "service" is bare-bones, I expect it to be. They don't claim one thing and provide another, like American and United. I long for the day when Southwest finally flies to Europe. That would shake-up things.
I’m not sure I agree that it’s the end of loyalty programs. It’s perhaps the end of loyalty programs for the average casual traveler. For the elite, like the Diamond Medallion at Delta (that I enjoyed for a few years) these programs will always continue, even when they’re not publicized. For example, Delta had the Flying Colonel program before their frequent flyer program, in the 70’s. Only the FC’s were even aware of that, because they received a nice plaque. They had a special reservation number, airport lounges, the whole nine yards.
As BA consolidates its hold on Heathrow, as other airlines have come to dominate one or more hubs through mergers and decreased competition, the impetus to reward consumers' repeat business has decreased by virtue of those airlines' being the only game in town. The repeat business is already a done deal. Furthermore, it's a simple calcuation: decrease spending on those loser mere frequent fliers and concentrate on only the big moneyed guys, i.e., frequent First Class passengers. It won't be long before the airlines announce that the proletariat should be thankful that they are allowed to fly at all.
Alas, BA is not the only one. My airline, Delta, has also recently begun awarding miles for cash spent (times a multiplier depending on status) and award ticket prices are skyrocketing. Six years ago, I bought business class tickets from USA to Europe for 100,000 miles each; last year, a coach ticket cost 115,000 miles. Earning miles is at a rate of 5x dollars spent if you have no status, that means a $1,000 ticket (excluding taxes) earns you 5,000 miles, while the cheapest round-trip domestic ticket on a red-eye or leaving at 5 am will run about 30,000 miles.
It’s a shame, after 35 years of loyal membership in a frequent flyer program, and over 2 million actual miles flown, all I have to show for it is lifetime gold status, which has not much practical value.
As would your 2 million miles be nothing more than memories in your mind if there were no loyalty programme to give you a commemorative gold placard or something.
Hehe, the memories are fine (far and away mainly business trips) and my commemorative gold placard is of the virtual, digital variety. :-)
My wife and I fly business class nationally and internationally from the US. After flying some 16 flights with BA, with cash and points/cash, I have exhausted the points and don't intend flying BA anymore. It has the most cramped cabin (eight abreast on a Boeing 747/777), the food is mediocre and seats hard to come by using points (Avios). Besides, the points are not worth much. If a round trip Washington, DC to, say, Madrid needs 150,000 points for two, the taxes and airline fees almost cost 50% of the value of a cash ticket. And, the circling over Heathrow along with the long security line even for business travelers (so called Fast Track) add to the discomfort.
We recently flew KLM and Air France to South Africa. The cabin is ore spacious (four abreast on a Boeing 787 and six, on an Airbus A380) and the points earned on their partner Delta truly afford an almost-free flight.
So, so long BA.
I agree with everything you said. In particularl, having 8 abreast in business class is outrageous. Just a way to encourage you to go first class.