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  #1  
Old Aug 19, 2012, 11:00 AM
jimworcs jimworcs is offline
 
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Default Frequent Flyer Rip Off Schemes

For years I have been banging on about how frequent flyer schemes are a fraud on the consumer and a waste of time. You are almost always better off getting the best value/most convenient flight available at the time of booking. This complaint in the Guardian illustrates the point perfectly:

Quote:
I fly two or three times a year from Birmingham to Rome. Until recently, there were no direct flights, so I went via Switzerland or Germany and in so doing managed to accumulate 12,800 Star Alliance "rewards" points on its Miles & More rewards programme. Needing to book a flight for this summer, even though two other carriers now offer direct flights I decided to use up those miles. I checked how many reward miles I needed and it came up as 15,000. By purchasing an additional 3,000 miles at a cost of €85 I thought it would still be cheaper than the £120 or so for Monarch's direct flight.

I went ahead and booked the flight using the points. I was alarmed when I had to put in credit card details but assumed it would be all right as I was dealing with reputable companies. However, I found that £206 had been applied to my card.

I have complained and been told that I was charged because I did not have enough miles to cover the taxes and surcharges. I then went on to the Swiss Air web page and found that I could have booked a return Birmingham-Rome flight for as little as £68 each way, all in. I feel utterly conned. ET, Coventry

For many years there's been a great deal of scepticism among consumers as to whether airline rewards programmes actually deliver, and letters like yours show why. We contacted Lufthansa, which runs the Miles & More programme in Germany, and can at least confirm one thing – those using the site to "buy" flights, are told how much they will be expected to pay if they don't have enough points to cover the taxes and charges, which in your case would have been another 15,000 points – 30,000 in total.

A Lufthansa spokesman sent us a screen shot showing a booking, and while the figure could be more prominently displayed, it is there. You must have missed it when booking.

Asked whether these programmes were ever worthwhile given your findings, he said they were aimed at serious flyers clocking up thousands of points a month. He conceded that it was often cheaper to book a flight directly rather than by using points.

To get an idea of how much you would have needed to fly to get a free flight to Rome, he said that someone flying from Manchester to New York changing planes in Germany (if you could face such a journey) would receive 6,000 Miles & More points. In other words, you would have had to do this five times to get enough points (30,000) to have booked you free flight to Rome. The moral of the tale, it seems, is always to check whether it is cheaper to book elsewhere rather than use rewards points.
  #2  
Old Aug 19, 2012, 1:36 PM
The_Judge The_Judge is offline
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And now my experience with my one and only mileage ticket I earned.........

I never flew a mile. All my mileage was gained by bonus points signing up for things and by using my credit card. I had earned enough for a free trip.

I used my mileage for an interport Asia trip, Narita, Japan to Manila, Philippines roundtrip. Since I worked for Northwest Airlines at the time, I could see that the flight was filling up AFTER I had already booked and had my economy space but still had alot of open seats in business. When economy is overbooked and business is open, airlines have to upgrade passengers to accommodate the whole. They would rather upgrade their premium passengers over just choosing people at the last minute. I sent an inter-office memo to our then CEO telling him the situation and if it came down to it and someone needed to be upgraded, would I please be given preference.

I showed up for my flight on said day, economy was full, I asked the gate agent about any possible upgrade as I knew the CEO (or most likely his secretary) had put a note in my reservation allowing the upgrade. I was upgraded to business immediately.

Bottom line, I directly paid zero dollars for my business class mileage ticket. They are not ALL scams. I am probably the minority but my trip went perfectly as do most of them as I plan ahead and prepare.
  #3  
Old Aug 19, 2012, 5:38 PM
peternh peternh is offline
 
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In any transaction, the party who fails to read the small print only has himself to blame--which is pretty much the position of the reply given to The Guardian's correspondent.

We might wish that reward tickets were easier to obtain (actually still quite easy with some schemes); we might wish that fees and taxes were also covered as they used to be (with some airlines they still are, I'm told); we might rail against the introduction of expiry dates (not all schemes have these) or arbitrary increases in the numbers of points necessary to reach a certain destination (very tiresome); we might get annoyed that the dates we want to fly are 'black-out' dates (some schemes have none); but the fact is that far from being 'a fraud on the consumer' these point-collecting schemes offer an extra benefit to travel, however modest, that no airline is obliged to offer.

Typically every sixth or seventh flight on a particular route can be either free, or cost only surcharges and taxes. I have flown extensively on this basis, recently, for instance, acquiring four seats on the same trans-Atlantic flight using three completely different points schemes (Aeroplan, Air Miles, and RBC Avion).

In some schemes upgraded seats, lounge access, increased luggage allowances, priority boarding, and other benefits which at least some travellers will regard as having value and importance are also offered. Clear target numbers of flight segments and miles flown are provided, and its up to each traveller, when purchasing a ticket, to consider whether any premium involved in taking one particular airline over another cheaper one, if that's the case, is worth the benefit gained.

In general I shop where the best value for money can be found, but I take any points that are available, and use credit cards that earn me points. Where I'm buying tickets for myself I fly with the airline that offers the best value for money on that particular route, but I take any points that are available. As a result points accumulate slowly under a variety of schemes, but eventually the benefit is there. Although all these schemes could be more generous, and have less small print, and certainly shouldn't influence you to spend more money than you usually would, four free trans-Atlantic tickets (in the example given, plus taxes) are not to be sneezed at, and resemble a substantial financial saving which I'd rather have than not have.

Those who don't read the small print or who fail to work out the costs and benefits have only themselves to blame.
  #4  
Old Aug 19, 2012, 6:01 PM
disnoke disnoke is offline
 
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Booking "free tickets" is not very wise as taxes are already a nice sum of the ticket and usually you will have to cough this up even if the flights is "free"

But I enjoy the benefits such as more luggage allowance, priority boarding (not so much but why not) and the lounge, usually you can have a snack and some drinks while waiting. If I can I upgrade using miles, especially if i bought an economy ticket at a good rate, I'll do that, the taxes are already included

Only if you fly all the time on company money then it's intresting if you can get the miles on your account and book hotels for free
  #5  
Old Aug 20, 2012, 12:05 AM
jimworcs jimworcs is offline
 
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Judge!! wtf... most people havn't got the ability to email the CEO and ask for an upgrade as a staff perk.... !!

Peternh... I quite agree that the guy who didn't read the small print has only himself to blame..that was not my point. My point was that his "free flight" was more expensive than purchasing the same flight directly over the internet. The fees and taxes apply equally to both purchases so cannot explain the difference. It is simply a racket.

For very frequent flyers, there can be some minor advantages... priority boarding, upgrades and club access...but in reality, these are more than paid for in the ridiculously high prices charged.

The truth is, they are designed to distort the market and discourage frequent travellers from making rational purchasing decisions, based on convenience and price, but instead to purchase sometimes higher fares, or less convenient schedules in return for "perks" which are given to the individual and not the corporate who is paying for this nonsense.
  #6  
Old Aug 20, 2012, 1:13 AM
peternh peternh is offline
 
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Quote:
Originally Posted by jimworcs View Post
My point was that his "free flight" was more expensive than purchasing the same flight directly over the internet. The fees and taxes apply equally to both purchases so cannot explain the difference. It is simply a racket.
While there is much reasonable criticism to be aimed at frequent flyer programmes, as I mentioned in my earlier post, it is difficult to see your remarks as either fair or entirely logical.

This would be a far better example for your case if the passenger hadn't decided (foolishly) to acquire a reward seat when he only had half the necessary points. Obviously extra points will be priced at a higher rate for distance travelled than is the case with straightforward purchase of a ticket, otherwise everyone would buy points and swap them for flights because this would be cheaper. Since a price has to be set for purchased points, but the actual cost of distance travelled using a ticket varies wildly according to route, season, time of day, demand, oil prices, phase of the moon, chicken entrails, etc. obviously airlines must set the price for points higher that the highest price for equivalent distance travelled on the most popular route at the highest season. It would be madness to do otherwise. Purchasing extra points, unless it's just a handful in order to qualify for a valuable reward, is always going to be bad policy. Surely this is common sense?

So in this case, because of that purchase, and because the purchaser didn't read what was on screen in front of him, he ended up paying more. You cannot logically generalise from this example that frequent flyer schemes are 'just a racket'. Surely it's obvious that in the overwhelming majority of cases people do not purchase extra points, do not end up paying more than they would have done by simply purchasing a ticket, and in fact obtain their tickets entirely free, or solely by paying taxes and fees they would have had to pay anyway.

I fly regardless of the existence of these schemes, and every now and then gain free or discounted tickets for family members on flights I would otherwise have paid for. If the airlines all shut down their schemes I'd still take the same flights I do now. I just wouldn't get a free or discounted flight every now and then. I might wish the schemes were more generous, more transparent, and easier to use, but really I can't see what I've got to complain about. If this is somehow still to be called a scam, then it is one that is simple to avoid: fly as you usually would, and don't bother to join any schemes. As far as I can see the only loser is yourself.

Quote:
Originally Posted by jimworcs View Post
For very frequent flyers, there can be some minor advantages... priority boarding, upgrades and club access...but in reality, these are more than paid for in the ridiculously high prices charged.
You're putting in your assumptions ideas you want to find in your conclusions. I certainly don't think those benefits are worth flying with a dislikable or expensive airline to earn, but on routes I fly there's often there's little difference in price, and all airlines are offering those benefits, or some third party is paying for the flight (employer, client) and the real cost isn't an issue. Furthermore, while we may put no value on those benefits, there are those who see them as very significant--lounge access and seat upgrades in particular. Isn't that rather up to them? Value is in the eye of the beholder.

Quote:
Originally Posted by jimworcs View Post
The truth is, they are designed to distort the market and discourage frequent travellers from making rational purchasing decisions, based on convenience and price, but instead to purchase sometimes higher fares, or less convenient schedules in return for "perks" which are given to the individual and not the corporate who is paying for this nonsense.
I think 'distort the market' is going a bit far--almost every single airline now operates them, after all, which greatly reduces their effectiveness and reduces them to a cost of doing business. Schemes to encourage loyalty to an individual brand (especially where there's precious little difference between competitors) are hardly unique to the airline industry, and are not 'scams'. Once again, the airlines don't have to offer these benefits (however flimsy), and you don't have to take them up even if they do. You must intelligently weigh up costs and benefits when making purchase decisions, and if you don't that's your fault, not that of the airlines.

Last edited by peternh; Aug 20, 2012 at 1:15 AM. Reason: Minor clarification and correction of grammar.
  #7  
Old Aug 26, 2012, 4:57 AM
Petro Blanco Petro Blanco is offline
 
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Default Flyer Miles....

You should be able to do with your miles/points whatever you want to do with them. I am sick of being turned down on ability to use my miles. If I want to sell them....I will sell them. Kick me out and I will not come back.
  #8  
Old Aug 27, 2012, 8:07 AM
jimworcs jimworcs is offline
 
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So Peter, you make some reasonable points, but lets examine this in more detail. (Incidently, I acknowledge that in the example given, the passenger made poor choices about his purchase of the seat, but it nevertheless illustrates the point that the "free" or "lower cost" flight can be illusory).

In a genuinely competitive market, frequent flyer schemes could potentially be a market tool which supports greater customer loyalty without significantly damaging the consumer overall. That is not how the schemes operate in the US. The US air market is dominated by US Airways, AA, United, Delta and Southwest. These five have grown into huge monsters, gobbling up airlines along the way such as AmericaWest, TWA, Continental and NW Airlines to name just a few.

Four of the big 5 operate the hub model, and SWA operate a hybrid hub and point to point model. The hub model requires huge numbers of transferring passengers to work, as the point to point traffic would not sustain the size of the hub. (For example, Charlotte, NC has a huge US Airways hub, but could not sustain the size of the operation on pure point to point).

These hubs form huge local monopolies, in which one or at most two majors dominate the market. Business travellers are forced to use the dominant carrier in their hub. The airlines then use the incentive schemes to try and block out any new entrant or competitor. A business traveller based in Charlotte, would enrol on US Airways because this would allow them to rack up the most points. For that individual, this may be a rational decision, but the effect of this is market distorting and anti-competitive and against the interests of the consumer overall.

It changes consumer behaviour in a way which seriously undermines the market. Instead of purchasing on price or even convenience, the consumer makes purchasing decisions based on "perks", which have predominatly been purchased using someone else's money (their employer). This is designed to dampen the desire of consumers to get "the best deal" or decisions based on service or quality.

The result is 4 huge local monopoly operators. They dominate and control whole markets (Delta at Altanta, AA in Dallas, United at Newark, US Airways at Charlotte for example). This increases fares and reduces the quality of service to all passengers and is ultimately against the interests of ALL passengers.

The US air market is dysfunctional. The major carriers repeatedly receive "exemption" from normal market rules. They require anti-trust immunity to take over their competitors, they enter Chapter 11 repeatedly to renege on their obligations and employee contracts, they have special protection from foreign competition and ownership rules are controlled to "protect" management. It is not as if this system is even effective. Four of the top five carriers have been bankrupt in recent years.

The impact is there for all to see. In the 1970s before de-regulation and the wide-spread market abuse now prevalent, US airlines enjoyed the highest of reputations for quality and service. Today, none of the major carriers appear in the 5 Star category of Skytrax, which is the largest passenger quality survey in the world. The standards of service are far below those of Asian, Middle Eastern and even European carriers. Perhaps you could argue that prices are lower. In fact not, the cost per passenger mile in the US is up to 40% higher than in other regions and overall pricing is 22% higher than in Europe, which is a comparable market in terms of size and development. Maybe the market works well in terms of profitability. In fact not, shareholder value has been seriously devalued at all five of the majors and 4 of those five have been bankrupt at least once and some even more often.

Not all of these problems are related to frequent flyer schemes. US airlines suffer from chronic poor management, which pays little attention to shareholder or customer needs. They can only do this because they know the market doesn't function...customers cannot "flee" the airlines, they are in hubs which are dominated by them. The frequent claims by passengers that they "will never fly Delta again" have little or no meaning in Atlanta or Salt Lake City etc, as they know, they have little choice and even smaller lower tier markets depend on the hubs for their connectivity so have little choice. The managers know the airlines are "too big to fail". Delta and AA entered bankruptcy safe in the knowledge they would be allowed to re-emerge intact and with largely the same management. There is no incentive for the managers to change their behaviour.

Some of the problems are related to the distribution costs of tickets, but even here, the US airlines have badly managed this. In other markets, airlines are the major distributors of their own ticketing due to good marketing and effective management. In the US, the airline management sold off their ticketing via Sabre or Gallileo etc for short term profit and are now trapped in a system of their own making which skims off huge amounts of their margin. Those poor management decisions made for short term gain in the 1980s and 1990s, generating huge bonuses for the managers, are now costing US airlines and their consumers huge sums in fares and ancilliary fees.

The airline industry in the US is broken. it needs a radical overhaul. I would start with the following:

1. Give airlines a 10 year plan which requires no airlines in a top tier airports to have more than 25% of the overall landing and take off slots in a particular airport.

2. Drop foreign ownership restrictions and operate open markets on a bi-lateral basis for all international routes.

3. Ban frequent flyer schemes for domestic travel for 10 years and then re-evaluate if they are market distorting.

4. Remove anti-trust immunity from airlines and give the DOT re-regulating authority, particularly in relation to consumer protection and rules which are unfair and one sided.

5. Re-evaluate Chapter 11 rules and instead allow for active management of an airline which fails. This should include the DOT having the power to hand over assets such as aircraft, landing slots and airport space to other carriers to maintain service. (Similar powers to protect the consumer are present in banking, so the legislative framework already exists for this principle).

Last edited by jimworcs; Aug 27, 2012 at 8:12 AM.
  #9  
Old Aug 27, 2012, 6:12 PM
peternh peternh is offline
 
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Quote:
Originally Posted by jimworcs View Post
but it nevertheless illustrates the point that the "free" or "lower cost" flight can be illusory).
Only in the sense that driving your car into a brick wall indicates that car repairs can be expensive. Here the consumer is to blame simply for not reading the regulations and costs visible on the screen in front of him.

Quote:
Originally Posted by jimworcs View Post
In a genuinely competitive market, frequent flyer schemes could potentially be a market tool which supports greater customer loyalty without significantly damaging the consumer overall. That is not how the schemes operate in the US.
The world is rather larger than the US, and most of what you go on to say, in addition to having practically nothing to do with frequent flyer schemes whatsoever, is specific to the US. None of this supports the large claim that frequent flyer schemes are 'scams'. None of it has anything to do with the circumstances of your initial post, which quotes someone encountering difficulties IN EUROPE.

You might want to reduce your claim to the one that all US frequent flyer schemes are scams, but you offer little to support that claim either, and nothing to counter the arguments already set out and which apply to all frequent flyer schemes.

Quote:
Originally Posted by jimworcs View Post
The US air market is dominated by US Airways, AA, United, Delta and Southwest...
...and much more on civil aviation in the US. Agreed, flying in the US is almost always an awful experience, and I try to avoid passing through the US whenever possible, and to avoid travelling with North American carriers in general. The service varies between indifferent and surly, there are extra charges for in-flight services, there are frequent delays, and the airports are dismal and rarely serve edible food. But none of that is germane to the discussion of frequent flyer programmes.

Quote:
Originally Posted by jimworcs View Post
The airlines then use the incentive schemes to try and block out any new entrant or competitor.
This is a large claim. Unfortunately it is difficult to name an airline of any size other than rock-bottom budget airlines like Ryanair that has no loyalty scheme of some sort or other. It is difficult to see how in a competitive market once any single airline begins to operate such a scheme the others could avoid doing so. If just one airline offered such a scheme on a route with two otherwise similar competitors it would obviously get all the business. The existence of most frequent flyer schemes is an unavoidable consequence of the existence of a few of them.

Quote:
Originally Posted by jimworcs View Post
A business traveller based in Charlotte, would enrol on US Airways because this would allow them to rack up the most points. For that individual, this may be a rational decision, but the effect of this is market distorting and anti-competitive and against the interests of the consumer overall.
It certainly makes sense to collect points of the airline offering flights to the most destinations from where you live. But the chances are that you will fly more frequently with the airline at whose hub you live regardless of the existence of any scheme. Frequent flyer schemes are aimed at those who have a choice, not at those who don't, and of course most of the world doesn't live at airline hubs. Your argument appears to be a criticism of the hub and spoke system rather than of frequent flyer schemes which are the flea on the dog. There is no evidence here that they are scams.

Your argument also completely ignores airlines' memberships of larger groupings. Where I'm currently based the airline with the most direct flights is Air Canada, an airline I like to avoid whenever possible. Indeed, I mostly board Air Canada flights only when spending points collected elsewhere. You're also ignoring the points collected through other means than flying, and the frequent flyer schemes that are not airline specific or that offer service with several different airlines (e.g. Avion in Canada, Avios in the UK, Air Miles in several countries). Even if they were otherwise valid, your arguments apply to none of these issues.

Quote:
Originally Posted by jimworcs View Post
It changes consumer behaviour in a way which seriously undermines the market. Instead of purchasing on price or even convenience, the consumer makes purchasing decisions based on "perks", which have predominatly been purchased using someone else's money (their employer). This is designed to dampen the desire of consumers to get "the best deal" or decisions based on service or quality.
This has already been addressed. It has already been pointed out that the way to avoid the 'scam' (that frequent flyer schemes aren't) is simply to make purchase decisions based on price and convenience and simply to bank any points that happen to come along, or to ignore them altogether. Your argument appears to be that consumers are stupid and that that's the airlines' fault. Many collecting points in a rational way will not thank you.

But loyalty schemes of this kind are both legal and common across many industries and in all cases involve companies spending as little as possible on a promotion scheme in order to gain as much as possible for themselves, exactly as anyone with any common sense might expect. The benefits and costs are publicly set out, and those who pay attention can calculate for themselves what's worth doing and what isn't. But free or heavily discounted flights are available even to those who avoid modifying their behaviour in any significant way.

Quote:
Originally Posted by jimworcs View Post
The US air market is dysfunctional.
Quite possibly. But that isn't relevant to the argument about frequent flyer schemes even in the US, let alone globally.

Quote:
Originally Posted by jimworcs View Post
Not all of these problems are related to frequent flyer schemes.
Indeed, it is hard to find one that is. The rest of the discussion is interesting, but simply not germane to the argument.

We might all wish that frequent flyer schemes offered more benefits and did so more clearly and more cheaply than they do. But they are not scams. Likely many airlines would like to dispense with them, but we can be quite sure they are engineered, unsurprisingly, to benefit the AIRLINE above all. But in some cases that means offering us for free (or a sizeable discount) unsold inventory for which we would have been prepared to pay and which we may obtain without any significant changes in our behaviour--indeed we may often obtain without ever having taken a single flight with the airline in question.

If that's a benefit not worth having, then don't take it. But you cannot call it a scam.
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