More Than Points

The Wall Street Journal is reporting today that airlines are now taking advantage of advanced scheduling systems to remove some of the best bargain flights and seat prices from their inventory. They use Southwest as the example of complexity in scheduling:

"No airline has a more complex schedule than Southwest. The low-cost carrier now has more daily flights than any other airline, and it runs a frenetic operation with planes hop-scotching across the country and spending only 20 or 30 minutes on the ground. With more than 500 airplanes and 60 cities to link together, there are literally billions of different ways to set the airline’s schedule.

Southwest’s November schedule was developed with an upgraded version of its in-house schedule-optimization system that reworked the airline’s entire 3,400 daily departures. The airline now flies a completely different schedule on Saturdays – in the past it just erased some flights here and there from the regular schedule on Saturdays. Now some cities like Omaha, Neb.; Salt Lake City; Oklahoma City; and Tulsa, Okla., get nonstop flights to Orlando only on Saturdays.

In January, Southwest will cut 190 flights, reducing its capacity by 6% in the slower winter travel season. That’s more schedule jockeying than the airline has ever done before. And next year, it will add Minneapolis-St. Paul to its route network without increasing its capacity. The scheduling system trimmed flights here and there and improved efficiency, freeing up airplanes to fly to and from Minneapolis."

The next step for the industry is to have different travel schedule for each day of the week. The downside for you the traveler: fewer bargain trips as the airlines maximize their revenue and optimize their resources. It appears that the powers of economics and supply/demand are starting to work against us.

USA Today has a good summary article highlighting some of the recent changes impacting frequent fliers of the major carriers.

A Few Choice Highlights

• Continental Airlines said Friday that it is reducing the number of miles it awards fliers on many short flights and lowering the bonus miles it gives to many of its most-frequent fliers.
• Last month, US Airways ended bonus miles for its most-frequent fliers.
• In August, Delta Air Lines began an "award travel fuel surcharge." SkyMiles members redeeming trips online now pay $25 for a domestic ticket; $50 for an international one.
• Starting Sept. 15, Northwest will begin charging $25 to redeem a domestic frequent-flier ticket, $50 for a trans-Atlantic ticket and $100 for a trans-Pacific ticket.
• Continental says that on March 1 bonus mileage will drop from 125% to 100% for Platinum Elite members and from 50% to 25% for Silver Elite members. Fliers who annually earn 75,000 miles achieve platinum status, and those who earn 25,000 miles reach silver status.
• Beginning Jan. 1, for tickets bought on or after Nov. 15, Continental will stop giving a minimum of 500 points on flights shorter than 500 miles. Fliers will instead earn the number of miles flown.
• Denver-based Frontier Airlines, too, will stop awarding a minimum 250 miles on most short routes on Sept. 15. Fliers will earn the number of miles flown. Exceptions: Flights between Denver and four Colorado cities — Colorado Springs, Grand Junction, Durango and Aspen — will earn 250 miles.
• United Airlines also stopped giving a minimum of 500 miles in July, and US Airways eliminated its mileage minimum last year.

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Airlines need to go back to business school and re-learn the concept of building customer loyalty and how it affects profitability.

I hate to make this into an "us" (frequent flier) versus "them" (airlines) but the airlines are making it very difficult for their best customers.  The airlines would do well to take a few lessons on improving the customer experience and building customer loyalty.  A frequent flyer program is not the answer to building customer loyalty and these days it highlights just how little they care about customer loyalty.

This Fortune Magazine article describes how one flyer, Mitchell Berns, had his original non-stop Delta flight canceled "due to weather" and found himself booked on another flight, with connections, for the next morning.  After checking the National Weather Service, he discovered snow was forecast for 5am the next morning, hours after his flight was supposed to land.  Other airlines were still scheduled to fly, but Delta refused to give him a refund so he could purchase a ticket on another airline.  He paid for a JetBlue flight out of his own pocket and landed at his destination without incident.

Back at home, he filed a small-claims suit ($15 in NY) against Delta for the price of the JetBlue ticket and won when Delta failed to show up in court.  Delta offered frequent-flier miles (yeah, right)  and then attempted to negotiate a confidentiality agreement (I can see why Delta wouldn’t want this story to be picked up in the press).  Berns counter-offered with $100 off if Delta paid within 2 weeks OR the confidentiality agreement - not both.  Surprisingly (or not), Delta took the $100 off the original JetBlue ticket.

"The lesson is, Don’t let them bully you with bogus cancellations," says Berns. The whole thing took him about four hours, he recalls, resulting in earnings of less than half his hourly billing rate. "But I’d do it again," he says. "That’s how good it felt."

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It’s always a good thing to stay positive, but don’t let the airlines take advantage of you, the customer.

We here at MTP usually focus on trends in the travel industry, rather than personal experience. However, a recent travel experience hits on an issue related to fuel economies and airline operations. I was recently traveling on a US Airways flight from Washington’s Reagan International (DCA) to Fort Lauderdale, FL (FLL). The weather en route was generally fine, though we did hit some headwinds and had to be routed around Tropical Storm Fay in northern FL.

As we neared our destination in South Florida, the flight had to be "re-routed" to stop in West Palm Beach (PBI) to pick up additional fuel. For those not familiar with PBI and FLL, they are 42.6 miles apart (give or take). Pilot said we had to stop and get gas; this turned into an extra hour for the flight to go the additional 40 miles.

It begs the question of just how low our fuel level was that the pilot was unable to go the extra 40 miles (or so). I’ve read some recent complaints that US Air is reducing the excess fuel on board to cut operational costs. Here are a few articles about how the pilot’s union is responding to pressure from the airline

http://www.azcentral.com/arizonarepublic/news/articles/2008/07/18/20080718biz-usairways0718.html

http://cbs2chicago.com/national/us.airways.pilots.2.772910.html

To collect more details, I posted this message to a forum on the FlyerTalk website; feel free to read the responses of your fellow road warriors. Out of this whole experience, we did find a very interesting website which allows travelers to see the actual flight path taken by their pilot called FlightAware. Here is the actual path of my flight.

And that was how my day went.

Delta, following the lead of its competitors, has announced plans to rollout wireless broadband internet access on all its domestic mainline fleet by mid-2009.

"Delta is joining with Aircell®, a 17-year leader in airborne communications for business and commercial aviation, to install the company’s Mobile Broadband Network on the carrier’s domestic fleet. The system, Gogo™, will enable Delta customers traveling with Wi-Fi enabled devices, such as laptops, smartphones and PDAs, to access the Internet, corporate VPNs, corporate and personal e-mail accounts, as well as SMS texting and instant messaging services.  Gogo will be available to customers for a flat fee of $9.95 on flights of three hours or less, and $12.95 on flights of more than three hours.
“Delta remains committed to providing a travel experience that maximizes the time our customers spend with us onboard by offering them even more productivity options,” said Richard Anderson, Delta’s chief executive officer. ”Our customers asked for in-flight connectivity, and we’re responding by rolling out the most extensive Wi-Fi network in the sky.  Beginning this fall, our passengers will have the ability to stay connected when they travel with us throughout the continental U.S.”

Gogo will be offered initially on Delta’s fleet of 133 MD88/90 aircraft and will rapidly expand to the remaining domestic fleet of more than 200 Boeing 737, 757 and 767-300 aircraft throughout the first half of 2009. The airline expects to have more than 330 aircraft complete by summer 2009.  The full fleet agreement between Aircell and Delta will provide a consistent, convenient experience for customers traveling on the airline who wish to use the Gogo Internet service."

Here is the original article from Delta’s News Room. By the way, American has already started this service on their 767-200 fleet; here is a review of the service by WSJ reporter Walt Mossberg.

A recently released Senate report estimates that flight delays in 2007 cost passengers, airlines and the broader US economy more than $40 Billion. Take a moment to absorb that figure. $40 Billion from lost productivity, added operational costs to support delays, increased jet fuel consumption, and impact to other industries.

Here are a few key findings from the Senate’s Joint Economic Committee Report

• The total cost of domestic air traffic delays to the U.S. economy was as much as $41 billion for 2007 including higher airline operating costs, lost passenger productivity and time, and losses to other industries.
• Delayed flights consumed about 740 million additional gallons of jet fuel totaling $1.6 billion extra in fuel bills. 
• Passengers were delayed by a total of 320 million hours, when accounting for padding in airline schedules.  Almost 20 percent of total domestic flight time in 2007 was wasted in delay. 
• Flight delays were longest during summer vacation months. Flight delays during the months of June, July and August averaged approximately 414,000 total hours of delay per month. Flights during December – the height of holiday traveling – totaled almost 438,000 hours of delay.
• 78% of flight delays in 2007 occurred before take-off, with 58 percent at the gate, and 20 percent during the taxi to the runway.
• 94 percent of all flight delays were caused by other flights arriving late, national system delays, or air carrier delays (less than six percent of delays were due to security or extreme weather)

The three largest airports in the New York City area, JFK, LaGuardia, and Newark airports had a total of over 40 million passengers last year.  The New York City area airports combine for more than 27 million hours of passenger delays.And the average per-passenger delay at these three airports is nearly 28 minutes – among the highest in the nation. 

The full report and the technical appendix can be found here

In advance of your next trip, keep an eye on whether your connection takes you through any of ’America’s Most Time-Draining Airports’. Maybe you’ll seek a new route to your destination

Can you imagine what you’d do with that extra 20% of time spent currently in airport delays?

The Travel Industry Association commissioned a recent study on the state of the travel industry. Roger Dow, president and CEO of the Washington, D.C.-based association, said the research "should be a wake-up call to America’s policy leaders that the time for meaningful air system reform is now." "The air travel crisis has hit a tipping point – more than 100,000 travelers each day are voting with their wallets by choosing to avoid trips," Dow said in a statement.

From this study, we gleaned some very interesting nuggets worth sharing

• Nearly half of American air travelers would fly more if it were easier, and more than one-fourth said they skipped at least one air trip in the past 12 months because of the hassles involved.
• The 41 million forgone trips cost the travel industry $18.1 billion – including $9.4 billion to airlines and $5.6 billion to hotels.
• The lost tax revenue to federal, state and local authorities equals $4.2 billion in the past 12 months.
• When 28% of air travelers avoided an average of 1.3 trips each, that resulted in 29 million leisure trips and 12 million business trips not being taken
• 44% of the air travelers surveyed said they would take more air trips each year if airport hassles could be reduced or eliminated
• People who flew more than five times in the past 12 months were more likely to describe air travel as frustrating, at 52 percent, compared with 33 percent of infrequent travelers, defined as people who flew one or two round trips in 12 months, according to the survey.
• More than half of respondents said either efficiency or reliability is getting worse, 60 percent said the system is deteriorating, and 56 percent said flying is the "bad" or "worst" part of travel – though 62 percent said air travel security is improving

I’m surprised that only half of flyers find air travel frustrating. When was the last time you ran into someone who enjoyed their flight?

In other words, they are reducing costs at your expense.

What This Means to You:

• Less planes
• Less airline staff
• First checked bag fee $15
• In-flight beverage "purchase" program
• No more bonus miles with Preferred status

“US Airways is also eliminating its bonus miles program for Preferred status Dividend Miles members. Preferred members currently receive mileage bonuses based on their status level. The Preferred bonus program will be discontinued for tickets purchased on/after Aug. 6, 2008.”

• Increased fees for booked at airport or through call centers
• "Redemption Processing Fee" for using Dividend Miles

I hate being the bearer of bad news.

This is just another sign, airlines are moving towards an "a la carte" menu to extract additional dollars from their customers.

In business school, this approach involves extracting additional customer surplus to maximize company profits.  By further segmenting the flying population, the airlines can extract additional surplus which it was giving away on a first come, first serve basis.  With oil prices at a record high, airplanes are competing to stay in business, not steal away customers from other airlines.  By cutting down on flight schedules, seat capacity is now in short supply so there is no concern about flying empty airplanes.  In a market with limited competition, the customer will pay the price. 

Just when you thought it was over…

Here’s a few choice quotes from the article:

"…the combination of reducing seating capacity within the airline’s fleet, moving toward an a la carte system of charging fliers for such things as checking bags, eating and drinking, along with expense reductions, will save the Tempe, Ariz.-based carrier $500 million annually."

"In addition to charges for baggage and refreshments, US Airways has raised the $15 charge to book flights through its call center to $25 for domestic flights and $35 for international flights. The $20 service fee to buy a ticket at an airport or city ticketing office increases to $35 for domestic travel and $45 for international travel."

"Most airlines except Southwest have announced capacity and personnel reductions, and a la carte charges."

"Fare-paying now looks like the customer is just paying the base price for the flight…You want doors – that’s going to cost you more."

"Right now, you’re dealing with a panicked industry which, after fuel costs, is making about 30 bucks a seat…If they can get an extra $10 out of a passenger, that’s a 33 percent increase. The industry already has sold most of its product for July and August below cost."

Don’t hold your breath - you can expect the other airlines to follow shortly.

This is good news.  It’s better than Continental and United merging.  It means your points can be used to get to more places (with the potential for less layovers) and you have access to more airport lounges all without the consolidation of flight segments that usually happen with a merger.  It’s an unexpected gem amid all the cost cutting and ala carte pricing we’ve been pummeled with in the past 6 months.

If you fly either airline you will enjoy the flexibility of the many more airports available to you since every Continental hub can be considered a United hub and vice versa – assuming it gains regulatory approval.

The email follows in all its entirety.  Have an excellent weekend!

Dear Mr. *point* man,

As a valued Mileage Plus member, we wanted you to be among the first to hear that Continental and United today announced plans to cooperate globally, linking our networks and services worldwide to deliver new benefits to you. In addition, Continental plans to join United in the Star Alliance®, the most comprehensive airline alliance in the world.

 
Once implemented, this new partnership, will easily enable you to take advantage of the resources of both airlines to enhance your overall travel experience, and receive more value from your Mileage Plus membership.

First and foremost, this partnership will include new frequent flier reciprocity that will enable you to earn miles when flying on either airline and redeem awards on both carriers. Travel on either carrier will count toward earning elite status. Similarly, members of either airline’s airport lounge program will have access to both Continental’s Presidents Club network and United’s Red Carpet Club® lounges.

Second, together with Continental, we will be able to offer you a more comprehensive domestic route network and together with our Star Alliance partners, greater choice of service throughout the entire world.

Starting in the U.S., you are going to see United and Continental develop extensive code-sharing that will facilitate travel whenever your itinerary involves both carriers. We will be able to provide you with a coordinated process for reservations/ticketing, check-in, flight connections and baggage transfer.

Internationally, Continental and United will establish joint ventures that will allow us to cooperate with each other and with other Star Alliance airlines throughout the world. These joint ventures will enable us to provide you with highly competitive flight schedules, fares and service to more destinations than we do today.

In short, once regulatory approval is obtained, this new partnership between United and Continental will expand your choice of flights and destinations, and improve your ability to earn both miles and elite status in Mileage Plus. Together we will offer you more value whenever you fly. We expect to bring you the benefits of our cooperation starting some time in 2009, and until then, we will keep you informed about our progress.

 
We appreciate you and your business, and we look forward to seeing you on your next flight.
Sincerely,

Robert Sahadevan
Vice President – Mileage Plus