The Death of the Mileage Run

In January of 2015, Delta will move SkyMiles, their frequent flier program, from earning miles based on distance flown and your status with the airline to a new system that bases your miles earned on the cost of the ticket and your status. In March of 2015, United’s MileagePlus program will take an almost identical step and turn into a miles earned based on spend and elite status system. American Airlines will keep their current mileage earning system in place for the foreseeable future but when they are done with some of the technical aspects of their merger with US Airways, I see them going to a model similar to Delta and United.

The New York Times has an article about the changes, calling them the “fadeout” of the mileage run. It is less of a fadeout and more of the complete death of the mileage run. The piece does a good job raising the concerns about confusion between redeemable miles earning and elite status earning, which will take place under two separate umbrellas. The more confusion there is for the end user, the more frustration. And while the average flier may not care, someone who does a bit of travel without keeping track of all the news and changes will certainly be a little annoyed. I also agree with the point that Mr. Barro makes about calling them “miles” after these changes. They are no longer based on distanced and merely represent an amount of money spent, making it much more appropriate to just call what you earn “points”. And while the examples of mileage earning and the losses faced by frequent fliers are illustrated in the New York Times piece, I think there are some unanswered questions about if and how basing mileage earning on spend will really be perceived by travelers and also, what it means for redemptions.

The New Earning Charts

In Delta’s case, if you are a non-status flier you will earn 5 miles per dollar spent. A Silver Medallion status flier will earn 7 miles per dollar spent, and so on. This is illustrated below per Delta’s calculator.

United’s changes are almost identical.

United MileagePlus 2015 Changes

It is nice that Delta’s calculator shows what you would earn in the old program and what you will earn on the same fare in the program. It makes it easy for a flier to look at the numbers and see just how good or bad these changes are for them.

Examples

Below are a few anecdotal examples to illustrate the gains and losses that frequent fliers and non-statused passengers will experience with these changes. I took the lowest available fare a month or more out for the different routes. Also, I focused on United, simply because they are who I fly, but the math for Delta would be very similar. I did not include taxes in the calculations as those are not included in the mileage earning for either airline. The fuel surcharges on international trips was included, again, because it is included in the calculations for mileage earning by the airlines.

The first example is a Portland, Oregon to Newark, New Jersey roundtrip. This one is my typical route and while the price fluctuates on this route, the $466 is reflective of a typical 7-day stay.

Sample Route Distance Fare Class
PDX-EWR-PDX 4,866 $466 Coach
2014 (Current) Earnings Member Silver Gold Platinum 1K
4,866 6,082 7,298 8,514 9,732
2015 (New) Earnings Member Silver Gold Platinum 1K
2,330 3,262 3,728 4,194 5,126
Difference Member Silver Gold Platinum 1K
-2,536 -2,820 -3,570 -4,320 -4,606

In this example you see that there is a loss of miles, regardless of elite status. A 1K would need to spend $885 2015 to earn near the same amount of miles that they would have earned in the program in 2014. With lots of competition on transcontinental routes, I see fares staying rather competitive for coach seats, meaning low fares, meaning low mileage earning.

The other side of this is the next example, the exact same route, Portland, Oregon to Newark, New Jersey, but this time, in first class.

Sample Route Distance Fare Class
PDX-EWR-PDX 4,866 $1,068 First
2014 (Current) Earnings Member Silver Gold Platinum 1K
7,298 8,514 9,730 10,946 12,164
2015 (New) Earnings Member Silver Gold Platinum 1K
5,340 7,476 8,544 9,612 11,748
Difference Member Silver Gold Platinum 1K
-1,958 -1,038 -1,186 -1,334 -416

While anecdotal, this example shows that paying more cash and sitting in the comfy seat does not necessarily generate more redeemable miles under the 2015 earnings programs. In fact, if your goal is to earn more miles, you are better off paying for the $1,500 refundable fare and doing an instant upgrade (if an elite on the airline).


 

Next is a long distance business class trip. A San Francisco-Frankfurt roundtrip priced as the average of what I could find for different months. There are spikes in price some months, but I found the $7,060 price to be pretty close to average.

Sample Route Distance Fare Class
SFO-FRA-SFO 11,398 $7,060 Business
2014 (Current) Earnings Member Silver Gold Platinum 1K
17,096 19,944 22,794 25,644 28,494
2015 (New) Earnings Member Silver Gold Platinum 1K
35,300 49,420 56,480 63,540 75,000
Difference Member Silver Gold Platinum 1K
18,204 29,476 33,686 37,896 46,506

In this example, the new 2015 program is extremely lucrative. The business class fare is high enough that everyone sees a significant gain in their redeemable miles earned. The 1K member actually doesn’t realize the full potential of the 11x multiplier because earnings on a single ticket are capped at 75,000 redeemable miles.

I then took the above business class example and made it an economy class booking instead. It’s not a bottom of the barrel example, it’s a mid-tier typical fare to Europe purchased somewhat in advance.

Sample Route Distance Fare Class
SFO-FRA-SFO 11,398 $1,400 Coach
2014 (Current) Earnings Member Silver Gold Platinum 1K
11,398 14,246 17,096 19,946 22,796
2015 (New) Earnings Member Silver Gold Platinum 1K
7,000 9,800 11,200 12,600 15,400
Difference Member Silver Gold Platinum 1K
-4,398 -4,446 -5,896 -7,346 -7,396

Again, everyone loses out on miles. Not incredibly large amounts, but there is definitely a loss.


Lastly, I’d like to look the one place where people will make a mint on miles compared to how many they are earning under the current program: The short distance but relatively expensive ticket. These are usually refundable or flexible tickets but are shorter distances (say, less than 500 miles each segment). It’s a typical business scenario and one that I wanted to explore. In this example it is Manchester, New Hampshire to Washington-Reagan via Newark-Liberty.

Sample Route Distance Fare Class
MHT-EWR-DCA-EWR-MHT 816 $1,366 Coach (Flexible)
2014 (Current) Earnings Member Silver Gold Platinum 1K
1,018 1,220 1,424 1,628 1,834
2015 (New) Earnings Member Silver Gold Platinum 1K
6,830 9,562 10,928 12,294 15,026
Difference Member Silver Gold Platinum 1K
5,812 8,342 9,504 10,666 13,192

What Does This Mean?

In short, the majority of travelers regardless of airline elite status, who fly on discount or regular coach class tickets, are going to lose redeemable miles under the new system. The new system is going to reward those on very expensive business/first class travel and those who have to buy refundable or flexible tickets. The ones who will see some of the biggest increases in miles are the short distance fliers who buy those refundable tickets. They are spending less time in a seat but paying more money for the privilege and the airlines are rewarding that.

Some, who I respect, have this to say:

When asked why:

And while Mr. Harteveldt isn’t incorrect that there is an element of low-yield travel created by gaming the mileage run system, the idea that this makes the airlines completely unprofitable and those passengers are a huge cash sink for those airlines, is a stretch. Truth is, airlines need some of that low-yield travel to fill seats that would otherwise go empty. The difference now is that Delta and United do not want to hand out the same number of miles for that seat. However, this has less to do with “rewarding” someone than it does with simply not putting the miles on the balance sheet.

The Cost of Miles

Regardless of how the airlines word these changes the real issue comes down to cost. The miles that the airlines have a cost associated to them for the airline. The airline records the outstanding miles on their balance sheets as liabilities. At some point, someone will redeem their miles and the airline will either pay a partner for the flight the passenger takes, or they will remove a seat from their own inventory for that passenger to sit in. There is a tangible cost here. In fact, when the Star Alliance recently changed their rules on reward redemption charges allowing carriers to set their own price for their premium cabin rewards, United responded by making partner rewards very expensive. If someone wants to redeem miles for a seat that Lufthansa charges United $5000 for, then United wants to collect more miles from that passenger.

The fact that airlines have millions upon millions of miles outstanding on their balance sheet does not look good to their accountants nor their investors, so in the changes to reward mileage earning, we’re seeing a shift. The newly rewarded miles will essentially be “paid for” up front (at least partially) while the old miles are removed from the balance sheets over time.

Want more proof that this is at least some of the motivation? Look at United’s page discussing the changes.

Mileage Redemption Options

That’s right, you can redeem your miles for Economy Plus seats on a specific flight, an Economy Plus subscription, and a checked baggage subscription. None of those three things has any real cost to United. If you use your miles for an Economy Plus seat on a specific flight, United is only out the $39 or $49 they would have charged someone had no elite member been available to take advantage of that seat as part of their benefits. If you use your miles for a checked baggage subscription, there is no cost to United, simply a slight drop in ancillary revenue on that flight, though even that is probably offset by the fact you spent miles on it. The cost for the airline is minimal while the benefit for them is taking more of the liability off of the balance sheet.

Even more proof of this is Delta’s recent announcement that there will soon be a limit on how many American Express Membership Rewards points one can transfer into SkyMiles (250,000 Membership Rewards points in a calendar year). Delta wants to limit the incoming liability of miles even though American Express has been one of their best partners.

The airlines are tying miles earned to how much you paid for a fare not just because “it’s rewarding” but because it limits their exposure to liability. Plain and simple.

What Do I Do Now?

The answer to this question is simple: Mileage earning shouldn’t be the determining factor of your airline loyalty, especially with these changes.

The argument used to be that a person could put up with the bad aspects of a carrier if the rewards were worth it. With the rewards quickly becoming based on spend and less on miles flown, why fly that airline over another if the price is the same? For example, I give United my business, even with the terrible Recaro seats, on a transcontinental flight because I value those points. With the mileage earning changes, my comfort takes priority and if that means a flight on Delta, so be it.

This isn’t to say that for everyone mileage earning is the deciding factor, in fact, I would say it’s a small percentage of people who actually care about this piece of the frequent flier game. I remember a discussion a long time ago about how most travelers redeem their miles for simple domestic rewards, sometimes paying the higher mileage rate to avoid paying what they considered a high fare.

There is also an option to earn the original redeemable miles as you have all along, the catch is, you have to not care about elite status. In the terms and FAQs of each airline’s new redeemable miles program (United | Delta), there is a statement regarding tickets booked on partner airlines. If you book on a partner’s ticket stock, basically who took your money, then you are still eligible to earn reward miles at the 2014 rates, but you in almost all cases, you will not earn elite miles. So you have a choice, become an elite with Delta or United or earn the 2014 redeemable mileage rates.

You could also play the credit card churning game to earn redeemable miles. I find it too time consuming and a ton of work to keep track of what cards need what minimum spend and which ones I haven’t signed up for yet. Some people love that game but for me, it just isn’t worth the time or the energy.

Another choice would be to start flying American Airlines. They are the last of the large U.S. carriers to have a mileage flown is what you earn rewards program and it will stay that way. Well, until they are done with their merger with US Airways, then I would say the chances are very good they too will move to a points based on spend system. Sure, bloggers will post about how great American is and how they are using their miles to go somewhere far away, but that I feel will be a short lived game. There is a year, maybe two left for the greener pastures on American. Feel free to make that move if you are prepared to make another move or choice when American decides to go to a system similar to Delta and United.

Like I said above, the answer is simple: Fly places, do it affordably and comfortably, and worry less about the miles being earned. That was a little difficult for me to write. I used to see a cheap fare somewhere and say, “a weekend there would be nice and the miles would be nice too” and buy a ticket. The miles were an incentive for me to buy a fare to go someplace new that I may not have been inclined to pay for, now I’ll just go new places knowing the earnings will not be as high.

Is There Any Chance The Airlines Change Their Minds?

The airlines changing their minds on this is unlikely. Why would they? They can now reward fewer miles and even cap them for their most “loyal” travelers. The cap at 75,000 miles on a single ticket is something that blows my mind. You (or your company more likely) drop $8,000 on a business class ticket to Asia and you get capped at 75,000 miles. United and Delta find you loyal, but only 75,000 miles loyal.

I think the only real way any of this changes is if the airlines struggle in the coming years. If people stop flying due to the economy or because of fares or whatever, then I could see the airlines reeling these mileage earning changes back to what they used to be, but even that is unlikely. Another scenario is that corporate accounts start complaining to the airlines. These companies pay a lot of money for their employees to travel and if those employees start complaining, it’s likely the corporate travel sales folks will get wind of it. But, there is nothing keeping Delta or United from sweetening the pot and giving those contracts some kind of mileage bonus every year, so even the idea of corporate contracts getting pulled is a stretch.

Lastly, I do see this changing some people’s behavior and that’s not necessarily a good thing. People who have the freedom to book via airline websites for their corporate travel could get themselves into trouble pursuing more expensive fares to earn more miles. To combat this, companies may enforce their corporate policies more stringently, taking away some money from Delta/United if they are not the cheapest carriers in a particular market.

In Summary

Overall the biggest problem with the new mileage earning programs is that they not only earn less miles for the frequent yet affordable traveler, but they are confusing programs now. You will still earn your elite status based on two criteria, qualifying dollars and qualifying miles, the latter being based on distance flown, but you will earn redeemable miles based on fare paid. It is even confusing to type.

These programs change on a whim. There are rumors (see footnote at bottom of page) that Delta’s Medallion Qualifying Dollars minimum is increasing for next year. It’s unconfirmed but if true, means these programs will get tweaked and changed as the airlines see fit. They will look to cut out the chaff and focus on people who are spending a lot of money. Pundits can say this rewards more profitable fliers but even that doesn’t take into account the caps on what a person can earn on a single ticket. This is about reducing costs and liabilities for the airlines. As the airlines see fit, they will make more changes to reduce those costs.

Focus on the good stuff. See a cheap fare to a place you want to visit and you have the cash? Buy it. Stop focusing on the miles and get out there and see the world. Miles, upgrades, rewards, etc. are all fun things but if they hinder the actual visiting of places, don’t focus on them.

Recently a number of airlines have been offering decent business class deals to Europe during off peak seasons. I have a feeling that this will become a new normal. We will see $1,500 business class fares to Europe from Houston, San Francisco, etc. when the airlines need to fill seats that would otherwise go empty. Take advantage of that. You’ll earn some miles and you will get a nice seat across the Pond.

For me, I am bummed about the move. I loved having a small incentive for a weekend trip somewhere I wanted to visit anyway. I loved being able to burn miles on the few trips my wife and I were able to take longhaul. My plan going forward is to continue to earn elite status simply because I am on the road so much but as soon as I hit a level I am comfortable with, my plan is to switch to booking on partner airlines and earning the old rates for that level that I reached. It’s a hybrid plan but one I think may have some benefits for me. If I was to stick to just flying United tickets everywhere, just like I do now, then I would lose out on around 95,000 miles, possibly more once I do the math for my end of year stats. My company spent a lot of money for my work travel and I spent a fair amount of cash on personal travel but that is only worth so much to United. Clearly, I am a low-yield passenger.

In any case, I hope you make the decision that works best for you financially and travel wise. Happy flying!

Edit: It is now confirmed that Delta is raising the qualifying dollars required for 2016 SkyMiles Medallion elite status.

Southwest Heart

Southwest unveiled their new livery this morning and while I am not a huge fan of the font or the colors, it seems they really thought about unifying their look. The bubble font is what bothers me the most. I thought bubble fonts were dead and we all said “good riddance”. I guess not.

A new commercial accompanied the livery unveiling and it’s a different marketing approach from previous Southwest spots and I like what they did. They talk about their customers, their commitment and how much their employees matter.

Index for Airline Fares – May 2014

The Bureau of Labor Statistics released the May consumer price index summary yesterday and within it was a piece of data that has gone somewhat unnoticed.

The index for lodging away from home rose 2.0 percent and has increased 4.0 percent over the last three months. The index for airline fares rose sharply in May; its 5.8 percent increase was the largest since July 1999.

And…

The index for all items less food and energy has risen 2.0 percent over the last 12 months; this is the highest figure since February 2013. The 12-month increase in the shelter index reached 2.9 percent in May, its highest level since March 2008. The index for airline fares has increased 4.7 percent over the span, and the medical care index has risen 2.8 percent. Indexes that have risen more modestly over the past 12 months include apparel (0.8 percent), new vehicles (0.5 percent), and used cars and trucks (0.2 percent).

Airline prices are on the rise and with oil prices likely to rise in the coming weeks there will be little relief. But hey, consolidation is a good thing. Right?

Thoughts on Malaysian Airlines 370 Speculation

A very well thought out post on speculation and Malaysian Airlines flight 370

I have thrown out a few small speculations of my own about the flight but the reality is, we won’t know what happened to the plane and the passengers until we find it. Add on top of that the poor leadership by the Malaysian government and other governments in the region to coordinate information and search efforts and we have powder keg of emotions ready to go off. The passengers on Malaysian Airlines flight 370 deserve better.

Half of Frequent Fliers Satisfied With Mileage Programs

I am a few weeks behind but the USA Today had a story recently about frequent fliers (flyers?) and how pleased they are with the airline mileage programs. Three of the key points in the study that the article referenced:

  • Overall, a slight majority of frequent-flier program users — 53% — said they were generally satisfied with their primary carrier’s loyalty program and that they’d recommend it to a friend.
  • Nearly half (45%) of those surveyed say they earn more points from credits cards and other ground-based promotions than they do from actually flying.
  • Awards that cost more miles or points than expected was by far the biggest frustration among the survey’s respondents. That was cited by half the respondents — far more than the No. 2 complaint: suddenly changing rules.

So a slight majority of those polled are “generally satisfied”, meaning 47% are less than satisfied or didn’t respond. A good chunk of those same people earn most of their miles via credit cards and other promotion tools and yet they are upset with rewards that cost more. It seems to be a self-fulfilling prophecy, more miles in wild, the cost of the good being provided (a reward) goes up. To give you an idea of how the manufactured spend game works, take a peak at this article on Vice that focuses on Vanilla Reloads.

After United’s recent devaluation I am less inclined to amass large amounts of miles for “aspirational” awards on partner carriers, it just isn’t worth it. Sure, I’ll keep earning and probably burning for United business class tickets where I can find them but I am going to limit my aspirational type rewards to Starwood’s Starpoints. There is also a number of frequent fliers, in hopes of greener grass, jumping ship to American Airlines. After the merger with US Airways is complete I am sure that the American Airlines program will be degraded to some extent.

As Seth said, the frequent flier game has become a lot less fun. As a result, my attention is turning more to cheap fares and less to miles.

Below 10,000 Feet

As you probably know by now, the FAA now allows use of personal electronic devices from gate to gate. Each airline has to come up with their own policy and implementation plan and a number of have started doing just that. JetBlue, Delta, American, United, and others now allow personal electronic devices during all stages of flight and more airlines are sure to follow.

My personal experience with the new policy has been solely with United. The airline took around a week and a half to implement the policy and I flew with them the first day it was in place. The flight attendants were very upbeat about it and stated that the only two caveats were that heavier devices, computers mostly, needed to be stored for takeoff and landing, and, that all devices needed to be in airplane mode during flight. The ability to use the device for the entire flight felt a little strange. I usually carry a physical book for takeoff and landing, now I just need my iPad mini or Kindle and I’m set. It is one less thing in my bag and that is always welcome. I would also say that it must be a relief for the flight attendants to not have to walk around and police people’s hand movements or worse, make those announcements, you know, “The captain has informed me that a sensor in the cockpit shows 10 devices still being used”. We can also stop policing each other. Passengers no longer have to hide that they are using a device to listen to music, receiving an ugly glare from their seatmate.

If you are flying soon realize that some carriers have not yet implemented gate-to-gate policies, the Express arm of United is one example. Also know that for international flights, most countries and FAA like bodies have not approved electronic device usage below 10,000 feet. Keep all of this in mind if asked to turn off your device. Sure the flight attendant may not have received the memo but they could also be correct when asking you for your cooperation.*

*As I wrote this there was a passenger arguing with a flight attendant about turning off her laptop.

I’m Guessing There Will be an Air Canada PR Opening Soon

Air Canada lost a dog when one of their employees decided to take it on a walk during a delay. While a nice gesture, the dog’s guardian had left instructions that the dog not be allowed out of the crate except in an enclosed room. But, that’s not the worst part. When the local Sacramento CBS station e-mailed Air Canada about the incident, this is the response they received:

I think I would just ignore, it is local news doing a story on a lost dog. Their entire government is shut down and about to default and this is how the US media spends its time.

Clearly the e-mail was not meant for the CBS station but for a co-worker maybe? My guess is that the spokesman, Peter Fitzpatrick, is polishing up his resume. Be careful when sending e-mail, you never know when you are going to hit “Reply All”.

Update: It looks like Fitzpatrick has responded to his e-mail comments:

Fitzpatrick, a veteran public relations official, told the Star that he regretted this email, but to suggest he was callous or uncaring is “an unfair portrayal.”
He said the email was partly meant to be a joke, but he was exasperated with the line of questioning that he had no answers to.

You’re in PR, your whole job revolves around answering questions (even ones you don’t have answers for).

Reclining Seats and “Your Space”

Yesterday I noticed a lot of tweets and blogs sending their traffic to an article on Slate titled The Recline and Fall of Western Civilization. The article asserts that we as a society are broken because we recline our seats causing those behind us to suffer. It then takes the utilitarian view that reclining seats should be completely done away with. The first thing that came to my mind was, “are we really that bothered by seats reclining that Slate needs an article about it?”. Then I started thinking about the subtle “me, me, me” that was going on here cleverly disguised as “it’s for the greater good”.

Obviously, everyone on the plane would be better off if no one reclined; the minor gain in comfort when you tilt your seat back 5 degrees is certainly offset by the discomfort when the person in front of you does the same.

This quote in particular stood out. Unless you are a very tall person the amount of discomfort one receives from that same 5 degree seat recline is minimal as well. Sure, you may not be able to use your laptop on the tray table anymore, but the idea that you will be “uncomfortable” is a stretch. I am on an airplane a good chunk of every week and there are a lot of other things that are much more annoying and inconvenient than the guy in front of me reclining his seat.

Sure, I think it is annoying when a person reclines their seat right after take-off, or even better, the guy who does it on the ground after the flight attendants walk away, but I see some value in seat recline. I have had a few instances of back pain where I needed some recline to help relieve that pain and that 5 degrees made a difference. If we’re going to ban reclining seats then should ban all items that make trash (people litter), people who sit with their legs open on the subway (takes up my space), and so on.

Maybe what the author really wants to see is a seat like what ANA has installed on their Dreamliners, essentially a seat where the seat back is a shell, the bottom cushion slides forward, and the back cushion slides down. Such a seat gives a recline, but does not infringe on the space of the person behind.

I will say this. No matter how tall you are, products that keep the person in front of you from reclining, such as the Knee Defender, are not the answer. In the end air transportation is similar to a bus. If people want the experience of how nice commercial travel was in the 1960s then we’ll need to bring back regulation, make air travel unaffordable for a section of the population, and close a few airports… No? But it means a “better” travel experience for those traveling.

Delta Competing Heavily for New York City

Analysis: Delta heats up competition for New York flyers →

At LaGuardia, Delta is offering 100 new nonstop flights this summer to 26 new destinations. The expansion was made possible by an unusual deal with US Airways Group Inc (LCC.N), which swapped air traffic slots at LaGuardia for Delta assets at Reagan National airport in Washington.

[…]

“New York is a dogfight, and it’s really the holy grail for many of the competitors out there,” said Chuck Imhof, Delta’s managing director for New York sales.

While sitting on the tarmac at LaGuardia a couple of weeks ago it was very obvious that Delta is making a huge push at the airport. Seeing how American and United respond should make for an interesting fall season.

Fight Brewing Over O’Hare and Parallels with Intercontinental

There is a little bit of a fight brewing in Chicago over the future expansion of O’Hare.

Mr. Emanuel is at odds with airline boss Jeff Smisek over expansion of O’Hare International Airport. The CEO of United Continental Holdings Inc. jabbed at Mr. Emanuel recently, saying there’s no need to finish the multibillion-dollar project launched seven years ago.

Both men have the best interests of their businesses (Chicago is Mr. Emanuel’s “business”) in mind as they discuss the upgrades and expansion of Chicago’s O’Hare airport. Mr. Smisek is trying to control United’s costs by limiting their involvement in the expansion of the airport.

Mr. Emanuel can’t afford to let O’Hare fall behind rival airports. Mr. Smisek, on the other hand, has a different agenda. Unlike airline execs of the past, whose expansionist strategies dovetailed with the city’s desire for an ever-bigger O’Hare, he’s focused on the bottom line. He aims to boost profits by reducing capacity and competition in the airline industry, which has a long history of big spending, bloody fare wars and monumental losses. His merger of Houston-based Continental Airlines Inc. and Chicago’s UAL Corp. advanced those aims while creating an airline with unprecedented market power, the largest in the industry.

The interesting take away here is that apparently Mr. Smisek hates competition, yet none of this came up during the merger of United and Continental, which truly reduced competition. And why is no one bringing this up in the possible merger of US Airways and American Airlines? If competition is so important, then enforce it when carriers try to remove competition directly by merging.

All of this should be a warning sign to those looking at the airline industry from the outside. The airlines are struggling and they are trying to do all they can to survive. For some, that means merging, for others that means looking at operations and reducing capacity and for others it’s a combination of both. And this is not just a problem in the United States, just look at Lufthana’s announcements about reducing regional jets from the fleet, removing first class from some aircraft, etc.

Then there is this article I came across. What stuck out to me was this:

The terms of the debate are different in Chicago, but the bottom line is the same. What’s best for the city may not be best for United Airlines, and vice versa. There’s nothing particularly remarkable about a large company with near-monopoly control in a given market doing whatever it can to keep competition out. What is remarkable is that the argument to allow such competition would somehow be damaging to consumers is given any credibility.

We sure are getting lax with our throwing around of the “m”-word. United and American Airlines both have major hubs at Chicago O’Hare but that has not kept carriers from starting service to the airport. Virgin America has a number of new flights to and from Chicago. And neither airline has tried to limit Southwest’s operations at Chicago Midway. During the city council meeting in Houston the word “monopoly” was thrown around a lot as well. United does not control the Terminal D/E FIS facility. Other airlines are free to come and go as they please. Southwest used to even have gates at IAH. They gave those up to move to Hobby and in doing so, gave up their option to fly international flights. TACA, Aeromexico, and VivaAerobus all fly to Latin America from IAH, clearly, United does not have a monopoly. The other airlines’ operations are not huge but that isn’t because of a monopoly, it’s because IAH is not their hub. By this monopoly logic, American Airlines has a monopoly in DFW even though plenty of other airlines have flights there. Or, heaven forbid, Southwest has a monopoly at Hobby and Love Field.

Let me refer you back to the two posts in which my wife Tiffany Tyler analyzed Southwest’s proposal and the claims United was making at the time, which seem to have evolved somewhat. I understand United’s fear of this proposal. I understand their threats regarding Terminal B at IAH, though given the growth projections for IAH and the fact that they want to close down the former Continental hub in Cleveland it’s hard for me to take those threats too seriously – where else are they going to go? Unlike Southwest, which says it will go to San Antonio for their Latin American and Caribbean business if Hobby is not available to them, they’re pretty much locked in. What I don’t understand is how having more competition, even if it’s just for a handful of Latin American routes, can be bad for travelers. It makes no sense to me, and according to his press release it makes no sense to CM Andrew Burks, either. I hope in the end it makes no sense to the rest of Council.

The problem is not necessarily that there is competition, it’s the fact that the competition is based on false figures ($133 Houston-Bogota fares). Where will United go if Hobby is allowed to have international flights? Denver. They have plenty of gates there and can serve the connecting traffic just as well from there as from IAH. In fact, I’m sure the city of Denver would be happy to have more people flying through their airport. During the city council meeting Southwest offered to build the necessary gates and pay for the FIS facilities at Hobby. I say let them do that. If the city does not have to pick up the cost then there is no reason not to let them try to compete in the Latin-American markets.