Even Amtrak, a government train service with no competitors, has a rewards program.
The part of the equation that I think the article is missing is that air travel is an industry with an extremely high level of substitute options. Rewards programs are there to try and combat the fact that their products are 100% interchangeable and create some level of loyalty.
Yes, they're also a convenient financial instrument, but I'm personally failing to see how that's a problem requiring intervention. Even with these programs as a profit center, airlines are overall some of the lowest profit margin businesses you can find. There aren't many travelers out there who have much justification to be upset about the prices they pay to fly when the airline is only making single-digit percentage profit off their flight.
The article, in my opinion, was too zealous about advocating for reinstatement of a style of regulations that I don't think makes a lot of sense for consumers or the airlines. It's well-understood that fares decreased and service volume increased after the Airline Deregulation Act was passed. Many aspects of the defined routes and fares setups of the Civil Aeronautics Board actively stifled competition by preventing competition from entering routes and fixing prices.
> The Civil Aeronautics Board decided which airlines could fly what routes and how much they could charge.
Doesn't that sound kind of awful? This would be like your local health department regulating the precise recipe of each meal served at a restaurant, going above and beyond regulating health and safety practices.
The article acts like the airline industry is just 100% devoid of regulations, but that isn't at all true. For example, airlines are required to advertise the tax-inclusive airfare, required to refund fare plus penalty in cash in the event of bumping overbooked customers, and obviously long list of safety regulations, and numerous other requirements.
> The part of the equation that I think the article is missing is that air travel is an industry with an extremely high level of substitute options. Rewards programs are there to try and combat the fact that their products are 100% interchangeable and create some level of loyalty.
I agree - but thought of it a different way.
Delta has a reputation among frequent flyers for having the best operations of any domestic carrier. AKA, if you need a flight that gets there on time, Delta is your best bet.
So, I expect these changes to their frequent flyer program (which pretty much all frequent flyers have reacted to with universal hate) are a recognition of that. AKA, we're offering a good product, so why should we be generous with our mileage/reward program.
Delta were already regarded as having one of the least valuable award points of any program.
As to why the changes are so hated, take this example.
Imagine you're flying economy 1x a month from Los Angeles to Amsterdam on Delta. Each flight would cost around $800, and earn you 11,120.
Under the current program, you could have Silver Medallion halfway through your 3rd trip, Gold by your 5th and Diamond by the end of the year.
(Some caviats that you wouldn't make it that far without a waiver for MQD spend you could get with a credit card).
Under the new program, it'd take you 7.5 months to earn Silver, and you'd never make it past Gold Medallion flying that same route every month.
> The part of the equation that I think the article is missing is that air travel is an industry with an extremely high level of substitute options
That's the entire point of a free market. Obtaining perfect competition. If you are producing a product that cannot be easily substituted then you shouldn't get to have a fully free market. Customer lock-in is the opposite of the concept and benefit of a free market.
Second, and industry with high startup costs, extreme barriers to entry, limited access to fixed resources (airport runways), and is of strategic importance to a country will always be regulated. Airlines will never be left to die (like for example the NFT market) - and we saw this during the 2008 period. And if you're going to socialize loses and have govt as your back stop there are rules you have to adhere to to ensure customer benefit.
I have to disagree that airlines have extreme barriers to entry. Yes they are a capital intensive industry but starting an airline is actually pretty simple and there are seven national scale airlines that have been founded since 1980 in the United States and are still operating today.
To start an airline all you have to do is lease planes and gates and hire an interchangeable labor force. You don’t have to develop any technology outside of your reservation system, no factories, no research and development.
An example of a recent airline startup is Breeze Airways.
The part of the equation that I think the article is missing is that air travel is an industry with an extremely high level of substitute options. Rewards programs are there to try and combat the fact that their products are 100% interchangeable and create some level of loyalty.
Yes, they're also a convenient financial instrument, but I'm personally failing to see how that's a problem requiring intervention. Even with these programs as a profit center, airlines are overall some of the lowest profit margin businesses you can find. There aren't many travelers out there who have much justification to be upset about the prices they pay to fly when the airline is only making single-digit percentage profit off their flight.
The article, in my opinion, was too zealous about advocating for reinstatement of a style of regulations that I don't think makes a lot of sense for consumers or the airlines. It's well-understood that fares decreased and service volume increased after the Airline Deregulation Act was passed. Many aspects of the defined routes and fares setups of the Civil Aeronautics Board actively stifled competition by preventing competition from entering routes and fixing prices.
> The Civil Aeronautics Board decided which airlines could fly what routes and how much they could charge.
Doesn't that sound kind of awful? This would be like your local health department regulating the precise recipe of each meal served at a restaurant, going above and beyond regulating health and safety practices.
The article acts like the airline industry is just 100% devoid of regulations, but that isn't at all true. For example, airlines are required to advertise the tax-inclusive airfare, required to refund fare plus penalty in cash in the event of bumping overbooked customers, and obviously long list of safety regulations, and numerous other requirements.