Thursday, June 20, 2013

Where United and I part ways (despite me agreeing with the business decision)

By now, if you're a MileagePlus member, or just interested in traveling, you've probably heard about the recently announced changes to United's MileagePlus program.  Boiled down to it's essence, United is now adding revenue minimums in an attempt to cull out low-value, high-use Premier members by requiring minimum spend.

The new chart is as follows:
It all works out to 10 cents per mile needed to be spent to attain certain levels of status.  However, every dollar you pay in ticket costs will not go to qualifying as a PQD.  To whit:

The following spending counts toward the PQD requirement:
  • Base fare and carrier-imposed surcharges
  • Flights flown by United, United Express, or Copa Airlines
  • Flights operated by a Star Alliance® or a MileagePlus partner airline and issued on a United ticket (ticket number starting with 016)
  • Economy Plus purchases

What this means is that taxes, fees and other government charges will not count toward your PQD making the total outlay required for qualification at various levels much, much* somewhat higher than that. As an example, the screenshot below is a typical fare breakdown (from ITA Matrix) of a United fare from IAH to LHR (London-Heathrow)

In the above example you have not spent approximately $1,100 toward your PQD, you have actually only earned $421* $878. This is without taking into consideration bag fees etc, which are free to an extent for most Premier members.  In order to increase the PQD on this fare, you can buy up to economy plus, greatly increasing the price of the ticket.  So in reality you are only receiving approximately 40-50% of your total outlay in PQD, which raises the cost per mile to somewhere around 20-25 12-13 cents per mile.  In effect, this makes buying an economy plus ticket next to worthless in terms of attaining Premier status.

Here's the thing:  That's exactly what United was trying to do when they rolled this out.  And I agree with their business logic 100%.

Yes, there are going to be those who whinge that "loyalty no longer matters to airlines" and they are about half-right.  Profitable loyalty matters, loyalty that's less (or not) profitable does not.  Especially when that less (or not) profitable loyalty sucks up the majority of available resources.  As I said, I'm OK with this.  It's a decision that United has made and it makes good business sense.  We're just at the moment where United and I part ways.

This is not to suggest that I'll never fly United again.  Flying out of Houston, I most certainly will. I might even fly on them enough to retain Silver Premier status, but I doubt it.  The fact is that I've been remaining loyal to United because there was something that was in it for me.  I would typically pay a little bit more (not a lot more mind you) to stick with the airline because my Gold Premier status made it worth my while.  All of that is changing now.

With the carrot of Premier status gone for the leisure traveler (it's still very much there for the business traveler) it's time to start judging the airlines on their merits, and by price.  United is rarely the cheapest option out of IAH.  Yes, with other airlines you have to connect (and that will be a factor in decisions) but those connections are often less dodgy than with UA because their planes have a tendency to be on time more often.  The fact is United, at this moment, is a very unreliable airline in relation to the rest of the industry.  Not only do they do a poor job of getting you to your destination on time, but their service is sub-par and their planes are (to be nice) starting to show their age.  While United has done some work to upgrade their premium cabins, their economy product is among the worst in the industry, especially on trans-continental flights.

The way I see it United is taking a big risk.  When everything started falling apart after the merger United lost a lot of high-value customers.  They seem to be thinking that, by culling the Premier ranks through revenue requirements, they're going to bring these passengers back into the fold.  The problem that I see is that United is still charging premium prices for an average product and hoping that people overlook that while they continue to get their house in order.

Because of all this the way I travel will most certainly change.  I'm going to be much more price conscious and will start to look at a la carte offerings (such as premium economy) much more closely as it relates to total ticket price. For those of you reading this of a credit card lean, I'm beginning to think that the airline branded credit card (unless you're not a light packer) is going to become somewhat worthless as other cards offer better points/miles values and increase flexibility.

Why limit yourself to one carrier when you have a choice of several?

*Note: As CW on twitter pointed out to me here. I made an error reading the fare schedule from Matrix software.  YQ is, of course, included. As always, I appreciate the free proof-reading.

Sports Section