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Transcript of December 5th FlyerTalk Live! Chat

With special guest Randy Petersen (Publisher, InsideFlyer magazine).

Randy Petersen
So are we ready to let me yak away? Thanks for coming up tonight, I know you should all be shopping for the holidays but what the heck.....

Mikel at WebFlyer
This question was submitted earlier by boilermaker: With UA on the verge of bankruptcy (and National out of the picture), do you see a further consolidation of carriers?

Randy Petersen
Not really. Sure I know it's contrary to all the other "experts" and I really only consider myself knowledgeable about miles and points, not the airline industry as a whole. What seems to ne loss in all this is the fact that just three short years ago these very same airlines were posting record profits, doing very much the same then as now. A few small differences: the events of 9/11, a faltering economy (it falters and then recovers and then falters, etc.) and isolated airline CEOs. United is a case of self-inflicted problems. Their CEO of a few years ago (with the support of their Board of Directors) thought it was more important to be bigger - not better.

Despite internal problems that sprouted canceled flights like crazy just over two years ago, he and others said hell with today's passengers, let's try to get more. I believe it was a case of honestly - size matters envy - by UAL toward American. With American in line to acquire TWA and become the biggest airline in the world, Jim Goodwin could not stand being #2. He never worked at Avis to know that #2 people try harder and many times are better. He wanted to be bigger. That two-headed mistake (internal labor issues hurting airline performance) and the bigger acquisition of US Airways and the added "What Were They Thinking" of Avolar combined with a faltering economy did them in.

Consolidation? Can't see it. I know everyone has become an airline expert on what needs to be fixed. Sure, these airlines will mix some fares ideas around and at the end of the day (remember, Bob Crandall suggested that many years ago and no one made much change to consolidation then). This industry will recover, somewhat changed but still in the public transportation business. I keep hearing the idea of low cost carriers.... Correct me if I'm missing something, but are low cost carriers new? By my records, Southwest is 30 years old and has had low cost this whole time. Just as British airways exists in Europe, Singapore and Cathay in Asia and even the Lufthansas, there's room for full-service business travel related airlines and low cost carriers side-by-side.

Is there one big airline too many in the US? A lot of people say that, but somehow I can't see breaking up UAL's traffic and distributing it among the other airlines makes things better. This is a full service airline, which means AA and DL would get bigger. That's a better world? These same "experts" predicted in 1991 when we had the last major economy problems with airlines that there would be consolidation with only 3-4 airlines remaining. Well, it's 11 years later and while I may need to count my fingers again, there's not much consolidation other than what has been natural in the airline business since day one.

I think I did say in 1991 - I did not think there would be only 3-4 airline in the next few years. Guess what? I threw a dart and guessed right. OK, let the "experts" tell us all again that there needs to be consolidation....I'm still waiting for them to be right from 11 years ago. Trust me, it doesn't make me right (I'm admitted guesser), but I do know that this same industry made record profits just three short years ago. I'm in for buying long on all their stock.

yabado
Randy- What other ways can you cash out UA miles besides airlines, ie milepoint

Randy Petersen
There are at last count, 5 ways to cash out of Mileage Plus. I can name them but honestly.... I don't want you to do that now. I've been doing this frequent flyer thing for 16 years and feel good about my instincts. I'm asking you to stay with UAL for right now and don't think twice about Mileage Plus. You'll only devalue yourself to no end, accomplish absolutely nothing and then be sorry that you've only got enough miles for Bakersfield and can't join the rest of us in Hawaii. The average length of an airline in bankruptcy is 23 months - Hell, even National Airlines laster 22 months in Chapter 11. There's plenty of time to do things more productive with your miles and I simply can't let you throw them away right now. hope you understand this is "tough mileage love" and I don't think my advice will let you down.

Scott
Randy, do you know anything about Globalpass? Do you think we may have problems with any Latinpass miles if it does change to Globalpass?

Randy Petersen
Thanks for the question Scott. For those of you that subscribe to InsideFlyer....we currently have a private NotiFlyer on that very topic on the insideflyer.com Web site. It's not public knowledge yet but we have a special inside news on that topic. I see no problems more than you see right now with any rewards. There is a chance that over time of they are successful that your award choices may increase. I have my 1,000,000 from the LatinPass run and am holding tight right now.

avek00
I know that UAers might have little to worry about in the near term, but what about US DM folks? The reorganization has been hitting some turbulence, the partners are leaving in droves, and mutual FF redemption with UA has not yet begun....

Randy Petersen
That is more the issue of you ask me. There may be a problem with any potential Chapter 11 by UAL to undo the US Airways deal. Here's my key factor and you're welcome to watch it as well. IF, US Airways can not get the ATSB to move the "conditional" loan of government money to "approved" then the lights may be winking at us.....

You simply have to watch this very closely. I am fond of US Airways and know plenty of honest and real members of DM. It would greatly disturb me to see harm come to them. If I see a true sign that something is so bad it can't be recoverable, I will send out an alert. The reason is simple - there is no airline in the world who has gone out of business (not acquired) where their miles and awards were honored by other airlines. Next

Mikel at WebFlyer
This question was submitted earlier by Karen Sadow: I remember articles in the past about bequeathing your points when you die, but I can't find any of that info now and was wondering how to go about doing this.

Randy Petersen
I'll see that we re-post up several articles on this in the insideflyer.com Web site as we've written about it several times. Depending on the program you can call the service center, choose to talk to a rep familiar with the process of submitting a death certificate (my sympathies) along with other account numbers and there will be a fee. I think AAdvantage is $100. But most if not all airline will work with you on this despite the fact that several of them say that miles can't be part of an estate. Good question and i'd like to offer my help on your situation if needed. Next

flytoeat
Do you have any insight on elite level qualification numbers for next year at the various airlines? Are the numbers significantly down, and can we expect similar promotions as the new "buy your status" promotion at AA?

Randy Petersen
While we may see something from Mileage Plus and US Airways as a form of a Christmas present for re-qualifies, I think what you see is what you got. The usual Elite Matches exist and of course the AAdvantage "sale". Truly they are not the first airline - Continental has done it before and earlier this year Priority Club Rewards (Six Continents) introduced it into their program. In reality, it might replace the year-end Mileage Runs.. Airlines understand this behavior and the price is based on average airfare that mileage Runs take place with in the month of December. There's more profit in a direct sale than a Mileage Run for the airline. Airlines are hesitant to get crazy on this because they know that many will bag the elite card and head off somewhere else since most frequent flyers like several elite status for balance in benefits and bonuses. Let's remember, it's not about the color of the card....they are also giving away the 50-125% bonus for each flight......next

ANDY
HAVE YOUHEARD ANYTHING ABOUT A NEW POINTS PROGRAM AT HOJO AND SUPER 8 ?

Randy Petersen
Yes, we featured an interview with the head of marketing for Cendant (parent company of these two brands) in our last issue and if you aren't a subscriber.... let's get with it. Only just kidding with you. That program has some database problems but look for it at the end of Q1 2003 and it will have a "unique" feature. I'm only alive because I haven't old anyone what it is yet. you know the code to keep my big fat mouth shut...

Mikel at WebFlyer
This question was submitted earlier by jeffreyt: I have a million unused frequent flyer miles. Is smart now to use those miles up? And if so, is it advisable to "spread the wealth" amongst other carriers too?

Randy Petersen
I've got far more than that and using them up is not even close to my mind right now. Because of the current climate in the industry, I don't see any way that there will be huge major changes to programs that would devalue those miles. My advice is pretty simple - Hedge Your Loyalty. Loyalty in just the right doses is better than being too committed these days. I almost hate to offer that up as advice, but if these airlines want to play musical benefits (US Airways proposed change to miles for elite status with discount airfares) I have no problem fighting back. Bottomline: Do unto Programs as They Do Unto You. But still stay loyal somewhere, just not as deep.

MileKing
Does AwardGuard offer $7500 of protection PER YEAR or one, lifetime aggregate total of $7500 should a FF program go out of business?

Randy Petersen
Thanks for asking that question. We have probably failed to clear that up and honestly, it's more just getting the information worded correctly than trying to change things. Our intent is to extend our "business interruption" insurance on our business as a benefit to those customers we try and help get more out of their frequent flyer programs. It's actually PER YEAR. Here's why. We're actually still helping people with claims from their awards in Midway from 1991. If it was one lifetime, they'd be gone by now. Same with mileage expiration for AA and UAL from the mid-90s. While it may be that I messed this interpretation up I'll stand by you as a member or possible member if this is why you are a member. Hope this helps.

Mikel at WebFlyer
This question was submitted earlier by boilermaker: With AA and other major airlines cutting flights, will new regional startups (ala the former Reno) or smaller regionals (such as Great Midwest) start taking up the slack?

Randy Petersen
Doubtful. Let's look at how airlines cut flights: instead of flying 4 times daily to some markets, only three times daily forcing a 50% load factor to 67% but still reducing schedules/capacity by 25%. airline harmed? No. Passengers harmed? Not really other than perhaps an adjusted schedule from before. I think the idea of capacity/schedule cuts are overrated for news. Why do I say that? Let's remember that when airlines started to fly again after 9/11.

I remember that they all cut back dramatically and that some of the airline were back about 17% or more in routes, capacity until they started to get back to normal. I don't remember a huge outcry or problem with the industry at where they are talking of going back to. As for the regionals.....airlines already have that covered with American Eagle, Delta Connection and other "regionals" already named. There's really not much room for more service other than what the airlines already have available.

Using these assets is the key - which is why RJs and others have been hot topics for years. There will always be new faces (owning airlines is like owning a major league sports team) but the market will decide if it can make it. What do you think the chances of a yet-to-fly and unproven model like JetBlue would have in raising capital in today's marketplace? It's all timing....and luck as well as a lot of work. While Southwest is the darling to talk about today for making money....aren't they 30 years old? Pretty old to be the "hot" new topic. The idea being there's enough out there if used properly and if you stay the course. Southwest stays their course and you can't argue with that.

fallinasleep
ANC Rental Corp., the parent of National and Alamo, announced yesterday that they are reviewing their relationship with FF programs and (I think) Hertz charges for miles for rentals now. Should we be concerned that rental car agencies will stop giving away miles in the near future?

Randy Petersen
Maybe. I take some blame on that because it was advice i gave their consultant. I was trying to make a point that 50 miles a day was simply not important to most frequent flyers anymore and that a review of the overall use of miles might be in store. The problem is that airlines themselves mis-managed car rental partners and caused this problem. They went from being exclusive (2-3 car rental partners) to having everyone in the programs thus making car companies pay for each and every rental, whether they were driven by the frequent flyer program or not.....

I really don't blame Hertz (they are a fine company), I blame their approach. What you see is the classic example that these programs are so powerful that it seems they are a loaded gun to the head of partners like car rental companies to stay to play. We may be better served for some partners to offer up more exclusive bonuses to a smaller subset of members than to be everything (50 miles) to everyone.

chix
What kind of promos do you think is on the horizon with Mileage Plus to keep us loyal?

Randy Petersen
I can't speak for them. But if I were consulting I would not hesitate to re-introduce a "Fly more Than Last Year" bonus. They have actually experimented with this a little. For my two cents - I'd can all this one-to-one BS bonus stuff and go back to general and memberwide promotions for awhile......

The reason is simple, they need to energize their entire membership, not just those in Des Moines that flew twice last year between the months of June-July and stayed at Hilton earning "Double Dip" bonus miles. That's good when things are right and the world is rosy....but we/they live in different times now. That's where I would start. I would also extend Premier benefits to all members either from last renew period or those that had tracked 75% of more miles toward re-qual.If you have a few more hours I've got more.... next

avek00
Do you believe that the DL/CO/NW application for an alliance will be approved by the DOT, and if so, what will the impact of their alliance be on FFs, especially if the alliance leads to NW, CO, and possibly KL joining SkyTeam

Randy Petersen
The final date for this in case you have lost count because of all the attention UAL is getting these days is December 21. I don't believe they can extend their review of this any longer. We have two weeks to find out. I personally think it will be rejected - on the same grounds that the ATSB decision was made for UAL. Leave the free market alone as much as possible and at last count these three airlines are in no immediate danger of going away. They all have respectable leadership, having made too many mistakes in the last three years and to my thinking - show absolutely to synergy....

While I won't say that I'll shave my head and dance naked from the top of the House of miles if this is passed - I will be the most shocked. I'll write about it, give you advice and realize - I don't know everything (HA! just a joke....). So, let the count down begin. They can all still be part of SkyTeam without a domestic alliance.

CameraGuy
Any chance of getting CO to join us for a chat?

Randy Petersen
Yes, they told me they would come on this year and because of all that has been going on I didn't pressure them. now I'll tell them they either live up to it or they owe me 1,000,000 miles. I'll get them on. I promise. Thanks CameraGuy

JY4D2
Randy - What do you think of UA returning the shuttle service? A good idea or a bad one in general and for FF mileage?

Randy Petersen
BAD, Bad, bad. In good times they showed they couldn't run the concept and while these are desperate times and maybe they would be better, I think they will leave that to others. Hopefully they've learned from Icarus.......don't fly too close to the sun.

Mikel at WebFlyer
This question was submitted earlier by gfowler-ord-1k: Do you have any details about how the BA $20 fare happened?

Randy Petersen
As in the past, it was a typo on data entry and as you might guess, fare basis have no "spellcheck" Not the first time for such things and definitely not the last. I highly recommend that FT member ScottC allow you to sign up for his Hat Deals email thread and you too can join most of these other folks tonight on a paid Mileage Run for fun. Next

wharvey
Randy, do you anticipate that United will do anything to further dilute their 1K benefits for next year?

Randy Petersen
No. history tells us that all airlines in past Chapter 11 proceedings did nothing to devalue programs. They may make small changes to match industry trends, but will not take the chance of losing you to someone else. I think they may learn when to hold and when to fold. Stay with the 1K, you make the rest of us a bit jealous....Next

Dan at WebFlyer
This question was submitted earlier by gfowler-ord-1k: Bring out your crystal ball, where do you see UA headed?

Randy Petersen
I've got one of those "crystals" marbles from gradeschool (wish i still had my 'steelies'), how that will still do the trick for the future.... Actually, They will likely have to change management again. They will involve all of us on an emotional roller coaster ride and we'll all have a collective sigh of relief when this is all over. I'm willing to say they will survive. They will not be as harmed as most people say they will. I can't speak for the Chapter 11 filing because honestly, i don't see it making much difference than what we see right now from United. I see them becoming a more friendlier airline and even may make life difficult for other airlines as they leverage Mileage Plus to retain and spoil frequent flyers.

One thing is for certain, other airlines will have a tough time stealing members of Mileage Plus - let's remember that UAL already has plenty of mad DL flyers because of the SWU snafu. And the increasing displeasure with some CO flyers makes UAL not look too bad since some of them have been there (Bankruptcy) with that airline before and lived through it. In other words, we'll all learn to live with the bomb and the weak will depart, the strong will be fine. Then it's on to the next airline. I don't see United changing much of what they are. If it wasn't for some really stupid mistakes by upper management in the last 2 1/2 years, we would only have US Airways to talk about. In three years time I'll be retired because I bought a lot of cheap UAL stock, so ask your questions now since I plan on being right with them. Amazing because I've not always been kind to this airline. But I'm very fine with Mileage Plus right now and the future. I've been doing this long enough that I've been through some of this before.

Sure UAL is bigger than the other problems airlines in the past, but I'm older and can take it.

SanDiego1K
Randy, I have been flying a number of the world's top international carriers as part of RTW trips. Their premium product is vastly superior to that offered by US carriers. Do the US carriers realize they have a competitive problem in their front cabins?

Randy Petersen
They do but will not change. Let's remember that the US market is the largest domestic market in the world and that it is difficult to manage a domestic change to international. These other airlines you have experiences on don't have the same problems. For instance, Singapore Airlines has no "domestic" flights - only international. It's the fleet demands. domestic demands and the fact that the US market could never compete in the labor costs for these markets against these other airlines. I think the US carriers understand the uniqueness of our own market and will leave enough alone. As you also might guess, because of the many global alliances, there is no need to compete with them in that product category. You can get it with what you have. Fortunately for many of us, we'll take richer frequent flyer programs over those benefits most of any day. END

Randy Petersen
Thanks all, sorry I continue ot be a slow typist but hey, that's what I am. Hope you enjoyed the show.... er, transcript and look forward to seeing you all on FlyerTalk.... Happy Holidays.

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