The Tyrannical World of Airline Loyalty Programs(flightfox.com)
flightfox.com
The Tyrannical World of Airline Loyalty Programs
https://flightfox.com/tradecraft/tyrannical-world-airline-loyalty-programs
4 comments
Waaaa! People aren't giving me enough free stuff! Waaaa!
Personally, I think loyalty programs should be broken up. Their very existence is premised on creating monopoly and cartel outcomes by round-about ways of curtailing competition; remember, that thing that our corporations pay lip-service to?
This may sound strange, but the best way to break up loyalty programs for, not only the airlines, but also hotels, is for someone to sue and get the IRS to start collecting taxes on income gained from loyalty programs. The hassle would not be worth it and they would die off; leading to more competition and lower rates.....actual free market competition.
This may sound strange, but the best way to break up loyalty programs for, not only the airlines, but also hotels, is for someone to sue and get the IRS to start collecting taxes on income gained from loyalty programs. The hassle would not be worth it and they would die off; leading to more competition and lower rates.....actual free market competition.
The IRS already collects if points are gifted with a valuation of $600 or more [1]. However, the conventional loyalty program is not a taxable event because it is treated as a rebate tied to a repeated series of sales events.
There are also many other factors in play that you haven't mentioned. The airlines, hotel and rental car companies run special loyalty programs for travel department heads and C-level execs at large customers with a lot of travel needs. These business customers get steep discounts, but push huge volumes (in the hundreds of thousands of dollars and up range) of bookings each week through their preferred vendors. The reward points systems are a lot more attractive at these more rarefied levels than what the traveling public (or corporate rank and file) has access to. I would be surprised if the decision-making didn't take these perquisites into account at least informally during negotiations.
[1] http://www.creditcards.com/credit-card-news/irs-taxable-inco...
There are also many other factors in play that you haven't mentioned. The airlines, hotel and rental car companies run special loyalty programs for travel department heads and C-level execs at large customers with a lot of travel needs. These business customers get steep discounts, but push huge volumes (in the hundreds of thousands of dollars and up range) of bookings each week through their preferred vendors. The reward points systems are a lot more attractive at these more rarefied levels than what the traveling public (or corporate rank and file) has access to. I would be surprised if the decision-making didn't take these perquisites into account at least informally during negotiations.
[1] http://www.creditcards.com/credit-card-news/irs-taxable-inco...
Interesting point. Southwest Airline's loyalty program relaunched last year, and brought the budget airline $180 million in incremental revenue.
I think Tyranny is harsh.
For a long time the loyalty programs have been a profit center rather than a cost center since the airlines sell them to credit card companies and other vendors.
For a long time the loyalty programs have been a profit center rather than a cost center since the airlines sell them to credit card companies and other vendors.
If you don't like them don't use them! It's their ball, they can take it home if they want to.
These days, it's rare that you get 1 reward mile for every 1 mile that you fly. Instead, there's all kinds of bonuses/penalties and scale factors based upon your ticket class. Discounted ticket types earn fewer miles, first travel earns more, and so on.
So you can't just say that free flight 'costs' have increased if they need more miles to claim them. Perhaps the reward miles are given out more freely than before? Or perhaps less? (I'm guessing less!) In any case, the article leaps to conclusions without the evidence.