United Airlines' decision to count spending only on tickets issued by United for purposes of
earning elite status marks a fundamental blow the concept of
airline alliances, undermining its Star Alliance partners and
begging the question,...
United Airlines' decision to count spending only on tickets issued by United for purposes of
earning elite status marks a fundamental blow the concept of
airline alliances, undermining its Star Alliance partners and
begging the question, will airline alliances soon be nothing more
than marketing gimmicks?
Say Lufthansa is running a sale and I buy a business class
ticket from Frankfurt to Los Angeles from the German carrier for
$2,500. The routing is Frankfurt-Chicago-Los Angeles and back the
same way and all flights are operated by United Airlines. Despite
being Star Alliance codeshare partners and A++ joint venture
partners (they share revenue on these flights), the price of the
ticket would not count toward my minimum spending requirement
because it would be issued on Lufthansa (220) stock rather than
United (016) stock.
Thus, United has now weaponized booking and
balkanized loyalty in the Star Alliance. United has
weaponized booking in trying to monopolize it, making it a
condition for loyalty and essentially going to war with its
partners for business, alliance partners that cannot be labeled
purely as competitors like AA and Delta. And that is certainly
United's prerogative. But it undermines the implicit promise
of the Star Alliance network, pursuing loyalty by siphoning
revenue from other member carriers in a race to the bottom. Surely
other carriers will follow.
If I were a CEO of one of the Star Alliance member carriers, I
would ask United CEO Jeff Smisek to explain himself in front of
everyone else at the next CEB meeting. What if every carrier
followed United's lead? In the aggregate, it will drive away Star
Alliance loyalty because consumers will be less incentivized to
book with Star Alliance, even if the price is a bit more, knowing
that the benefits are diluted. Paying an extra $100 for elite
status + lounge access is a lot easier to stomach than paying $100
more only for lounge access...
What if Thai, Singapore, Asiana, ANA, and new member EVA decide
that if United will not "count" flights on codeshares booked
through them, they will no longer count flights not booked on their
own ticket stock. Despite United's notable Pacific route network
out its Tokyo and Guam hubs, conscientious frequent flyers of these
programs will scale back purchasing from United, opting
instead for booking on their own carriers, who presumably would
market their own flights more prominently than United codeshares.
United thus looses revenue.
The problem is not that I won't be able to qualify for 1K status
next year. I may well be in Germany, which would exempt me from the
requirement all together. The problem is United has unleashed a
snowball that I fear will gain in intensity and size as other
carriers contemplate retaliation. The result: the consumer is
crushed, or at least in a position much worse off than before.
The "good" news is that there are rumors of a Star Alliance
systemwide tool under development that would track spending in a
uniform manner across Star Alliance. I have no inside information
in this regard, but if it is the case, why doesn't United wait
until it is rolled out to implement its new revenue-based scheme?
It is not far-fetched to wonder, for penny-wise, pound-foolish
reasons, that even if such a tool become available United
would still mandate tickets be issued on United stock in order to
satisfy minimum spending requirements for elite qualification.
This is a sad chapter in the story of airline alliances, an
indication that the future world of airline alliances will be
limited to something like the three Ls---lounges, luggage, and
logos. That's not something to celebrate.
