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If you book an award ticket on an airline, is it really free?
That question is more complicated than it may seem. If you earn miles and points the old-fashioned way, by flying, the answer is probably yes. You’ll fly free sometimes as an airline thanks you for your loyalty.
But if you generate miles via credit cards, as many travel-savvy spenders do, your flights aren’t exactly free. Your credit card company is buying miles from the airline, and using them to reward you. How much the card companies pay is a trade secret, but analysts say it’s probably around 1.25 cents per mile.
Let’s do some back-of-the-napkin math. You can buy a one-way ticket next month on Southwest from Chicago to Orlando for about 4,100 points. At 1.25 cents per mile, J.P. Morgan Chase would pay Southwest about $52 for a segment that costs $77 in cash. Since cards have other benefits for airlines as well, Southwest is “really ambivalent whether it’s a cash paying customer or a reward customer,” Andrew Watterson, Southwest’s chief revenue officer, told me recently.
Watterson and I had an interesting conversation about the economics of loyalty programs, and why Southwest expects its new Hawaii routes to “ignite” credit card applications. Let me know what you think by emailing at firstname.lastname@example.org or tweeting me at @briansumers.
— Brian Sumers, Skift Airline Business Reporter
Stories of the Week
Southwest Airlines Expects New Hawaii Routes Will ‘Ignite’ Credit Card Sign-Ups: A few years ago, Watterson said, Southwest realized it didn’t have enough “sexy” destinations to persuade travelers to sign up for its branded credit card. First, it added Mexican and Caribbean destinations, including Cancun, Cabo San Lucas, and Aruba. Hawaii is next. To be sure, Southwest wouldn’t have added these routes if the underlying economics didn’t work. But the credit card is certainly helpful to the airline’s bottom line.
United Airlines May Introduce Domestic Premium Economy: We’ve long heard true premium economy wouldn’t work on U.S. domestic flights, in part because domestic first class is roughly equivalent to long-haul premium economy. But will United find a way to bring premium economy to U.S. flights? We may soon find out.
Super Long-Haul Trips Expose Flight Crews and Passengers to Cosmic Radiation: Bloomberg’s Justin Bachman has a fascinating story about airborne radiation, and why flight crews and passengers may have reason to be concerned. Your average long-haul flight is equivalent to one X-ray, he writes. But over the Poles, the risk is much greater. That’s a concern because airlines have been rushing to add Polar flights to save fuel. “Since airlines gained access to Siberian airspace, the number of polar flights has soared, with more than 17,000 trips last year from just a few in 2001,” Bachman writes.
Virgin Atlantic Struggles With Boeing 787 Engine Trouble: Virgin Atlantic has tried to hide its Boeing 787 engine troubles from customers as well as it can. But the carrier is still having issues with its Rolls Royce engines, and it now is leasing four A330s that once belonged to Air Berlin. Virgin Atlantic is leaving the interiors as they were, though. It’s a cost-cutting move, not a homage to Air Berlin.
Qantas Takes Steps to Overcome Pilot Shortage: Qantas, like many carriers, is bringing its pilot pipeline in-house by creating the Qantas Group Pilot Academy, scheduled to open next year. At first, it should train about 100 pilots per year. Skift freelancer Allan Leibowitz explains why Qantas decided it needed the program.
European Airline CEOs Talk Brexit and Are Divided on the Harm: Is Brexit a big deal? It depends on whom you ask. Ryanair’s Michael O’Leary is saying it’s a disaster, but he often goes with hyperbole. At a conference last week, other airline leaders, including Willie Walsh, CEO of International Airlines Group, told Bloomberg they were were not concerned. “I am completely relaxed,” he said.
Virgin Atlantic Adds Basic Economy to Fend Off Rivals: The dominoes are falling. Virgin Atlantic is the latest carrier to add a transatlantic basic economy fare, though it has given it a different name — economy light. Which will be the next airline to introduce one? It’ll probably be United, as well as its transatlantic partners. United hinted at it this week.
This Is Boeing’s New Middle-Market Airplane: The great Jon Ostrower, formerly of Flight Global, The Wall Street Journal, and CNN, and now a blogger, obtained a conceptual rendering of Boeing’s proposed middle of the market airplane. Will it look like this when it hits the market? Probably not. But it’s still fun to see what Boeing is considering.
Eastern Air Lines Redux?
Can’t we just let the brand die?
If you follow this closely, you’ll remember a Miami-based charter operator licensed the Eastern name about a decade ago. At the time, it hoped the name might help it move into scheduled service. It was so bullish it placed orders for two aircraft types — the MRJ regional jet and the Boeing 737.
But while the airline got some press — for a short time, Miami to Havana flights were among its strengths — its plans fizzled. Last year, it sold most of its assets to Swift Air, a charter airline, which hasn’t been using the name.
“Dynamic International Airways, LLC is a Virginia limited liability company. It will immediately be submitting a request to register the trade name (d/b/a) of Eastern Air Lines under Part 215 based on a license with the owner of the intellectual property,” two attorneys for the airline wrote in a letter to the U.S. Department of Transportation.
There is an existing relationship between Swift and Dynamic, according to the filing. Kenneth M. Woolley owns all of Dynamic, and 38.75 percent of Swift Air.
What do you think about Dynamic trying to use the Eastern name? Should everyone just let the brand die?
Meet me in Hamburg
I’ll be attending the Aircraft Interiors Expo next month in Hamburg. It’s my first show, and I’m looking forward to it. But all this work of setting up meetings is daunting, so let me know if you’ll be there and have a product to pitch.
Skift Airline Business Reporter Brian Sumers [email@example.com] curates the Skift Airline Innovation Report. Skift emails the newsletter every Wednesday. Have a story idea? Or a juicy news tip? Want to share a memo? Send him an email or tweet him.