Weekly Aviation Insight & Review

Monday, May 20, 2013

The Second Half of 2013:
More Reductions In Capacity - And Hence, Passenger Traffic

Year to date, US enplanements are trending at about .08% above 2012 - which is essentially just "noise" - and, combined with a hard look at airline capacity planning,  is a harbinger of 2013 being a down traffic year.

Using Aviation DataMiner, we analyzed airline capacity currently filed for the second half of 2013. The data bears out the Airports:USA forecast of traffic being down for the full year:

Note that the 3Q is basically a wash with the same period in 2012. However, airports, concessionaires, suppliers and other entities should prepare for a significant year-over-year hit to traffic in the last quarter of 2013. Note that capacity offered will be a significant 5.2% down in the last three months of the year. This would also portend to represent reduced capacity in the 1Q of 2014 as well.

These data are consistent with the fleet renewal trends in the US airline industry - the seats just won't be there to support any material growth in passenger traffic.

But these shifts are not consistent across the country. We have found some airports with very strong growth potential, based on local economics and/or airline strategy shifts.

We'll be covering these futurist trends at the 18th Annual Boyd Group International Aviation Forecast Summit. We will be bringing attendees up to date on the dynamics that will shape 2014 and beyond. And this comprises just one segment of the industry's #1 event. Click here for details and to register. It's where aviation leaders gather every year.

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New Airport Board Workshop Planned For International Aviation Forecast Summit
Is Your Board Really Ready For The Future?

Next week, we'll be posting the events planned at the 18th Annual Boyd Group International Aviation Forecast Summit, hosted by BWI, November 3-5, 2013.

One of the standard features of the event are pre-Summit  workshops covering key hot-button areas of aviation. This year, one of these will be The New Airport Realities 101 for Board Members.

 This workshop is designed to bring both new and current members of airport governing bodies up to speed on the near-total changes in airline and aviation dynamics that will be emerge in the next 18 months. These will demand changes in how airports plan for the future.

In this Workshop, we'll be covering:

• The new realities airline strategies - pros, cons, opportunities and threats. Fact: the US airline industry is shrinking - in terms of capacity, fleets, departures, and markets served. So, it's important that every airport board be aware of this airline industry structure. Today, many airports are wasting thousands of dollars buying into enormous amounts of consultant-quackery.
  
  The workshop will discuss how to focus on what can be accomplished, where the threats and opportunities can be found, and how to manage community expectations. Retaining air service access is the key - because, regardless of the surveys done or the studies completed, the hard truth in that there are very few airlines left, and maintenance of service levels will be critical.

• Regionalization - working together is the only solution for the future, not only in regard to airline service, but in regard to being a compatible part of your region's infrastructure

• General Aviation - we'll review the key points of what to expect. (Because of the gravity of the changes in this area, we're offering a separate Workshop)

• Coming Regulatory Issues. It's often hard for board members to keep up with the range of issues that the government throws at airport management. In this part of the workshop, we'll go over the key issues facing airports, including potential security changes and the on-coming requirement for safety management systems (SMS).

This is just one of the incisive pre-Summit workshops we're planning for November 3. As of this date, we're also scheduling:

• Managing Information In A Flash Media World

• Understanding Airline Financials - Between and Below The Lines

• Doing Business With China - A Primer For US Airports & Aviation Companies

• The Other Side of The Airport - The New Realities of General Aviation

More detailed information will be posted next week. in the meantime, click below to reserve your space at the Summit.

Monday, May 13, 2013

 Emerging Forecast Trends - Disruptive

If you have not already done so, we'd invite you to register for the 18th Annual Boyd Group International Aviation Forecast Summit, November 3-5 in Baltimore.

We're going to be covering trends and issues that are entirely missed at other industry events.

Trends that will affect airports, airlines, suppliers, financial institutions, and even labor. Write this down: in five years, the air transportation system will be fundamentally and structurally different from today. Not just evolutionary shifts, but tectonic movements in the foundation of aviation.

We'll be covering trends such as the rapid emergence of Global Portals as centers of intercontinental commerce... the "vortex effect" of economic growth at these portals. Then there's the changes in how airlines view revenue streams - not passengers, but the flows of long green across multiple commercial sectors. New fleets coming on - 737Max, A-320NEO, Bombardier C-Series - will affect financial institutions - the residual value of that 737-700 is going to be really problematic on the balance sheet.

Then there are the new dynamics facing the airport industry. The emergence of Global Portals will affect how airlines will - and, in many cases, will not - serve mid-size and smaller airports. Connectivity to the globe will replace the need - and the possibility - of that service to San Jose, or Orlando, or Kansas City. Speed date meetings, séances, and the air-service-cocktail-party-circuit will need to be replaced by hard economic planning to adjust to the new and re-focused air transportation industry. For US airports, the focus has to shift to a wider revenue perspective.

Just a couple of areas that will be extensively covered at the Summit:

US Traffic: Sliding South

The Airports:USA 2012-2022 enplanement forecast is undergoing further revisions. Downward. And that's likely to be accelerated by the time of the Summit.

Initially, it appeared that US airport traffic would be down 1.5% - 2.0% in 2013. Given traffic and capacity trends in the 1Q of 2013, we're now seeing the potential of as much as a 3.0% to 3.5% decline in passenger traffic.

Not a decline in "demand" per se. A decline in the seats that airlines are going to offer, based on fleet and schedule trends. It is possible that national enplanements may drop to as low as 720 million  - somewhere near 30 million fewer than in 2012.

Competitive Changes In Turf. We're paying close attention to Atlanta, where the competitive outcome of the AirTran/Southwest/Delta competition is far from clear. Southwest's new plan for ATL indicates a need for significant stimulation in local O&D. How they engineer system flows into Hartsfield will be critical. Other hot-button points are PHL and JFK, where the eventual settling of the AA/US merger could materially shift international traffic flows.

Fleets: Changes In Fundamental Airline Strategies

Clear Some Additional Space In The Desert. The trend to watch will be how airline systems shift fleets and capacity. It's now also clear that there will be an accelerated shift out of 50-seaters by the end of 2013. (Remember, it was Boyd Group International forecasts that first identified this trend - a decade ago - back when "everybody knew" RJs were the long-term wave of the future.)

What to watch: it's not the "small markets" that will be heavily effected by the 86-ing of 50-seaters. In fact, the effects will be barely noticed in most places. Today, the usual suspects in the consulting and academic sectors are predicting hard time for RJ-centric airports. In many cases the opposite is true. Not enough to put year 2013 enplanements outside of a bracketed number, but at some mid-size airports, there will be growth as more seats come along with larger jets.

Two reasons... First, in many applications, 50-seaters are no longer economically-adequate or sized properly, and airline systems are leaving money on the table until they can shift into larger units of capacity. Second, these are not "regional" jets - they are smaller units of capacity. Nobody will notice, for example, when United drops that mid-day 50-seater rotation between Denver and Phoenix.

Another trend is the less-than-expected demand for super long-haul fleets. The real-world airline strategies and economics may not be that compelling. That's a finding of the Boyd Group International Global Fleet Trend & Demand Forecast. There should be some interesting interaction on this with the manufacturers during the Fleet Forecast Session at the Summit.

Alliances: Promiscuity Is Spreading.

The Qantas/Emirates deal last year signaled that maybe alliances are not all that much of a bond. To be sure, Qatar is just now joining oneworld, but the message was clear... cooperation can cross alliance boundaries. Of more interest is the code-share between Virgin America and Singapore Airlines. As a Star Alliance partner, SQ connects to United - and now to VX, too.

Global Portals - Get Connected Or Lose Out

A real challenge for communities across the US will be to re-vision the role of their airports. The public needs to be enlightened to the hard reality that connections to the global economy are far more critical than getting those elusive "low fares" from airlines that in reality don't exist, anymore.

The entire structure of how air trade is accomplished will shift focus to intercontinental cross-flows. Major points such as ATL, DFW, YVR, FRA, PEK, etc. will be the centroids of air transport. These are the points where economic growth will emerge - and in the future, community air service efforts must shift to building connectivity to the Global Portal network. No, not cheap fares. Access to the world economy is the future.

These just scratch the surface of what will be coverd at the Summit. And, it's in addition to the insights from airline and aviation industry CEOs and executives. For more information on the Summit, and to reserve your space, click here.

Without question, it's the one event that really does deliver new perspectives and new visions of the future. Join your colleagues in Baltimore, November 3-5.
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Monday, May 6, 2013

The LCC & "Low Fare" Diversion...
There're A Lot More Important Needs Coming Up

It's a common headline across the nation:

"Task force formed to attain fair airfares!" Or, "Community leaders join forces for affordable air service!" Or, "Plans drawn up to lure a low fare airline." Or, "Funding committed to attract Southwest!"

There's noting wrong with civic boosterism. But within hard and easily-identified realities, a lot of these well-meaning crusades have about as much chance as a prime rib in a shark tank.

In most cases, these groups would do better to consult the nearest Ouija Board, or maybe a Witch Doctor. A séance with a spiritual moose would be just about as effective. Here's the economic truth: that low-fare carrier probably isn't coming. And if it does, it will be focused on a couple of key leisure routes, period, and they'll need a whole lot of gelt to make up for the losses it will take.

Meanwhile, the global economy continues to expand.

It's understandable that communities would pursue such "task forces" and the like. They are not experts in the realities of the airline business. But most of their hired "advisors" are - or should be. Some of these "advisors" sell so many of these pipe dreams, they might want to join the plumbers' union.

Reality:: A community's "need" for lower air fares is not the same as an economic opportunity for an "LCC."

Reality: The future is the global economy, not just "fair" air fares to Florida.

Southwest? JetBlue? Spirit? All nice objectives. But what about Star? oneworld? SkyTeam? Or access to the intercontinental systems of Air China, Lufthansa, and TAM? These are also objectives that are important for every community. More important, actually, than snagging an elusive LCC.

Let's take a righteous look at reality...

 Just Focusing On An "LCC" Is Limited Vision. It's very unfortunate that communities get misled away from the increasingly-important goal of maintaining and expanding air service access, to chasing low fares - the traffic volumes for which usually don't exist. Furthermore, just having a so-called "low fare airline" in town is no hard guarantee of universal low fares.

Boyd Group International just issued its Traffic Snapshot of the 4th Quarter of 2012. Using the core metric - which is the fare cost per mile for air service at the top 100 O&D airports, the data show clearly that just having a so-called "LCC" in town is no guarantee of across-the-board low fares.

Here are the top ten highest air fare cost  of the top 100 O&D airports:

Read 'em and weep - with the exception of CVG, (which just got one-a-day flights from Frontier) every one of these airports had LCC service. Some, a lot of LCC service - at Tulsa, for example, Southwest has almost 40% of the traffic.  

(Dallas/Love is an outlier - the Wright Amendment has restricted flying to short-haul markets. As this law continues to be lifted, the fare cost per mile will drop.)

But the point is clear: deal with it, air travel is not cheap, and there are no LCC silver bullets..Furthermore, there are not many "LCCs" to chase after, and even those may be out of market reach. That's a point that a lot of communities are not made aware of before the silly "surveys" and "studies" are done and paid for.

Bottom line: For most communities, regardless of the civic gymnastics, the "LCC solution" really does not exist any longer. The number of such airlines are few, and the options where they might be interested in taking subsides are very limited. The fare dragon lives.

Give Us A  Call. You Need To Plan Beyond Orlando Nonstops. To be sure, seeking lower costs of air travel is positive.

But today, in a shrinking airline industry, the new imperative is to assure that the community maintains and enhances access to the global economy. There are whole new measures: How much service from the three global alliances? What about your airport's "China-access" level? The number of airline hubsites accessed? Load factor choke points? These and other key factors are what create and protect economic viability, not a one-a-day flight to Orlando.

This is the professional advice and guidance Boyd Group International provides its clients. We recognize that cost of travel is important. But we never lose sight of the longer-term strategic objectives that every community must have as a critical part of its air service program. It's much more than whether the Mertz family can get to 'Vegas on the cheap. It's also whether Mr. Chiang and his team can get to the region from Shanghai to establish and maintain the white goods factory.

If your airport and community is interested in planning for the entire air service future, give us a call. Our team goes beyond just the obvious, and can develop a plan to keep your region competitive with the economic needs of the global economy. Air service planning is a lot more than just "luring" Southwest.

The 4th Quarter Airport Traffic Snapshot is now available and can be viewed and downloaded by clicking here.

 

Monday, April 29, 2013

Anybody Bother To Read The Numbers?

Hooray! The Sequestration Curse has been lifted! Ding Dong The Delay Witch is dead!

Congress has saved the day! They've passed a law that will shift $253 million in the FAA budget to air traffic control.

Whew! that was a close one.

Saved By Comparative Chump Change. What's "close" is apparently the relationship some in the media (not all, some) have with this Administration. Do notice the near-total lack of investigation of the data and the claims put out by the DOT Secretary. It sure looks like they're covering this story verbatim as fed by the Administration. Just a couple of minutes using a $10 calculator would have blown this sequestration scam into the cold light of day.

Do the math. This $256 million that is being taken from other programs represents just 1.6% of the total FAA budget. And, they tell us that this comparative chump change is all that's needed to bring ATC back to its traditional levels of semi-efficiency. Remember, too, the FAA still has more money in its budget than in 2008 - over a billion dollars more.

Like good little followers, we're supposed to believe that do a $253 million accounting entry, and, poof! all is well. All of this potential chaos, we are to believe, was entirely the result of a funding cut that, by the way, is just half of the amount that Congress right now wants to spend on more M1A2 tanks.  Machinery, by the way, that the Army doesn't want.

Damage Control. The fact that major congressional dragons on both sides of the aisle revolted against the White House is not lost on the FAA Administrator and the DOT Secretary. Suddenly, there seems to be sudden "research" from some sectors of the media, implying that there really weren't so many delays caused by the FAA cuts - it was being overplayed by the airline industry for their own selfish gain.

 It's just curious that this came out only after some in congress were claiming that the FAA cuts were causing massive delays at big airports. The questions were fairly similar - "Yes, but there are always delays," the reporter would ask. "We just don't really know whether the FAA cuts really had much to do with it, do we?"  Gotta wonder where this suddenly came from.

What is left out is that it was the FAA Administrator and The DOT Secretary who for weeks were confidently predicting system meltdown due to the "necessary" sequestration cut.

The FAA Administrator's Job: Protect Air Commerce. There comes a time when it's incumbent to call dishonesty  for what it is. This whole sequestration thing is a political football game at the expense of the public.

This is not just some difference of opinion. It's not about the "blame game" - which is the cheap cop-out from folks who don't have the intestinal fortitude to stand up and call a scam a scam. It is the responsibility of the FAA Administrator and the DOT Secretary to do all necessary to protect the viability of the air transportation system. They did just the opposite. A 4% cut in the FAA budget is not "deep" as was dishonestly portrayed by the White House press secretary. There was no hard legal requirement for LaHood to have cut controller hours. It was a subjective decision - and one that was intended for political gain.

But now we have what represents 1.6% of the total post-sequester FAA budget shifted to ATC system, and all is back to normal.

Including the traditional lapses in integrity inside the Beltway.

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Monday, April 22, 2013

Airports:USA Enplanements Forecasts
Revisions To Reflect FAA-Inflicted Traffic Loss

In light of the Administration's decision to use the air transportation network as a political chip with the unnecessary constriction of the air traffic control system, we are currently reviewing the negative effect on airport enplanements.

Prior to this stunt on the part of the FAA leadership, traffic for year 2013 was expected to be at best flat with 2012. As it stands now, it is a certainty that airlines will need to cut flights to accommodate the intentional and entirely unnecessary reduction in ATC throughput planned by LaHood and the FAA. (See below for facts & details.)

If this program is implemented, we will monitor the effects over the first several days, and revise the forecast as necessary. The current low (worst-case) forecast is for a 4.5% decline. If the Administration carries through on is threat to hamstring the system, the baseline (most likely) forecast will probably be closer to the low forecast, but until the damage is known, the only hard projection is that airports had best plan of material reductions in traffic.

Airports:USA is the only comprehensive enplanement forecast accomplished independently in the private sector. Because it relies on real-world airline industry and economic factors, since 1992, it has been far more accurate than FAA forecasts.

As a new feature, Airports:USA forecast will be available on-line starting May 15 as an option for Aviation DataMiner subscribers.

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FAA Sequester Cuts - Welcome To PATCO II
The Administration: Politics First. People & Honesty, Second.

Anybody remember the PATCO strike of 1981?

Controllers walked off the job, demanding to be paid rates similar to airline pilots. The US airline industry was devastated. ATC thruput was constricted for months, while the Reagan Administration rebuilt the staffing levels. Reagan made no friends in the labor movement, but he did take immediate action to protect the public.

Fast forward to today. There's a planned cutback in FAA staffing that the FAA Administrator and the Secretary of Transportation promise - yes, promise - will snarl air traffic. They'll see to it.

Just like the PATCO strike, damage is being intentionally and unnecessarily inflicted for the purpose of parochial gain. PATCO wanted more money. The Obama Administration wants to inflict as much pain as possible on the public to "prove" that sequestration is a disaster, and more taxes are necessary.

 There will be lots of hand-wrenching news stories this week, lamenting how sequestration is harming America.

The truth is that there is no reason whatsoever for these cuts.

In Short Supply: Truth. Let's repeat the facts - the ones that a few veneer members of the media are intentionally ignoring, lest they make the Administration look bad. For the FAA, the sequestration reductions equal only about 4% of the agency's total 2012 budget, which was an increase from the 2008 budget. And after the cuts, the FAA will still have a bigger budget than in 2008, and today, there are one million fewer airline departures.

Let's see...More budget than 2008, and less airline traffic in the sky. Funny, does anybody remember LaHood before now claiming that towers would need to be closed and controllers laid off? Nope.

Draw your own conclusions. And aviation industry leadership should not pull any punches. This is not a drill.

It really is an attack on the economics and health of the air transportation system and the millions of jobs it supports, The "crisis" is not financial.

It's one of integrity.

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Monday, April 15, 2013

More Air Commerce Taxes: More Money For Hucksters

Government waste. The way to fix it is to give it more money. Or, that seems to be the accepted philosophy.

Gotta love the self-righteous din about making sure certain sectors of society start to  "pay their fair share" of taxes - which really translates into "hit up anybody with a lot of money and no political juice." Seems that  nobody dares to ask the question, "How's all this loot being spent now? And what to you plan to do with the new bucks you'll get from these taxes?"

Nowhere is this more obvious than in air commerce. Apparently, the flying public is one of those freeloading fat-cat sectors that needs to be brought to tax-justice. Currently taxed higher than booze, air transportation is one of those easy targets for the ruling elite to pounce on in an attempt to keep the current sloppy federal system in operation.

The Administration is planning to nail air travelers with billions more in taxes, without one single statement about how it will be spent. Not "where" it will be spent - that we know - but how. Remember,the FAA and TSA are not exactly paragons of efficiency, and just gouging the public for more money to support sloppy spending is nothing more than a operationally-corrupt government extorting money from the citizenry to keep a corrupt system in operation.

Raise the "security' fee? Great. So, is anybody asking about what plans  this Administration has for assuring that there will be no more fiascos, like buying screening equipment that doesn't work? Or $50 million for new uniform designs at the same time Homeland Security is trying to make us believe there's no money in the till to fully staff at peak periods? Or having massive security failures tolerated at places like Newark? Or avoiding enhancing real security across the aviation system, not just looking for pointy objects?

More money for the FAA? A $100 tax per departure. Nice extortion, especially when NextGen is years behind and the Administration wants to play politics with safety in planning to close airport towers. Again, even after the "necessary" (and they are not) sequester cuts from ATC, the FAA will still have over 9% more money than five years ago, and one million fewer flight departures. Anybody want to ask about that?

 The fact is is that none of these new fees and taxes are earmarked to improve anything. None are earmarked to enhance efficiency. They are just intended to flow more dollars into shoring up a collapsing system. Government waste? Heck, one of the top Republican leaders in the Senate has blown that off, saying it's just a minor issue.

Sure, Senator. That's as ridiculous as claiming that extortion, bootlegging, prostitution, and protection rackets were just a minor part of the Capone empire, too.

To buy off the airport industry, the Administration is proposing a big increase in the PFC cap, hoping that the alphabet groups in Washington will go along to get more PFC revenue. But there is a wider issue - these taxes will - write this down, will - torpedo air service expansion, particularly at mid-size and small communities.

Higher PFCs are, as a practical reality, needed. But this Administration bribe-for-support (and that's exactly what it is) will come at a high price for airports. Supporting corrupt programs to get one's objectives is not consistent with integrity.

Therefore, every airport in the USA should be loudly opposing this easy-tax approach. The pompous congress members who squawk about needing more air service in their states and districts who don't come out four-square against what the Administration is planning are - deal with it - hypocrites who put party ahead of right-and-wrong.

Again: when a political hack endorses more taxes on aviation, ask a simple question:

"What are you going to do to improve the system with our money?" Chances are, you won't get a straight answer.

Just like with any other huckster scam.
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Monday, April 8, 2013

The Rite of Spring Returns

There's nothing like taking freely-available government data that apparently aren't fully understood, repackaging them with a mystical, not-to-be-questioned voodoo formula, and sending it to the media as if it came from Madame Curie after discovering Radium.

Yessir, it's another part of the rite of spring. It's as regular as beer bashes on Daytona Beach, and about as intellectually exciting. Yup, it's the annual "Airline Quality Report" issued from the halls of academia.

Now, we can brace ourselves for a couple days of oh-so-serious network correspondents reporting on how "airlines" are treating passengers, and maybe some fun subjective conclusions that are not much more than vague opinions. 

Message To Academia: A "Certificated Carrier" Is Not An Airline. There's a reason the word "airlines" is in quotes, because this "AQR" isn't really an airline-quality report. It's a certificated carrier report, which as such is pretty useless to the consumer-on-the-street trying to make a decision on which airline is better or worse.

Major airline systems today are generally comprised of schedules operated by several certificated carriers and it is unfortunate that the document doesn't know the difference, apparently. It's like reporting on the on-time performance of airplanes leased from GECAS or ILFC. Nice, but reflective of nothing.

That's what's fatal to the utility of this annual AQR - the data regurgitated aren't related to airline brands - like, the entities that consumers buy tickets from - but focus instead on "certificated carriers" - many of which do no  business as airlines. Like SkyWest. Mesa. ASA, etc. They don't sell seats. A consumer cannot book a flight on them. They typically do not make their own schedules. They usually have nothing to do with pricing. They make minimal decisions, if any, regarding specific service policies. They just lease the planes and crews to major airline customers.

It's usually the operational decisions by the major carrier that determines the "quality" of the service - like turn times, customer amenities, off-schedule service policies, etc.  And in most cases, these certificated carriers provide lift to more than one major airline customer. SkyWest flies airplanes under contract for American, Delta, United, and Alaska, for starters. So repeating BTS data on SkyWest tells the consumer nothing useful in regard to specific-brand airline quality.

Furthermore, a passenger journey on Delta or United or American or US Airways might entail riding on several certificated carriers. So, unless the data are aggregated based on the brand that consumers buy from, the data - whether in raw BTS form, or filtered through some magical mathematical formula - are pretty useless.

Keep in mind, too, that the data this report pulls from the BTS website - as if it came directly from Delphi - is not complete. Some carriers, such as Air Wisconsin, which operates over 70 aircraft for US Airways, do not report.

Certainly, it is great to have reviews of how airlines are performing. But it's incumbent that the foundational data be fully understood before taking pen to paper. The AQR only gets half way there.

But the media will eat this up, particularly if it's a slow news week.

It's just another rite of Spring.

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Monday, April 1, 2013

Frequent Flier Programs Today...
Perks, Or Just Hassle-Avoidance Mechanisms?

At the 17th Annual Boyd Group International Aviation Forecast Summit, hosted by BWI Airport November 3-5, one of the key Forecast Mapping Sessions will review the future emerging trends in the airline industry. We'll be reviewing how fleet decisions, consolidation, contracting route systems, and other dynamics will shape how and where carriers apply their resources.

First, It Was Free Travel. Now, It's Just To Avoid Travel Grief. One of the areas we'll be reviewing is how airlines, in a world of very few brand choices left, will address consumer loyalty, and how that will determine the passenger segments they will focus on.

A critical part of this is the near-total transformation of "frequent flier" programs from rich incentive systems designed to win new business, into essentially brass rings that consumers had better reach for on the air travel merry-go-round, lest they find themselves relegated in to boarding in Group 13 with the high school field trip. 

The point is, particularly for domestic travelers, a consumer's status as a frequent flier member simply does not have anywhere near the value to the carrier as it once did. That's not due to any sinister plotting on the part of the airline industry - it's just simple economics. Airlines do not need to give a lot of stuff away anymore to get travelers to fly.

Things Have Changed In The Last Three Decades. In 1981, American Airlines implemented its "AAdvantage" program, which promised free flights for customers who flew the carrier  a specific number of times, measured by nonstop route miles. (Contrary to popular lore, American didn't single-handedly dream up the idea, and theirs was not the first in the industry - commuter carriers had implemented such "fly ten, get one free" schemes in the 1970s.)

But American was the first major carrier to see the value of frequent flier programs, and the rest of the industry quickly followed with their own. Back then, things were different than today.

First, airlines had plenty of extra seats - a 65% load factor was considered to be strong. Back then, there wasn't much to keep consumers - particularly high-value business travelers - loyal to one airline or another. Back then, the incentive of free travel could -and did - shift brand loyalty from another airline. Back then, carriers had plenty of seats to dedicate to award travel. Back then, it was simply about getting more consumers to shift from TWA or Eastern or Northwest to AA, with the promise of free flights. Back then, it was just membership, not a dizzying array of program levels, apparently named after the mineral chart in Chemistry 101.

Get Ticked At Your Carrier?. Great. Start At The Bottom Rung At Another. If There Is Another. Fast forward to today. The entire raison d'être for frequent flier programs has changed. Or, maybe more to the point, it has essentially disappeared.

Unlike 1981, there aren't a lot of airline choices out there, anymore. Unlike 1981, airlines are successfully selling most of their inventory, and don't have a lot of extra empty seats that need filling, based on the promise of an eventual free flight. Unlike 1981, there are four major airline systems left, each has a strong hub connect system.

So it's no longer an open field in regard to winning over brand loyalty from another airline. It's the marketing version of trench warfare - without much shooting or change in turf. The top-rung frequent travelers are pretty much locked in to one program of another. If they want to shift to another carrier, they start at the bottom, and that means a lot of flights with no perks at all, until some status level is reached at the alternative carrier. If there is one.

The "Perks" Aren't That Great, Anymore. That represents a situation where those gold-platinum-diamond-plutonium level frequent fliers are becoming more like captives than exalted customers. If they don't qualify for whatever level by December 31, it's no more board early. No more chance at a first class seat, which is less and less likely, anyway. And a good chance of no overhead space left.

One other change is that the lure of a free flight is getting less and less exciting. Cashing in miles for a trip to just about anyplace more exotic than Omaha typically entails a web-based magical mystery tour to find flights that are within a baseball season of the desired departure date. And even then, finding that the only available routing from Denver to Honolulu might include connections at LAS, LAX, and SEA. Again - today airlines just don't have a lot of extra unsold seats to give away for frequent flier awards.

Oh, Yeah. That Free Flight Isn't So Free, Anymore. It's becoming more and more common that using FF miles isn't "free" anymore. Carriers are tacking on fees in addition to just using miles. On one carrier, the simple upgrade of a US-China flight from a business class fare (which clocks in at $7K to 9K)  to first class, entails 30,000 more miles, plus another $300. Each way. Seats are not materially different, and even if the food is better (and it's probably the same entree-on-a-casserole-dish as in business class) that's pretty expensive vittles

Exclusive Perks? Now, The Great Unwashed Can Buy Them Ahead of You.  Another fun point: the "perks" that are offered to the top-rung program members aren't so exclusive, nowadays. Want early boarding (to assure a carry-on space in the overhead)? At most carriers, the schmiel paying a dirt-cheap fare can get that perk for an extra fee. A seat in the "premium economy" section? That gold-level status is matched by that same flies-only-once-a-year schmiel for an additional $25 bucks, or whatever.

How 'bout first class upgrades? Less and less potential. Some carriers often have these seats on sale, or available for not-too-exorbitant upgrade fees. So that premium status takes a back seat - literally - to the non-frequent traveler willing to cough up another hundred bucks to get to 'Vegas.

Point: airlines have discovered that those free perks offered to the mineral-level FF program members are a rich source of ancillary revenue when offered to the masses traveling in the economy cabin.

It's not anything personal - it's strictly business. The top-level FFP members are not going to bolt to another airline - in most cases, there isn't one. So, those premium economy seats, the first-class upgrades, the board-early privileges are easily turned into extra revenue offered to anyone. Given this situation, airline management would be irresponsible for not doing so.

They aren't Mother Theresa. And this isn't 1981, anymore.

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