创建服务中心发展的灵活性概要1.doc

Creating Flexibility in Service Center Evolution Examples from frequent flier program, a revenue center in the rise 创建服务中心发展的灵活性 从飞行常客计划的例子,一个收入中心的崛起 Creating Flexibility in Service Center Evolution Examples from frequent flier program, a revenue center in the rise Yee-Tien Fu Department of International Business National Cheng-Chi University Taipei 11623, Taiwan, ROC yeetienfu@ Abstract—We study the evolution of popular frequent flier program,its role shift from a cost center to a revenue center. We also propose standard and creative ways to tackle the over-issuance problem and ways to facilitate the flexible redeem of the points to enhance customers’ utility and loyalty and to lessen the over-issuance problem.Keywords-service center; frequent flier program; airlines; flexibility; real options; subsidization; contingent claims; mileage derivatives I. INTRODUCTION Frequent flier program was a creative design, introduced in1981, and had propagated since then. The program allows airlines to transform the unsold seats, often in a costless way, to customer loyalty.Remember that the opportunity cost of an unsold seat is the sale price of a ticket, and the marginal cost of selling an unsold seat is nothing but a packet of peanut and a bottle of coke. However, over many good years, airlines have gradually transformed the cost center to profit center, by selling the miles, at the price of one to three cents per mile, to credit card issuers and hotel chains. The revenues received from mileage sale are reported to be 800 millions and 436 millions in 2007 for United Airlines and Qantas Airlines, respectively. On average, the miles sold to the third party now count 50% of the total issuance. Not to our surprise, due to the over-issuance and limited available seats on each flight, customers had started to feel the pinch of fewer designated seats on desired flights, escalating fees for seemingly free tickets, and quicker expiration dates for miles. The airlines, at the same time