True, loyalty is expensive, but a status match is cheap, free even, as the loyalty you gained was not to the airline you’re matching to. And in this case, the OP hasn’t even flown them recently, I think that’s probably the rock bottom of zero loyalty.
Yep, thats true. I guess though in a case like this where the contender is trying to steal market share from the incumbent (_if_ indeed thats what they are trying to do) then you really need to entice good customers away from that incumbent.
The best customers to have are the ones who have status, because they obviously pay and keep paying. You don't only want unhappy customers moving across, nor do you only want the mobs of swinging voters who will go with the daily cheapest fares.
Its a big ask of a customer to ignore their long and hard built up status to try another vendor in the market where they will simply disappear back into the masses again - I'd suggest its too high a bar to expect those who are potentially going to become your _best_ customers to cross.
Status is almost always held year to year, if we ignore for a moment lifetime status (a related but probably different business case). Aiming at premium customers then, and throwing them a bone which at least puts them on an even standing to their current vendor will make the transition easier for those inclined to try and removes what I'd suggest is a _major_ impediment to these high value customers moving loyalty to you.
Worst case is that they don't like your product and move back to where they are comfortable. Its cost you almost nothing because if they don't like you then they won't be using much of the 'free' status services you have matched for them. If they do like your product then they need to get their bum on your seat otherwise their status with you will slip in the following year.
There is potential for annoyance with your existing customer base who have worked hard to get their status with you, and this shouldn't be ignored - but an acceptable middle ground that allows you to expand into premium product with premium passengers has got to be found else your strategy will only pick up 'churning' customers and will probably, overall, fail.