AIRLINEINSIGHTSMARKETINGNEWS

Airline Loyalty Programs Of Tomorrow Part 1 – Yesterday And Today

Airline Loyalty Programs

Airline loyalty programs have been around since the 1950s when airlines like United Airlines started tracking customer travels.  In this series of insights, we will examine how these programs evolved over the past 65 years and discuss future innovations for them to remain relevant and effective in an age where loyalty is fragmented and increasingly hard to maintain.

Airline Loyalty Programs

History

The first modern airline loyalty program was created in 1972 by Western Direct Marketing for United Airlines who wanted to reward customers with promotional gifts and plaques for their patronage. Texas International Airlines (later merged into Delta Air Lines) was the first to use miles travelled as a base to track loyalty.  In 1981, American Airlines rolled out the AAdvantage® program and ushered in the first golden age of airline loyalty program. The airline welcomed an unheard of 130,000 frequent flyers and Admiral Club® members into the program at the same time.  United Airlines (MileagePlus®), Delta Air Lines (SkyMiles®) and British Airways (Executive Club®) followed suit soon after with their own programs to compete for customer attention within the next twelve months.

The Early Days

Before the existence of airline alliances and cross hotel/airline partnerships, frequent flyers could only accrue and redeem within one airline loyalty program.  AAdvantage made history again as the first to allow its members to accrue and redeem miles on British Airways flights from North America to Europe starting in 1982.

While most airlines adopted the method of allowing members to accrue and redeem flights using miles as the base denomination, Southwest Airlines’  The Company Club® (changed to Rapid Rewards® in 1996) used a simpler method by rewarding members one credit for each one way (including connections) flown and providing a free flight for every 8 round trips or 16 credits earned.

 

Southwest Airlines Company Club 1987 Advertisemen
Southwest Airlines Company Club 1987 Advertisement (Picture courtesy of Southwest Airlines)

 

With the creation of airline ealliances like Star Alliance (1997), oneworld (1999) and SkyTeam (2000), airline loyalty programs no longer need to negotiate access to each other’s program separately. By joining one of these alliance, airline members would allow its members to accrue and redeem across the board through a system integration.

For many years, airline loyalty programs were called “frequent flyer programs” as only flights flown were tracked. By the 1990s, many airlines started partnering up with other travel vendors like hotel chains and car rental companies for cross product marketing and promotions. Online shopping options, dining programs and unique experiences were added to the mix in the 2000s.

 

Today’s Landscape and Key Features of Airline Loyalty Programs

The top three airline loyalty programs today are American Airlines’ AAdvantage, United Airlines’ MileagePlus and Delta Air Lines’ SkyMiles. They combined to have close to 300 million members currently.

These programs have the following key features in common:

 

Airline Loyalty Program Key Features
Airline Loyalty Program Key Features (Infographic created by Experience The Skies)
  • Status qualification system based on a combination of segments flown, distance flown and dollars spent. The status earned from a specific period will enable the member to enjoy benefits such as priority check in, priority boarding, complimentary upgrade opportunities, lounge access, dedicated support lines, priority support during irregular operations, security line bypass, etc
  • Redeemable mileage system used to track to miles earned from multiple sources and redeemed as a currency for on board amenities, flights, car rentals, vacation packages, etc. All systems would have clauses to determine whether or when these miles would be expired
  • Marketing partnership with other vendors such as credit card companies, hotels, cars, tour groups, online shopping malls to earn or redeem miles from a variety of products and services

In the next part of the insight series, Experience The Skies will discuss the airline and customer definition of loyalty, current perspectives and the direction airline loyalty programs should take in the next five years.

 

About Larry Leung and Experience The Skies

Larry Leung is the Director of Research and Strategy at Experience The Skies. He is a certified avgeek, a public speaker and a dessert and design enthusiast. Contact him through LinkedIn or Twitter.

Experience The Skies is a consulting company based in Toronto, Canada that specializes in the travel industry with focus on the assessment, competitive analysis and development of loyalty programs, technologies, marketing, ancillary revenue solutions.Follow Experience The Skies on TwitterFacebookFlipboard, and Instagram.

 

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