Experience The Skies revealed the history and current key features in part 1 of the Airline Loyalty Programs of Tomorrow Series (Refer to this post). In part 2, we will discuss 1. the airline and customer version of loyalty and 2. key features between loyalty programs between different types of carriers.
Airline Loyalty Programs
1. What Does Loyalty Mean To An Airline And A Customer?
“Loyalty – a strong feeling of support or allegiance.” Loyalty is something both airlines and their customers want from one another. The search for loyalty can sometimes turn into a love/hate relationship between these two parties as they have conflicting perspectives on what it means fo them.
Current Perspective – Airlines
Up until the early 2000s, most full service loyalty programs value customers who fly a standard set of distance (e.g. 100,000 miles on qualifying revenue flights) or segment (e.g. 100 segments) and reward them with an equivalent elite tier regardless of how much they spend on these flights.
Low cost carriers like WestJet Airlines, Southwest Airlines and JetBlue Airways transformed the qualifying criteria by using dollar spent as the base consideration for elite tiers to reflect how customers contribute to the revenue mix. Today, many of the full service carriers like Air Canada, United Airlines, American Airlines and Delta Air Lines employ a hybrid of both with a flight and spend component to determine loyalty.
While airlines welcome all types of customers filling their aircrafts, high on their list of the most loyal would be those who fly in higher priced fare classes, repeated customers at mid tier fare classes and those who book mostly in premium cabins.
Current Perspective – Customers
For decades, customers are trained to determine loyalty as a function of flying a determined set of distance or segments to receive an associated set of benefits. They believe that they should be treated the same regardless of how much they contribute to the airlines’ revenue mix because they have “flown enough”.
Customers on low cost carriers typically have a simpler system to navigate earning status, enjoying benefits and redeeming awards. Full service carriers with more total loyalty members have structured their programs with more rules so that higher spent customers are prioritized for more access to earn status and enjoy the benefits. Over the years, these rules can be seemed as cumbersome for both customers and airline employees alike.
2. Key Features Between Loyalty Programs Of Different Airline Types
Three airline types dominate the skies today: Ultra Low Cost (e.g. easyJet, Ryanair, Spirit Airlines), Low Cost (e.g. WestJet, JetBlue Airways, Southwest Airlines), and Full Service (e.g. Emirates, Cathay Pacific Airways, Air Canada). The line between them can get blurry sometimes but their loyalty programs have some standard features highlighted in the following table:
|Key Features||Ultra Low Cost (Base fare + a la cart pricing for amenities such at seat assignment, carry on baggage, check-in baggage allowance, highly restricted fare rules)||Low Cost (Only the highest fares may include seat assignment, carry on baggages, check-in baggage allowance, complimentary meals, priority services, or lounge access, highly restricted to fully flexible fare rules) ¹||Full Service (Many fares may include seat assignment, carry on baggages, check-in baggage allowance, complimentary meals, priority services, or lounge access, highly restricted to fully flexible fare rules) ¹|
|Status Criteria||No status tiers||Based on spent||Based on travel or travel+spent|
|Upgrade||No upgrades available||No upgrades available||Different upgrades structure based on status (e.g. complimentary, use miles, use certificates or miles+cash)|
|Award Flights||None||Simpler system (redeem points or miles based on market pricing or redeem points to get discounts on flights)||Redeem different quantity of miles for award flights based on geographic zones. May be use cash to supplement, as required. Different fee systems to modify or cancel flights.|
|Cheaper Fares For Specific Passengers||Join a club to get lower fares||Not available||May be available through Flight Pass (status members may get redeemable miles or status upgrades as part of purchase)|
|Lounge Access||None||Only selective fares or top tier status members will gain lounge access.||Complimentary access depending on airlines and status level.|
|Airlines Alliance Benefits||None||None||Varies depending on airlines|
|Partner Status (e.g. with hotels)||None||None||Varies depending on airlines (e.g. Select United Airlines MileagePlus members will have Marriott Rewards statuses)|
|Earn / Redeem points or miles on other products||None (possible to earn more point with a credit card)||Limited (mostly vacations and credit cards)||Biggest earn and redeem selections from different vendors|
1 – In today’s competitive market, many low cost and full service carriers began to offer “basic economy fares” that feature the same product and a la carte pricing as ultra low cost carriers.
The Changing Landscape
As the number of elite members swell over the years, airlines find it too costly to provide the same set of benefits to the most loyal customers (e.g. number of upgrades, priority treatments, lounge access, etc). In turn, customers find it more difficult to enjoy many published benefits and are fed up with trying to be loyal to one airline.
In the next post of the series, Experience The Skies would look into the gamification aspects of airline loyalty programs. Is there a happy medium between engagement and abuse?
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, Twitter or email.
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. Find out how Experience The Skies can assist in loyalty programs analysis by contacting [email protected] or follow other posts on Twitter, Facebook, Flipboard, and Instagram.