You don’t have to be a frequent flyer, a cabin crew member or loyalty provider to know that the airline loyalty industry has faced some serious turbulence of late.
First there was the American-US Airways merger that’s raised fundamental questions over how the two vastly different corporate cultures will combine, along with their respective philosophies as they relate to customer reward programs. Then there is Delta with a major announcement that its 32-year-old Sky Miles rewards program will be linked to additional passenger spend and pegged to ticket price costs – a new passenger hoop designed to better manage (read: limit) the number of travelers who reach elite status, thus, reducing airline costs.
When Kobie talks about loyalty programs engendering genuine customer relationships that inspire experience-driven outcomes, returning customers and improved ROI, somehow this is not what we envisioned.
And unfortunately, there’s growing public skepticism that airlines are only loyal to one thing: profits.
Thankfully in airspace littered with troubling news, there’s also some good news (even from Delta) – especially as it relates to Big Data metrics, analytics and omnichannel loyalty tactics.
Here’s one example: Alaskan Airlines landed a glowingly positive review in the New York Times. Compared to other carriers, Alaskan Airlines has expanded mostly without mergers and was profitable for 33 out of the last 39 years, achieving a record $316 million in net income last year.
Part of that success came in the form of strict cost savings. Not through tinkering with its Mileage Plan ™ loyalty program, mind you two-thirds of Alaska’s 730,000 residents are members of the program, which includes discounted tickets – but by using Big Data to their advantage. By tracking a wealth of minutiae such as the time it takes pilots to begin taxiing the airline discovered that cutting just one minute of taxiing time per aircraft saves $25 to $30 million in revenue. Now that’s what I call turning data into action. Revenue like that gives airlines more room to continue supporting their loyalty initiatives. That’s true even when faced, as Delta was, with rising loyalty program popularity that threatened to undermine Sky Miles’ profitability if something wasn’t done.
Smoother Skies Ahead?
Of course, Sky Miles’ changes aren’t all that’s happening with Delta. The airline recently announced a joint loyalty program with Starwood hotels, called Crossover Rewards. Sharing rewards between hotels and airlines is a great way to maximize benefits, streamline point accrual and drive loyalty simply by adding transparency to the process. The move follows the popularity of similar coalition programs like Air Miles in the UK and Canada and is also inspired by loyalty program partnerships between grocery stores and gas stations. In the latter example, a topic we’ve written about in a recent blog, Five Things Your Retail Customers Expect This Year, shoppers earn points toward discounted fuel based on the amount they buy. Since food and fuel are necessities, the programs’ symbiotic nature is encouraged.
For many, how people fly and where they stay is equally linked. While I applaud Delta for its actions in this regard, I’m surprised airline-hospitality partnerships aren’t more common. As we discuss omnichannel loyalty, an enterprise-level initiative to drive, track, measure and reward incremental behavior throughout the customer experience, going “omni” might also include omni-partnerships. In this advanced scenario, interdepartmental data will be de-siloed as will customer behaviors shared across verticals, improving loyalty management. While crossover loyalty programs are fraught with security risks, data deluge and a fear of “loyalty cannibalism” – where one company operates more parasitically than symbiotically – considering its success elsewhere, Delta shouldn’t be the only pioneer.
Sky High Pioneers
Speaking of pioneers from a pioneering state, I really hope Alaska Airlines will be similarly inspired by Delta’s doings. Regardless, both carriers, in separate ways, have advanced the airline/FFP conversation, demonstrating that the tables can be turned on frequent flyer program turbulence.
Can Alaska Airlines’ revenue success be emulated by other carriers augmented by analysis of Big Data? And will the revamped Sky Miles program be as successful as earlier iterations once everyone’s “jets” have cooled? Share your views and continue the conversation in the comments section below.