Why Airline Loyalty is Not Up in the Air

Jan 21, 2013

Christopher Elliot, author of the book Scammed: How to Save Your Money and Find Better Service in a World of Schemes, Swindles and Shady Deals, recently wrote a rebuke of airline loyalty programs in the Huffington Post. Considering Kobie’s work with Hawaiian Airlines and other travel and hospitality brands, I was perturbed by his conclusions and feel others may be wrongly persuaded by his argument.

Elliot discussed how airline loyalty programs are only loyal to one thing – the airline and not the customer. He mainly criticizes airlines for turning features that were once considered standard – e.g., a certain level of seat comfort – into perks that only frequent fliers can access. He also points out that loyalty programs’ fine print gives carriers carte blanche to make any changes they want if they deem a program “too generous.”

Of course, he’s entitled to his opinion, but here’s mine: Frequent flier programs are very much the precursors of modern loyalty campaigns across multiple industry verticals. They’re over 30 years old with cross-brand membership in the millions. Some 99% of business travelers, according to a recent study by Frequent Business Traveler and FlyerTalk, are members of an airline loyalty program. So if something was grossly amiss, don’t you think there would have been a backlash by now? Travelers would have long since cried foul and federal regulators would have stepped in.

The reality is that US businesses spend $50 billion on loyalty programs, which can generate as much as 20% of their profits, every year.

Loyal to Loyalty – And to Airlines

If designed and executed correctly with the right technology and tools operating across multiple channels seamlessly in real time, loyalty programs remain a popular way for consumers to realize value.  More than that, a truly great loyalty program rises above the points-for-rewards stereotype and delivers experiences. That’s something that airlines, like other verticals, are striving to achieve. It isn’t always about a discounted flight or extra leg room – although those perks are nice too!

Regarding the “too generous” claim? That’s up for debate. Airlines aren’t magicians and loyalty program benefit changes are a measured response to real economic challenges. There’s a reason why so many airlines, legacy carriers and LCCs alike, have merged, filed for bankruptcy or folded completely in the last decade.

Can an airline’s loyalty program fine print be a transparency nuisance? Sure. But that can be true in any industry. It’s a topic we addressed as it related to Citibank when two customers sued the bank on the grounds that it employed deceptive trade practices by not disclosing that frequent flyer rewards could be taxed. You can read the post from Kobie’s President, Michael Hemsey here.

Ultimately travelers remain loyal to airlines because they’re growing more customer-aware by the day. New technologies and expanded advantages are pushing the boundaries of what’s considered a loyalty program perk. Such innovations were on display last year at Mega Event in San Diego. Virgin America, for instance, offers priority check-in, security clearance and boarding, free checked bag allowances, digital/social rewards and an expanded purchase window for an eight-seat first-class section and complimentary best seats in the main cabin.

With expanded offerings like these, it’s no wonder why airline loyalty programs are soaring to new success, grounded on driving the ultimate passenger experience. The team at Kobie and I have written about this extensively and will continue sharing insights into best practices and omnichannel approaches for airline and travel brand loyalty programs in the coming year.