In the year 2020, air travel seems to be among the worst affected businesses in the global pandemic. Many experts say that GDP can be correlated with the performance of the aviation industry. It is evident from the fact that the global economy has shrunk -4.9% to -5.2%. The logic is straightforward: people fly more when they have more money.
In 2020, market reports from all sources have presented grim descriptions for the airline industry.
Looking at the historical data, the aviation industry has never seen a calamity of this stature in its 110-year history of commercial operations. Creating innovative strategies for customer loyalty is one way to go forward. Loyalty programs are very popular in the airline industry because of their lucrative returns.
In a post-COVID world, the existing airline loyalty programs must be optimized, strengthened, and scaled to help the airline industry get back on track. Airline loyalty is hopefully the solution to get out of the 2020 dilemma in the billion-dollar aviation industry.
The airline loyalty programs, also called frequent-flyer programs (FFP), are offered by many passenger airlines to keep their customers loyal to them. All airline loyalty programs have a similar ‘earn and redeem’ design: Business travelers have to get a membership (mostly free) and earn miles and points every time they fly with airlines or use any of their partner’s services.
The perks are designed in such a way that they incorporate the entire ecosystem of air travel including hotel chains, airport stores and lounges, car rentals, taxis, restaurants, travel credit cards, and so on. As the entire ecosystem is so tightly connected, the loyalty programs in the airline industry thrive due to frequent fliers.
The aviation sector has generated massive profits out of loyalty programs. For example, United Airlines recorded $5.3 billion in revenues related to loyalty in 2019, along with its associate partners. The loyalty contribution amounted to 10% of total revenues at United. Similarly, other carriers such as American Airlines and Delta Airlines have created their own airline loyalty programs which contribute billions of extra revenue every year.
It is clear that the airline loyalty programs contribute a huge chunk of revenue for these carriers. Not only the big airlines, but their associate partners have also benefited from well-designed airline loyalty programs.
The loyalty program is a very important tool in customer retention. A well-crafted loyalty program eliminates the risk of losing your customers to competitors. If you take care of customer’s needs while also pampering them with extra perks, why would a customer choose your competitor over you? Customers are motivated to spend more when they feel rewarded for every action. Every purchase paves way for more purchases.
Glen Hauenstein, President of Delta Air Lines, believes that customer loyalty and customer experience is a part of the same cycle, and revenues flow once you know how to take advantage of it.
“Get your customers to fly with you often, and they will like you. If the customer likes you, they will join your programs and like you even more. If customers like you more, they will fly more. It is a continuous cycle.“
– Glen Hauenstein, President, Delta Air Lines
Delta Air Lines has mastered how to monetize its loyalty offering. With a well-designed airline loyalty program, Delta Air Lines has effectively increased its revenue by 19% in a single quarter. Delta also renewed its relationship with American Express in a bid to increase its revenues by 75% till 2023. Delta is proof of the concept that a loyalty program with an established strategy can offer great returns.
While carriers and its associate partners make a lot of money from loyalty programs, the benefits of airline loyalty programs are extended to customers as well. Since the airline is focused on retaining customers, it cannot afford a blip in customer experience. The competition among carriers to design the best airline loyalty program directly benefits you as a customer.
With loyalty programs, you have more bargaining power, convenience, and comfort. All you need to do is fly frequently with the same carrier and keep gathering your rewards, which is mostly converted into frequent flier miles. When you accumulate a sufficient number of miles to cover the cost of the ticket, you can earn a free flight through loyalty.
In a report carried by ValuePenguin, flyers need to gather between 5,000 to 147,000 miles to be eligible to earn an awarded ticket. However, the free flight in a loyalty program depends on factors such as distance between source and destination, the preferred class, and of course, the choice of carrier. For example, Hawaiian Airlines allows you to redeem your miles for as low as 7500 to the neighboring islands, while United Airlines require at least 10,000 miles, which is again determined by the distance.
If you are not a frequent flier or don’t stick to one carrier, it will be difficult to accumulate free rewards. In that case, you can use your loyalty points for other benefits such as discounts, free access, and premium upgrades on services of the airline and its associate partners.
Beyond free flights, there are 10 benefits of airline loyalty programs for customers:
Since you have joined an airline loyalty program, the airline already stored your information. Your airline loyalty membership will save you time and hassle when you book flights and during activities where you submit your personal information.
In many cases, you get special dedicated lanes during onboarding, providing you with elite status.
Inside the flight, a member of the loyalty program gets preferential treatment over a non-member. In exchange for reward points (miles), you can avail of in-flight amenities such as extra bags, in-flight purchases, or exclusive services. The amenities vary from carrier to carrier.
One of the benefits of the airline loyalty program is the choice while reserving seats. If available, you can get a preferred seat on priority.
Many airlines and hotels have exclusive partnerships as part of loyalty deals. You can get exclusive access to VIP lounges at airports in exchange for your airline miles or loyalty points.
A member can get varying degrees of perks while using the services of associate partners. The dollars spent at partner outlets can get you discounts or more loyalty points.
If you qualify, you can be upgraded to a premium or business class.
You can get free tickets to a concert, a sports game, or an event in a particular city.
In exchange for points, you can get the merchandise of the brand and its associate partners for free.
Some carriers such as El Al Airlines have an option for proposing in an airplane in exchange for loyalty points. Many other high-altitude experiences can be created with loyalty points.
There can be a healthy debate on what a great airline loyalty program should look like. But there is doubt that great customer service is at the heart of any loyalty program. An airline loyalty program must be a win-win for all stakeholders including airlines, associate partners, and customers.
Let’s have a look at the 10 best airline loyalty programs in 2020:
Airline: Delta Air Lines
Valuation: $25, 931 million
Airline: American Airlines
Valuation: $23, 440 million
Airline: United Airlines
Valuation: $20, 172 million
Airline: Southwest Airlines
Valuation: $8,013 million
Valuation: $7,418 million
Airline: Air France-KLM, Tarom, Kenya Airways
Valuation: $6, 675 million
Airline: Air Canada
Valuation: $6,331 million
Airline: International Airlines
Valuations: $5, 138 million
Airline: Singapore Airlines
Valuation: $5,032 million
Airline: Cathay Pacific
Valuation: $4, 701 million
Sooner than later, all airlines will take refuge in loyalty programs, which aims to offset the catastrophic impact of the 2020 meltdown to turn the tide. It is certain that the post-COVID era will see a stupendous rise in airline loyalty. The carriers who offer the best loyalty programs will gain a competitive edge.
If you are looking to create a loyalty program for the airline industry, Annex Cloud offers fully integrated customer loyalty solutions. For more information on Annex Cloud’s airline loyalty offering, contact our experts or request a demo now!