I recently planned a quick get-away trip and decided to check my airline rewards program points. I discovered that I had more than enough points to get to my destination. By using my cobranded airline card, I thought it seemed logical that I’d be rewarded for not only my loyalty to the airline, but for the cobranded airline credit card I try to keep near top-of-wallet. So I decided to purchase two tickets with hard-earned customer loyalty points.
When I redeemed my points, not really to my surprise, but definitely to my dissatisfaction, the flight and seat options made available through the airline loyalty program were actually inferior to those I could have purchased through standard channels. There were fewer flights and even worse seating selections. This was the reward for my loyalty? And being that I was already suspect of the restrictions and restraints, I didn’t think there would be such a dramatic difference. I actually felt betrayed for my loyalty and returned the tickets and purchased a better deal with my every-day bankcard, which offered better reward options and requiring less points and virtually no out-of-pocket expense
Clearly, the airline customer loyalty program is a “broken” model. Or is it? Of course, it’s not a coincidence that options are limited so that airlines can maximize revenues through standard bookings prior to filling award seats. However, denying the loyalty program account holder flexible options for past purchases threatens ongoing and repeat business…and it feels downright traitorous. Airlines have also been increasingly promoting the access to ‘any flight, anytime and anywhere.’ However, more recently, airline loyalty programs appear to be singing a new tune, one of which may be off-beat to the consumer and offers less value for brand loyalty.
Customer Loyalty is “Not” a Two-Way Street
In an ideal world, loyalty is a two-way street. However, according to information obtained by surveying 2,500 U.S. air travelers and published by Deloitte’s Travel, Hospitality and Leisure division, those who fly aren’t much more loyal to these programs than those who provide them. Look at these findings:
- 44% of business travelers and 72% of high-frequency business travelers participate in more than one airline loyalty customer loyalty program
- Only 44% of all travelers and 40% of business travelers fly at least three quarters of their air miles on their self-identified preferred airline.
- Participants “overwhelmingly…reflected the sentiment that airline loyalty programs were too commoditized.”
At the root of this apparent disloyalty is the reality that customer service and comfort, two major components on which the airline industry was built, have deteriorated to the point where everything is now fee based. Even changing seats, something that used to be free, now carries a fee. Add the long lines at security check points, the restrictions enforced at drop-off and pick-up areas and carry-on size and weight restrictions, and the disloyalty on the passenger side becomes easier to understand. It’s human nature to seek out a better deal, especially when an existing deal is less than satisfying.
One of the more recent megatrends is rewarding consumers for ticket value, or better yet spend amount, versus rewarding all patrons the same simply based on trip duration. This actually makes sense, as spend more, get more. As a consumer, I want to be rewarded more than the next guy if I paid more, and the airline should want to reward proportionately as well. However, when such change is coupled with further constraints, are airlines starting to take it too far.
Can Airline Loyalty Programs Change?
Making changes isn’t easy and can sometimes come with a high cost, as seen in the examples below:
- According to an article entitled, Value of Frequent-Flyer Miles Will Soon Drop for Delta and United Travelers, appearing on www.businessweek.com, both Delta and United are changing the rewards requirements it takes to find seating in premium cabins for international flights. The changes involve both first class and business class seating, and the changes are dramatic. United’s award levels are increasing as much as 87%. An example in the article states that while today a first-class seat on an international flight requires travelers to spend around 150,000 frequent flyer miles, on February 1st, that same seat on a United partner flight jumps to costing 280,000 miles. Fly United itself and the requirement rises from 150,000 miles to 180,000.
- That same article states that, as of June 1st, Delta is also raising requirements, although not as drastically. On that airline, a round-trip business class flight from the U.S. to Europe rises 25,000 miles from the current level, while similar flights to Asia increase 20,000 miles.
There has been consumer backlash in the form of lawsuits over such dramatic loyalty shifts.In fact, there are several noteworthy cases taking place, one of which has made its way to the U.S. Supreme Court. In that case, Rabbi S. Binyomin Ginsberg, of Minnesota, is fighting that he had his membership in Northwest’s program revoked for what the airline viewed as ‘abuses,’ one of which was his ‘…complaining and asking for compensation frequently,” to quote an article entitled, Frequent Flier Programs Undergoing Changes, which appeared on www.moneynews.com.
While airlines continue to restrict and devalue their customer loyalty programs, banks and credit unions are launching new travel card products that offer more value and virtually no restrictions for travel redemptions, and are competing against airline cobranded cards. The unknown is how big of a threat is this to the airlines? When other rewards currencies are used for airline purchases, the airline is filling the seat as a standard booking, and not a rewards seat that offers no incremental lift. However, the airline cobranded payment card may no longer receive use or be perceived as beneficial, which cuts into revenues the airline receives for the “sponsored” payment card. Some lingering questions still remain though. Will airlines turn-off consumers from their loyalty programs or will consumers simply adapt? Or better yet, will airline cobranded payment cards lose traction (and revenues) due to the overarching global loyalty program changes? And will the cost-savings yielded by the changes off-set top line losses? Airlines will have to uncover those answers, but with only four major U.S. carriers remaining, consumers may simply not have a choice no matter how many times the loyalty rewards programs change, and they actually may not care. Stay tuned for part two of the series in which some interesting consumer stats and viewpoints are shared.