In 2024, the airline sector faces a significantly altered era due to the global COVID-19 pandemic. According to a recent study by IATA, there has been a significant resurgence in passenger numbers, with an impressive increase of 16.6% in revenue passenger kilometers (RPK) from January 2023 to January 2024. This recovery marks a critical milestone, reflecting the industry’s robust rebound as it approaches and even surpasses pre-pandemic levels. For airlines, whose profits suffered during worldwide lockdowns and pandemic restrictions, this is excellent news. To sustain and enhance this growth, industry stakeholders are turning to innovative strategies, as detailed in “Deploying Next-Gen Airline Loyalty Programs: A Complete Guide.”
Despite the changing landscape and the evolving needs of travelers, airlines continue to prioritize loyalty by adapting their programs to be more flexible and resilient. They are enhancing loyalty programs by offering more redemption options, extending elite status, and providing personalized rewards. These efforts demonstrate airlines’ commitment to retaining and engaging members, ensuring loyalty remains a cornerstone even amidst new challenges.
What are Next-Gen Airline loyalty programs?
Airlines use frequent flier programs (FFPs), often known as airline loyalty programs, as an incentive system to reward customers, encourage repeat business, and enhance customer loyalty. The original concept was clear-cut and easy to understand: the more people fly, the more miles or points they accrue, and the more benefits they receive.
Up until recently, the number of miles flown determined how many extra points might be accumulated. To obtain more points, some travelers took advantage of this loophole and took lengthier, even multi-stop flights—which were also typically less expensive—instead of short, direct flights.
This practice led to a significant alteration in the structure of Frequent Flyer Programs (FFPs). Airlines recognized the need to address this issue and transitioned to revenue-based models, effectively putting an end to the exploitation of frequent flier miles. Most airlines adopted this new approach, which not only curbed the cheating but also aligned with their sustainability goals by discouraging unnecessary flights or “mileage runs.”
The majority of FFPs available today are revenue-based, which means that points are earned based on the actual amount spent by members. In this manner, airlines not only stop cheating but also move closer to their sustainability targets by discouraging pointless flights, or “mileage runs,” and giving priority to passengers who purchase first class and fly for business.
Benefits of Airline Loyalty Programs
1. Free Flights and Upgrades: Through airline loyalty program deployment, customers or corporates can accumulate points or miles that can be redeemed for free flights or upgrades to premium cabins, which can improve the overall travel experience and reduce expenses more so, in case of group travels.
2. Priority Services: Members of loyalty programs frequently receive priority services, which lets them get through the airport quickly and spend less time waiting. These services include expedited boarding, check-in, and security clearance.
3. Exclusive Lounge Access: Many airline reward programs include free access to airport lounges, which provide a restful and productive setting before travel. These lounges include facilities like comfortable seats, free snacks, meals and beverages, Wi-Fi, and more.
4. Bonus Offers & Discounts: Members of loyalty programs are eligible for exclusive deals, promotions, and discounted prices that aren’t available to the general public. These offers enable members to save on future travels and optimize the value of their loyalty.
5. Flexibility: Customers can book and manage flights conveniently, and get assistance on web check-in by being a member of an airline loyalty program. In some cases, they can even modify tickets for free and get a complete refund in case of cancellation.
6. Benefits from Partner Programs: A lot of advanced airline loyalty strategies include alliances with hotels, rental car agencies, retail stores, and other airlines. These relationships let customers accrue and use rewards for a wide range of services and goods.
7. Elite Status Perks: By traveling frequently, members can collect more points earn an elite status, and earn extra benefits like free upgrades, bonus miles, attentive customer care, and access to special events and experiences.
Different types of Airline Loyalty programs
1. Mileage-based programs
One well-known example of a mileage-based reward program is United Airlines MileagePlus. As members fly qualifying routes with United Airlines and its partner airlines, they accrue miles based on the distance flown. You can use these miles to book award flights, hotel stays, vehicle rentals, and other travel-related benefits. Travelers can earn and redeem rewards according to their needs by purchasing extra miles with MileagePlus, which gives them flexibility in topping up their accounts for award redemptions.
2. Revenue-based programs
A popular reward program that is based on revenue is Southwest Airlines Rapid Rewards. Rather than the distance flown, members receive points based on the cost of the ticket and the fare class they purchase. By purchasing more expensive flights, travelers can earn points more quickly and have more freedom when it comes to redeeming them for flights with no seat limits or ban dates. Furthermore, Rapid Rewards members can accelerate their point accrual for award travel by earning points through partner activities like credit card spending, hotel stays, and vehicle rentals.
3. Tiered programs
There are several membership tiers in the British Airways Executive Club’s tiered loyalty program, which include Blue, Bronze, Silver, and Gold. By accumulating Tier Points on the basis of the number of flights taken and the fare class reserved, members move up the tiers. Benefits including priority check-in, lounge access, additional Avios (points), and improved customer service are available at each category in increasing amounts. Executive Club members are rewarded for their devotion with additional benefits and privileges, including access to promotions and offers that are specific to their tier membership.
4. Coalition programs
Star Alliance is the world’s largest airline alliance, with 26 member airlines, including Lufthansa, United Airlines, Singapore Airlines, and Air Canada. Members of the Star Alliance loyalty program can accrue and redeem points on any of the participating airlines, taking advantage of seamless connectivity, perks associated with reciprocal elite status, and access to more than 1,300 airport lounges across the globe. Furthermore, Star Alliance provides Round the World prices, which let passengers easily visit several locations on different continents while accruing and using miles from a variety of member airlines.
5. Co-branded credit card programs
One example of a co-branded credit card program involving transfer partners is the Chase Sapphire Reserve credit card. After making purchases, cardholders can earn Ultimate Rewards points that can be applied to a number of airline reward programs, such as British Airways Executive Club, Southwest Rapid Rewards, and United MileagePlus. Benefits from the card include access to airport lounges, travel credits, and improved travel insurance coverage. Furthermore, cardholders can make the most of their points by using Chase’s travel portal, where points can be redeemed for travel at a 50% premium, offering more flexibility and value when it comes to trip planning.
Wrapping Up
The airline industry in 2024 is testing new waters with a renewed focus on customer loyalty. As airlines recover from the challenges posed by the COVID-19 pandemic, loyalty program technologies have evolved to be more flexible, personalized, and aligned with sustainability goals. According to PWC, passenger numbers are expected to reach 4.7 billion in 2024, surpassing pre-pandemic levels by about 5%. By prioritizing loyalty, airlines not only foster customer retention but also build stronger, more resilient relationships with their travelers.
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