Frequent Flyer And Loyalty Programmes – Driving Traveller Value And Airline Revenue
Frequent flyer programmes have been a common part of many airlines’ loyalty strategies over several decades now. But they have evolved from elemental loyalty models with modest money-making strategies into major revenue earners. With growing industry maturity and drastically improved technology and data analytics capabilities, the nature of FFPs is being transformed.
The contrast between these programmes and the activity of flying is dramatic. One has limited capital investment needs and generates cash almost merely by existing; the other, ringed by safety and economic regulation is highly capital intensive and even more risky, in exceptional circumstances returns a modest profit.
There are however few exponents who have climbed the heights of optimising the FFP business – for it is a business now, with a sideline of loyalty.
Qantas is a leader in the field. It is for example targeting EBIT of AUD500 million from its FFP by 2021. To put that in context, in FY2019 Qantas returned a total profit of just over AUD1 billion.
And Air Canada, arguably the first airline to create a genuine financial model for FFPs early this century, having sold off its programme, has recently re-acquired it.
With the advent of sophisticated data analytics, FFPs have also become much more than an internalised activity, with the ability now to drive change right across the business, from revenue management to network planning and beyond.
In short, FFPs have become a valuable commodity in more ways than one. But, mingled with their poor cousins, the flying part of the airline, market valuations are often suppressed.
- How important is loyalty in an age of commoditisation?
- What are the strategies behind smart FFPs?
- How valuable is data analytics as information is accumulated?
- What are the arguments for and against owning and hiving off?