Many carriers are exchanging miles for points and other incentives as the issues around flying – and the sharing of data – become more sensitive. By Jenny Southan.
In an age when loyalty is harder than ever for companies to earn and maintain, a number of major airlines are overhauling their frequent flyer schemes to revitalise their relationship with their customers (and make them more money). Since American Airlines launched one of the world’s first airline loyalty schemes in 1981, it has gradually become harder to earn miles (many carriers have switched to giving points in relation to ticket price rather than distance flown). It has also become more challenging to redeem them as planes fly fuller – management consulting company McKinsey estimates that 30 trillion miles are sitting unspent in travellers’ accounts.
In the summer, Australian flag carrier Qantas announced sweeping changes to its Frequent Flyer programme, some of which benefit members and some of which benefit the airline. Although the price of redeeming points on upgrades has increased by up to nine per cent, and seats in premium cabins cost up to 15 per cent more, there are more reward seats (in excess of one million a year) to more destinations. The AU$20 million (£11 million) revamp also includes Lifetime Platinum status, and a new Points Club scheme that allows people to earn on non-airline purchase such as Uber rides. Carrier charges are being slashed, too, saving passengers about A$200 (£109) per return journey on average.
Qantas Group CEO Alan Joyce said in a statement: “While the points required for business class seats on international and domestic flights will increase slightly, it is the first increase in 15 years and the product has improved a lot in that time.” Qantas Loyalty CEO Olivia Wirth added: “While frequent travellers have always been at the centre of what we do, the growth of our program and its hundreds of partners has provided opportunities for many members to now earn most of their points on the ground.”
What other changes have airlines been making? In September, United introduced a new PlusPoints upgrade currency for elite MileagePlus members in its two top tiers (Premier Platinum and 1K). Taking effect in December, it will replace the more complex Regional Premier Upgrade and Global Premier Upgrade certificates with the granting of a bank of points to customers (320 for 1K, for example) who then get to buy upgrades for a fixed amount (for example, 30 points for a premium economy to business upgrade on a long-haul flight).
Luc Bondar, United’s vice-president of loyalty and the head of MileagePlus, said: “The new PlusPoints programme increases the overall number of upgrade opportunities for top tier Premier members, expands the fare classes where they can be used, and lets members request upgrades on multiple flights all at once.” In the summer, the airline also said it was scrapping expiration dates on points, which previously became unusable after 18 months.
However, on November 15, United is removing pricing charts for award seats, which list fixed rates of redemption for award seats (such as 30,000 miles for an economy flight from Europe to the US), instead switching to a “dynamic” model whereby the cost of seats changes throughout the year according to demand. Lufthansa became the first major European airline to do the same thing in the spring with its Miles & More scheme, suggesting that this will be an approach many other airlines will be taking in years to come.
To increase the opportunities for earning (and thus build loyalty), airlines are also partnering with hotels to enable reciprocal earning and burning benefits. American Airlines has joined up with Hyatt (although only those with elite status can take advantage), Air France-KLM has teamed up with Accor (free to anyone), and then Emirates and Marriott launched Your World Rewards, allowing members to earn Skywards Miles on hotel stays and Marriott Bonvoy points on flights. (Emirates Skywards Silver, Gold and Platinum tier members will earn one Skywards Mile for every US dollar or equivalent spent on top of points when staying at participating Marriott Bonvoy hotels.)
Although some of this is good news for the customer, the industry needs to wise up to the backlash against the use of people’s data. With documentaries such as The Great Hack on Netflix, which examines the Facebook-Cambridge Analytica scandal, the public is more savvy and mistrustful than ever about how their online presence is being monetised. There have also been a number of data breaches that have shaken consumer confidence – last year, up to 600,000 British Airways customers had their names, addresses, emails and card payment details compromised in a cyber attack. And a Marriott hack in 2018 exposed the passport information of more than five million people dating back to 2014.
With 77 per cent of Brits a member of at least one loyalty scheme, according to a 2019 poll of 275,000 people by YouGov and partnerships and rewards agency Mando-Connect, data protection is vital. Rod Sims, chairman of consumer watchdog the Australian Competition and Consumer Commission, recently said: “Consumers may be shocked to find that some schemes collect their data even when they don’t scan their loyalty cards, or that they combine it with data from other sources that they might not even be aware of. Most people think they are being rewarded for their loyalty with discounts or points, but in reality some schemes are building up detailed profiles about consumers and selling those insights to other businesses.”
Loyalty, it’s fair to say, works both ways – and companies must keep innovating to keep their customers coming back.