Airline industry facing up to death of Airmiles

New research we commissioned, in conjunction with Airline Information, shows that 90% of airlines are being forced to find new, more profitable ways for customers to redeem their frequent flier currency.

These include partner offers such as hotels and insurance, with less than 50% of Airmiles programmes reported to be profitable.

Respondents cited accounting pressures, such as the need to record loyalty currency on balance sheets as a taxable liability, rising operational costs and shrinking seat capacity as a combination of factors causing the majority of airline brands to lose money on every seat they give away.

This shift to airlines seeking a broader range of redemption platforms is reflective of a wider trend in Airlines’ ancillary revenue and loyalty activities.

Consumers today demand more choice of how they redeem loyalty currency, and airlines are increasingly able to offer additional products and services from partner brands, seamlessly and securely, via their own sites. This allows airline brands to both enhance the customer value proposition and deliver enough revenue for redemption programmes to be, at the very least, self-funding.

Airline brands are clearly being forced to continually adapt their loyalty programmes in what is still an incredibly tough business environment. New models demand high levels of customer engagement, with tailored reward and recognition content that drives loyalty from a wider customer base.

Whilst broadening their redemption offering to consumers, it will be crucial for Airlines to add value by using their customer data, developing genuine insight and applying it to offer customers more relevant benefits, products and services. Airlines are uniquely placed to leverage their customer data, as they not only have a large volume of data collected about their customers but more importantly they have permission to use it.

Offering memberships via unique bundling of, for example, travel insurance or wi-fi and airport lounge access provides a platform for airline brands to build a relationship with customers. It’s by focusing on the relationship instead of the revenue, that the airline industry will be able to develop additional sustainable streams of income.