Can Airlines Really Survive Without Loyalty Programs?

An airline frequent flyer program may be just a status for a traveler; it serves as a lifeline for the airline itself. Loyalty programs are designed to be much more than a way of earning and redeeming points; these nurture customer relationships, trust, and loyalty. The commercial airline industry relies heavily on loyalty programs that serve as a way to engage travelers even before and after their flights with the airline.
In recent years, major airlines have continuously been widening the focus of their loyalty programs to gain customer trust, satisfaction, and retention. Airline loyalty programs offer different ways to earn miles or points, including the use of co-branded credit cards on everyday purchases.
Apart from select credit card purchases, airline loyalty points can be earned by flying on the airline or its partners or by other activities such as hotel stays, vacation trips, and car rentals, as specified by the airline. Earned reward miles or points can be redeemed for flights, flight upgrades, ancillary products and services, or select third-party activities.
Loyalty members can grow status levels by reaching certain benchmarks through qualifying flights and/or point targets. Members may also receive bonus miles, upgrades, or other complimentary perks based on their status level. Airlines expand their loyalty programs by offering partner bundling, points-to-cash conversion options, and other personalized promotions to grow their customer engagement rate.

Related
Airline loyalty programs
Airline flights
- Seats and upgrades
- Rewards redemption towards airline fees
- Rewards redemption towards ancillary products and services
- Benefits of dynamic pricing, cash, points, and the combination of both
Partner bundling
- Rewards earning and redemption on partner airlines Bundling airline tickets, vacation trips, hotel stays, car rentals, and other activities
- Partnerships with restaurants
- Premium tier recognition among airlines and other partners
There was a time when airline loyalty programs only offered rewards and redemption opportunities through flights. In other words, the only time the airline loyalty program is in effect when it is offering and operating a flight route that is flown by a consumer. Loyalty members could only earn miles or points when flying with the airline, and also redeem their earnings on flights. Partnering with other airlines to share loyalty rewards, earning and redeeming strategies only offered so much more.
Photo: rafapress | Shutterstock
Economic breakdowns, recessions, global pandemics, and company-specific losses forced the airline industry to widen its loyalty program horizon to opportunities outside of flights. Today, airline loyalty members can earn and redeem rewards irrespective of the number of times they fly with the airline. In fact, there are more (and perhaps more lucrative too) avenues to earn and redeem airline loyalty points than flying with the airline itself.
Bundling rewards with partner airlines have opened a whole new world of opportunities for consumers where rewards can be earned and redeemed across various partners, alliances, and on a variety of activities. The expanding scope of the customer loyalty business has successfully brought in popular credit card companies, offering unlimited opportunities.

Related
5 Ways Airline Loyalty Programs Generate Revenue
These programs can be airlines’ most valuable financial assets.
Cash conversions
- Reward points conversion to prepaid visa cards for global redemption opportunities
- Conversion to cash value for wider redemption
Personalized promotions
- Personalized promotions based on tier status
- Discounts and promotions based on consumer preferences
- Complimentary upgrades and ancillary services.
Photo: United Airlines
Consumers are not limited to specific airlines or companies; everyday spending on co-branded credit cards can earn a lifetime of points and loyalty status with airlines. Airlines have created almost customized programs to shift away from the routine frequent flyer programs approach and increase their customer engagement rate.
High-frequency versus low-frequency travelers
Airline loyalty programs typically matter more to high-frequency travelers than low-frequency ones. High-frequency business travelers take airline loyalty programs into account when selecting flights. Even when traveling for leisure, they tend to rank the loyalty program highly and be influenced by its potential or actual benefits.
Photo: Brisbane Airport
That limits the airline’s ability to depend solely on conventional frequent flyer program models that work based on flight-specific activities alone. Low-frequency fliers, on the other hand, generally overlook loyalty programs, seeking cheaper flights from any airline they can get.
In doing so, they may opt for multiple loyalty programs while maintaining a lower rate of engagement with all. While the long-term benefits of a specific loyal program are missed, infrequent travelers may save a big buck on the upfront cost of travel.
That practice forces airlines to expand the horizon of their loyalty program to allow infrequent travelers also to be part of the program through other non-flying activities. Third-party activities and credit card earnings play a major role in keeping such travelers loyal to the airline-specific program.

Related
Status Matches Now Available For Alaska & Hawaiian Airlines Frequent Fliers
The status match is in addition to the existing matches available to carriers, including Delta, JetBlue, Southwest, Air Canada, and Aeromexico.
Customized loyalty programs are the need of airlines
As every traveler’s journey is unique, the need for a loyalty program also differs based on customer needs and preferences. Even an ideal earn-and-redeem loyalty program will not work for all consumers, forcing airlines to lose its customer base. Loyalty programs are designed to be customizable, both in its earning and redemption processes.
Photo: Chase
For example, some customers may like to redeem their loyalty points for a spa session before their late-night flight, while others may prefer to enjoy warm food at the airport. Airlines establish partnerships with various third-party services to ensure they cover all grounds and offer something for everyone. While not all programs offer the same level of customization, most allow various avenues through which consumers can earn and redeem reward points.
Airline brand ambassadors can make all the difference
Airlines are in dire need of brand ambassadors to market their products, services, and partnerships. Despite signing celebrities and executives as brand advocates, airlines often rely on their loyalty program members to build credibility and a social media image. Testimonials from frequent flyers can go a long way in developing the airline brand. This can be done in multiple ways, including through surveys and consumer-focused activities.

Related
These US Airports Have Lounges You Can’t Find Anywhere Else
Premium lounges have been popping up all over the US, offering a higher level of exclusive luxury and comfort.
The value of an airline loyalty program
The United States Department of Transportation (DOT) focuses on various ways customers participate in airline rewards programs and are impacted by their transactions. Whether it is earning points, redeeming for flights and other perks, or purely getting a refund for their expenditure, the devaluation of earned rewards must be checked to ensure fair policies and processes are in place. The US Transportation Secretary Pete Buttigieg expressed his enthusiasm about the value of loyalty programs for consumers by stating,
“Points systems like frequent flyer miles and credit card rewards have become such a meaningful part of our economy that many Americans view their rewards points balances as part of their savings. These programs bring real value to consumers, with families often counting on airline rewards to fund a vacation or to pay for a trip to visit loved ones. However, unlike a traditional savings account, these rewards are controlled by a company that can unilaterally change their value. Our goal is to ensure consumers are getting the value that was promised to them, which means validating that these programs are transparent and fair.”
The value of an airline loyalty program to the customer depends on the terms and conditions that govern its use and benefits. Major aspects of loyalty program terms relate to how reward points are earned, how earned rewards can be redeemed, the value of redemption, the benefits of various status levels, restrictions, and the validity of rewards and redemptions.
Airline-specific rules generally determine how loyalty rewards are valued against the price of a cash purchase. While airlines reserve the right to alter their loyalty terms, consumers must see the value of rewards to continue enrolled in the program.

Related
American, Alaska, JetBlue & United Make Top 10 List Of World’s Best Loyalty Programs
The carriers have been recognized for the opportunities they offer.
link