flYING HIGH ON INCENTIVES

SBHD: The airlines have always been one step ahead with rewards for frequent flyers, but the different schemes on offer can be confusing, once you get down to the small print. What exactly do travellers gain?

Imagine standing on the viewing deck at the top of the Queen’s Building at Heathrow Airport. Suddenly 200,000 packed Jumbos swoop past. An unlikely event, but it would take that number of planes to fly every member of every airline loyalty scheme at the same time. Multiple membership reduces this figure slightly, but nevertheless it’s no wonder airlines have tightened up their redemption opportunities.

The days of the packed Pan Am Jumbo bound from London to New York with no fare-paying passengers on board are long gone. But loyalty schemes are on the increase: the number of members worldwide of frequent flyer schemes is estimated at 85 million and they are still growing at more than ten per cent each year. American Airlines alone claims 22 million members.

Business travellers, whether in the UK, Europe or beyond, have a vast choice of airlines, making the task of attracting this lucrative business extremely difficult. Once this has been accomplished, though, how does an airline hold on to its regular customers when there are so many good offers and enticements from rival airlines? It is hardly surprising that most airlines have some sort of scheme designed to reward their loyal travellers. Just how they do this and what their motives are depends on a number of factors, which are usually determined by customer wants and needs.

Let’s look at two very different travellers who cross the Atlantic. Barney Burnham is a freelance travel broadcaster who had previously bought a ú3200 round-the-world business class ticket valid on Qantas and Northwest as well as around ú800 worth of vouchers for first-class travel on Northwest within the USA. “It was my own money, therefore what really mattered to me was the chance to earn extra air miles for further flights free of charge,” he says. “I actually earned enough points for two business class return flights from London to Boston.”

This “earn and burn” system, as it is known in the industry, is simple and works very well – until you bring partnership schemes into play. That is when it usually pays to spend an afternoon examining the small print at the back of the brochure.

Geoff Turner, on the other hand, places much more importance on the enhanced service he can receive during his journeys. As marketing director for BSS, a broadcast and surveillance systems supplier, he frequently needs to make transfers from transatlantic flights. “Access to a comfortable lounge is really important, particularly if I have a three or four hour wait for a connecting flight,” he says. “That’s why the British Airways Executive Club, with its service-led benefits, is best for me.”

British Airways can point to Turner as proof that it has listened to what its travellers want. “Lounge access is one of the key points of our Executive Club programme,” says Iain Webster, BA’s senior manager, UK relationship marketing. “Providing a range of benefits such as lounges, priority waiting lists and dedicated reservations all goes towards giving our frequent customers as much assistance during their journey as we can.”

One vital aspect of administering a loyalty programme is to collect all the information it can on its members. Now, an airline can find out, in much greater detail than ever before who its customers are, learn about their preferences and build up complete profiles of them.

From an airline’s point of view, the ability to find out in-depth information about its customers is crucial to the long-term success of a loyalty programme. It is sometimes difficult to see exactly what an airline can gain from appearing to give so much away, but when it is welded firmly into an overall corporate plan and marketing strategy, it is easy to see the benefits it can bring.

The “Win, Win, Win” scenario illustrated by Air Miles, seems to prove how everyone can gain from involvement in a loyalty scheme. Companies have the opportunity to change customer behaviour and generate incremental business, consumers as collectors have the opportunity to travel the world or pursue a range of leisure activities, and suppliers have the opportunity to fill excess capacity without dilution. The Air Miles rewards are aimed not just at frequent flyers, but at all consumers. The overall idea, however, is the same.

But travellers appear to be reluctant to redeem the points and miles they have accrued – only 28 per cent of miles are redeemed, leaving an astounding 1.4 trillion miles unused worldwide. Airlines have guarded against the potential disaster of everyone suddenly wanting to cash in their miles at the same time. They have set time limits on the use of accrued miles, as well as restrictions on which flights can be used with redeemed miles.

However, the airlines are quick to point out that they want travellers to use the benefits they’ve built up. “Blessed are the redeemers,” Webster says. “It shows that they’ve understood the principle, that they’re playing the game and that they’re committed to the scheme.”

Commitment to a scheme can bring its irritations, not necessarily for the traveller, but for other cogs in the business travel machine. Travel agents are not always as excited as passengers about the potential rewards of a frequent flyer programme. After all, there’s nothing in it for them when flights are booked using awards from the schemes.

Paul Allan, head of Ian Allan Travel and chairman of the Guild of Business Travel Agents, says: “Frequent flyer programmes are naturally attractive for travellers, who in effect build up an individual relationship with an airline. Obviously they will want to continue collecting mileage points with that airline, but it begins to get messy when we agree special route deals for the company with another airline. This conflict is usually followed by a lot of fuss from the traveller, who does not want to switch carrier.”

Travel agents do need to be involved with loyalty schemes, though loyalty to their clients must come first, says Carlson Wagonlit Travel’s commercial director, Colin Rainhow. “Assisting with the different schemes can work to our advantage if it backs up the travel policy of our clients. But we have to step in when there’s a conflict of interest between our client and an over-enthusiastic traveller trying to build up his points tally. People try to travel on daft routes to get maximum bonus points, and we don’t allow that to go unnoticed. “

Who has the final say is another matter entirely. On the one hand, companies state that as they pay for the travel, they should be entitled to choose which airline they use. On the other hand, as travellers face disruption and time away from home, then they think they should dictate how the journey is made.

This inevitably takes some homework, as airline schemes offer rewards at different times. For example, Northwest claims that frequent flyers using its WorldPerks scheme will reap the benefits of free tickets sooner than most. “The total number of flights you need to take to qualify for an off-peak ticket is ten,” says a spokesman. “That compares with 12, 14, even 25 or 30 flights required by other carriers.”

A business class ticket from London to New York would earn 7,500 bonus miles with Continental, 8,665 with United, 6,196 with Virgin Atlantic and 12,202 with Lufthansa. Of these, only Lufthansa would offer an immediate perk: its Miles & More scheme offers free return ticket upgrades for 10,000 miles.

The fundamental message from the airline loyalty schemes is thankfully a great deal clearer than many of the schemes themselves. “Airlines want my custom and are prepared to repay my loyalty,” Barney Burnham says. “Things become more complicated, however, in they way they choose to do it. But as frequent flyer schemes increase, airlines will become more adept at acting on information passed on by scheme members.

“Then if travellers want lounges, hotel discounts, upgrades, free flights or days out at polo matches, the airlines can fine-tune what they are offering. They will keep passengers happy as well as reaping the obvious financial rewards that will come from a large, regular customer base.”

SBHD: BRITISH AIRWAYS

Air Miles awarded on all Concorde, First Class Club World and Club Europe fares, all fully flexible World Traveller fares, all fully flexible Euro Traveller fares, all fully flexible Euro Traveller and Eurobudget fares and all fully flexible UK domestic/Super Shuttle fares.

Travel Points (ranging from 15 for a domestic single flight to 150 on Concorde) determine Club levels. You need

60 over a period of 12 months to reach the blue level, 400 for silver and 1000 for Gold. Naturally the number and level of benefits rises with each colour.

SBHD: SWISSAIR

In creating its Qualiflyer scheme, Swissair has teamed up with Delta, Cathay Pacific and other airlines, as well as three hotel groups and two car hire firms. When you travel economy, your account will be credited with the mileage between the two airports. Business class passengers receive a 50 per cent bonus, while mileages are doubled with first class. Hotel nights usually mean an extra 250 miles on your account, as does renting a car.

SBHD: NORTHWEST

Northwest has recently changed its WorldPerks scheme to include a mileage banking system, which eliminates the time-consuming process of posting tickets back to the airline for travel awards. Some uneconomical awards, such as 25% and 50% discounted companion awards, have been eliminated, while some award mileage requirements are increasing to match more accurately travel supply and demand.

SBHD: VIRGIN ATLANTIC

Virgin Freeway is a free ticket programme where miles can be earned travelling on Virgin, British Midland, SAS and Air New Zealand. Miles can be exchanged for free flights, hotel accommodation, car rental, holiday vouchers and exciting activity awards. Various bonusmiles schemes help boost your tally.

SBHD: AMERICAN AIRLINES

The massive AAdvantage scheme now includes a tie-up with Sandals Resorts in the Caribbeanas well as Alamo Car Hire, Forte and Hilton International Hotels.

The worldwide aviation industry’s first frequent flyer programme, AAdvantage was designed in 1981 – it now claims a membership in excess of 23 million.

The worldwide aviation industry’s first frequent flyer programme, AAdvantage was designed in 1981 – it now claims a membership in excess of 23 million.