What Incentives Do Airlines Have to Improve for Frequent Fliers, Anyway?

“T he clear message out of American and AAdvantage has been — like at Delta and United before — that the airline is focused on the bulk of customers who fly the airline at most once a year, and get treatment equivalent to exactly what they they pay for in hopes they’ll pay more — and that loyalty matters a lot less than before.”

When you read this article written by Gary Leff of View From The Wing, you will find seven ways in which he suggests how American Airlines and its AAdvantage frequent flier loyalty program should be fixed — which are as follows:

  1. Don’t take away elite benefits on the basic economy fares that are coming.
  2. Stop making it harder and less convenient to fly.
  3. Offer a consistent product.
  4. Stop slow-walking updates to Admirals Clubs.
  5. American went from first to worst in lifetime status, so reverse that.
  6. Actually offer saver awards on American flights.
  7. Cut out making changes without notice.

I do not disagree with his suggestions — in fact, my sentiments have been similar with Delta Air Lines and its SkyMiles frequent flier loyalty program and have been expressed in numerous past article here at The Gate — but the first thought which came into my head after reading this article is:

Why?

What Incentives Do Airlines Have to Improve for Frequent Fliers, Anyway?

Notwithstanding the success of writing articles for View From The Wing for greater than 14 years — indeed a laudable accomplishment in a space where weblogs pertaining to travel, miles and points seem to be a dime a dozen these days — the question which has to be asked is: is Gary Leff a valuable customer of American Airlines?

I do not know the answer to that question — nor is it of any interest to me simply because the meaning of the term valuable customer can be quite subjective. Is a valuable customer someone who spends $100,000.00 per year on airline tickets? Is a valuable customer someone who is responsible for bringing more paying customers to an airline? Is a valuable customer someone who is so fiercely loyal that he or she goes out of his or her way to fly as a passenger on airplanes operated by that airline instead of considering less expensive or more convenient alternatives? Is a valuable customer someone who never complains and is considered low maintenance to an airline?

You will not get an definitive answer from any airline, as none of them will publicly reveal specifically whom they consider valuable customers. I can tell you that I heard straight from the mouth of one former airline executive a story of how one difficult customer was “fired” — and that executive seemed excessively exuberantly proud of that when it was recounted in a room filled with customers and employees of that particular airline some years ago.

The sad part is that that executive was the only one in the room who did not seem to think that the telling of that story was blatantly inappropriate for both the audience and for the moment itself, which was otherwise a celebration of gratitude of the service of many of the employees of the airline who were in attendance in that room on that day several years ago — but I digress, as usual…

…but when you read weblogs at BoardingArea and countless articles from other Internet web sites, how many times have you seen the word hobby to describe the earning, collection and use of frequent travel loyalty program miles and points? How many times have you seen the word hack used to describe ways in not only how to procure a better deal; but in some examples where those ways to the point bordered on being deceitful and dishonest? In how many of those articles have you read about the writer bragging about flying as a passenger all over the world — practically “for free”?

Let us be honest here: if you were the chief executive officer or owner of an airline, would you consider the people who primarily use your business as a vehicle for their “hobby” from which they can “hack” their tricks on what your company has offered over the years “valuable customers”?

A Correlation Between Airlines and Their Frequent Flier Loyalty Programs?

The reason why frequent flier loyalty programs have been so successful over the past 35 years is because they are amongst the most successful marketing tools implemented which allow airlines to better predict the behavior of their customers. Give them a chance to earn elite level status, and they will patronize the airline more. Throw some miles their way towards the payment of flights, and they will patronize the airline more. There are many cases of customers who have become fiercely loyal to an airline — beyond to a fault in extreme cases.

The only problem with that concept was that the airlines arguably went too far, showering perks and benefits to their top customers which they could not afford to give — especially when they were in debt to the tune of billions of dollars. Something had to give; so airlines started charging for products and services which were once included in the price of the airfare while cutting back on those perks and benefits — while in the process arguably ridding themselves of the chaff in terms of customers who laughed as they paid as little as possible to enjoy said perks and benefits while keeping the wheat in terms of customers who paid premium prices for airline tickets.

As with politics in general, have the airlines overcorrected themselves to the point where they have trimmed perks and benefits too much while charging inflated prices in the form of ancillary fees on too many products and services? That depends on your point of view, as there is no real definitive answer to that question due to a plethora of factors; but I would not be the least bit surprised if the majority of people thought the answer is yes.

Because of the difficulty of gauging what customers will do in the future, it is therefore difficult to quantify exactly what damage can be caused by something which does not employ a hard business principle such as profits and losses; and even though there are generally accepted accounting principles, there is room for accountants to be creative with the numbers of a corporation in order to give a more euphemistic appearance to the financial condition of a company.

Rather than being creative with numbers — to a point of deception, at times — to satiate the hunger of stakeholders to profit in the short term, how about implementing policies and procedures to ensure that customers are indeed happy with patronizing a company such as an airline, without “giving away the store”? Despite not being able to definitively rationalize doing so with hard numbers, I would surmise that the company would benefit handsomely in the long term — and not solely with profits.

“I sent a letter to UAL customer service re: how they screwed up my baggage”, Steve R — who is a reader of The Gateexpressed in this comment in reply to this article pertaining to four wishes which Ed Pizzarello of Pizza in Motion had for the then-new chief executive officer of United Airlines. “Never got so much as an acknowledgment from them that they received the letter. Why? Because they don’t care, they don’t have to when the U.S. big three carriers have a stranglehold on the industry; they’re raking in record profits, and pax loads are higher than ever. Their motto ought to be: Want to fly? Then pay up and shut up. Don’t hold your breath about customer service. There is none. They are Easy Jet and Ryan Air on steroids.”

That comment arguably sums up the state of commercial aviation in the United States these days, in my opinion.

Summary

From the point of view of a frequent flier, Gary Leff is basically right on the money — but speaking of money, how exactly is American Airlines going to benefit financially from what he advises?

“If American wants to earn a revenue premium they need to treat their high frequency customers well.” Perhaps the definition of high frequency customer needs to be refined. American Airlines does not simply want customers solely of a high frequency — they want customers who will contribute significantly to their financial bottom line.

Is there really a difference between the customer who spends $50,000.00 per year on more expensive flights versus the customer who spends that same $50,000.00 per year on numerous less expensive flights throughout the year — other than the possibility that the more frequent customer may be more costly to maintain? Does the person who spends $50,000.00 per year on more expensive flights have any right to feel slighted or insulted if the airline he or she patronizes catered to customers who fly significantly more frequently as its utmost priority?

Customers may want airlines which offer a consistent product; but airlines want customers who consistently contribute significantly to their financial bottom lines. It is as simple as that.

In the meantime — with competition significantly reduced in recent years due to mergers and acquisitions; and with the legacy airlines basically offering similar frequent flier loyalty programs with negligible differentiation — I am compelled to ask this question:

Exactly what incentives do airlines have to improve for frequent fliers, anyway?

Photograph ©2014 by Brian Cohen.

5 thoughts on “What Incentives Do Airlines Have to Improve for Frequent Fliers, Anyway?”

  1. Joe P says:

    So many of these bloggers are entitled crybabies that it gets hard to keep reading their articles. Some of them really seem to feel that the rest of us should be grateful we’re allowed to share the same air as them. It’s gotten to the point where it seems like they want people who have paid for a premium class ticket to be downgraded so the elites can have those seats. It’s becoming quite ridiculous to the point where I wish I didn’t have to fly to get to the places I want to go. But I guess this is what America is coming to. We are becoming the country we deserve, like it or not.

  2. Stephan says:

    Airlines will begin to focus on customer service and airline FF programs again if/when we get another recession (ie: like in 2008). If people stop flying then better times will return for those who still do, as airlines need to jockey for customers. No airline gives a hoot about the customer when they have consistent BIS and they sure as heck don’t want mileage runs and folks maximizing like Gary or Lucky.

  3. EJ says:

    Brian,

    Great article. It’s nice to see a “blogger” finally question why airlines would want to be quick to reward people who are looking to find the best deals and maximize value out of their loyalty programs. There’s nothing wrong with frequent flyer “hobbies” and I do it myself. The problem is the unrealistic expectations that some flyers have about being rewarded for loyalty.

    Sadly, it’s all about the money for businesses. And maybe that’s not a bad plan for them. With minimal competition, they simply don’t HAVE to offer generous upgrades, privileges, etc. it’s all about supply and demand.

  4. rmh says:

    @joe

    ” I wish I didn’t have to fly to get to the places I want to go. ”

    there are always alternatives.

  5. DavidB says:

    The quest is for revenue maximization and that means high-yield corporate fliers who for the most part are less engaged with their FF status (and benefits). This means benefits can be reduced (going from 8 SWUs to 4) and numbers of upper tier elites reduced, thus less costs to support. The few thousand regular fliers who frequent online forums and read the blogs become litter along the highway. Loyalties shift based on corporate accounts, often out of the hands of the actual corporate flier. Data mining and improvements in tracking mean $s become the measure, not miles/flights flown. Loyalty is now a misnomer. Banks have become the biggest buyer of miles and the battle lines for the consumer have moved to their competition with one another, no longer the airline and we fliers. Like so many other sectors of the economy, the airline industry has become a captive of the financial industry not its customers.

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