Loyalty Programme Aviation Industry

1. Loyalty ProgrammeAviation Industry NIIT Technologies

2. Our plan… • What is ‘Loyalty Programme’ • Why ‘Loyalty Programme’ • For whom ‘Loyalty Programme’ • Technicalities of ‘Loyalty Programme’

3. For starters..What is Loyalty • The quality or state or an instance of being loyal(www.m-w.com) • Loyalty is faithfulness or a devotion to a person or cause(www.dictionary.com)

4. In structure…What is Loyalty.. • Loyalty programs are structured marketing efforts that reward, and therefore encourage, loyal buying behaviour — behaviour which is potentially of (more) benefit to the firm(www.en.wikipedia.com)

5. Why loyalty Programme • Loyalty Programme, from a business point of view, is a win-win situation for all parties. It involves multi-tier benefits. Stakeholders: • Airlines • Passengers • Credit Card Companies • Allied Services (hotel, car, and forex etc)

6. For whom loyalty Programme… • Service Provider (Airlines)Airlines try to attract new customers and retain existing customers with the loyalty programme. • Passengers (Members)Passengers benefit from travel class upgrades, fare discounts, extra privileges, and ease of travel arrangements

7. For whom loyalty Programme… • Credit Card CompaniesAirlines bond with Credit Card companies and generate mutual business (e.g. BA ties up with AMEX and offers more miles on credit card purchase) • Allied Services:Hotels and Car Rentals give special offers/discounts to loyalty programme customers

8. Some facts … • A top business traveller will average 21 flights away from home per year (OAG). • 94% of business travellers belong to at least one frequent flyer programme and 60% belong to three or more programmes (OAG). • 80% of business travellers state that loyalty programmes influence their travel decisions (Accenture).

9. Some more facts … • 20% of loyalty programme members generate 80% of an airline's profit (McKinsey). • 9% of travellers buy 50% of an airline's premium seats (Accenture). • 2% to 4% of loyalty programme members generate 33% of an airline's profit (McKinsey).

10. Exercise 1 • In group of 4 each, make a sample list of six special benefits together that a loyalty club member may get at car rentals and international hotel chains.(You can use your imagination and refer personal experiences)

11. The looks… • In airline industry, a member is normally issued a plastic card that looks like a credit card. • The card contains basic details of member(More travel related and less demographic) • These cards are easily procured by members by signing up with Airlines (the difficult part is to earn miles …of course ;) • Card is continuously updated with all past travel

12. Major Players • All big airlines today invest heavily in Loyalty Programme.British AirwaysAmerican AirlinesJet AirwaysSingapore AirlinesIts not just offering services….also to catch up with competition.. 

13. Card details may contain.. • Name/Address • Seating Preferences • Meal Preferences • Credit Card details (in some cases) • Basic Contact details • Emergency Contact Details • Passport and Visa details

14. Quick History Started with manual update of records with Airlines • In 1990s came magstraps • Followed by bar-coded cards • Some are now even chip cards (e.g. looks like credit cards issued by ABN Amro Bank in India) • Next level is RFID…though amid lot of debate (it costs more)

15. How miles are earned?? • Members earn miles when they fly with card issuing airlines or with partner airlines.E.g. Flying from Delhi to New York will earn 2500 miles. • Normally, higher travel class will have more miles accrued for same distance. • Miles earned = Function of distance, travel class, fare type • Miles can also be earned when members don’t fly.

16. Main benefits to member.. • Members is at benefit when miles earned on club cards are redeemed for various benefits • Freebies • More miles mean higher possibility of getting an upgrade • Invitation to introductory offers • Access to airport lounges • Travel arrangements: Member gives card number, 90% details ready for booking

17. Exercise 2 • In Group of 4 (not same group as earlier), make a sample loyalty programme sign up form. Cover aprox. 15-20 details of passenger

18. Club Cards…are all same?? • Just like gold/silver credit cards, loyalty programme cards also have different levels. • Different airlines may give different names, but in principal, they are on same lines • Common categories can be:Platinum cardGold cardSilver card

19. Airline FFP Tier 1miles/ sectors Tier 2miles/ sectors Tier 3miles/ sectors Eco % Biz % First % Air Canada Aeroplan 25,000 miles / 25 segments 35,000 miles / 30 segments 100,000 miles / 100 segments Depends on routes/ continents Air France / KLM Flying Blue 25,000 miles / 15 one-way flights 40,000 miles / 30 one-way flights 70,000 miles / 60 one-way flights 100 150 150 Air India (& Indian Airlines) Flying Returns - - - 100 150 250 American Airlines AAdvantage 25,000 miles / 30 segments 50,000 miles / 60 segments 100,000 miles / 100 segments 100 125 150 British Airways BA Executive Club 600 points / year 1,500 points / year - 100 125 150 Cathay Pacific Marco Polo Club 30,000 miles / 20 sectors 60,000 miles / 40 sectors 120,000 miles / 80 sectors 100 125 150 Delta SkyMiles 25,000 MQM** 50,000 MQM** 75,000 MQM** 100/ 150 150 150 Emirates Skywards 25,000 miles / 20 sectors 50,000 miles / 40 sectors - 100 150 200 Gulf Air Gulf Air FFP 1,000 points 2,500 points - 100 200 300 Japan Airlines JAL Mileage Bank 30,000 points/ 30 flights 50,000 points/ 50 flights 70,000 points/ 80 flights - - - Lufthansa Miles & More 35,000 status miles/ year 130,000 status miles/ year 600,000 Hon circle miles, over 2 yrs 50 - 150 200 300 Virgin Atlantic Flying Club 15 tier points 40 tier points - 100 150 (premium economy) 200 (upper class Some Club Cards…

20. Are Members Forever? • The answer is … NO

21. Only Issuing Airline? • To the delight of passenger, normally, loyalty programme cards are acceptable (and earn miles) on partner airlines too. • E.g. Club card issued by Cathay Pacific is recognized at British Airways too • This works in favor of both passenger and airline (miles for former, business for latter)

22. Oneworld American AirlinesBritish AirwaysCathay PacificDragonairFinnairIberiaLANMalév Hungarian AirlinesRoyal JordanianQantas Skyteam NorthwestKorean Air Delta Continental Alitalia KLM Air France Czech Airlines Aero Mexico Star Alliance Air CanadaAir New Zealand All Nippon Airways Asiana Austrian Airlines Group bmi LOT Polish Airlines Lufthansa Scandinavian Airlines Singapore Airlines Spanair TAP Portugal Thai Airways United US Airways Varig(From April 2006, also South African Airways and Swiss International Airlines)

23. Are Miles Forever? • The answer is … NO

24. For any Airline, • You need to know who are your most profitable customers and do something about it

25. Exercise 3 • Tom and Tim are twins and share the same profile: both are male, 45 years old, and earn US$100,000. They also share the same flying activity: both fly 100,000 miles each year, have achieved the highest flyer status and use the airline co-brand credit card. So both of them are the airline's best and most profitable customers. Or are they?

26. Loyalty Mantra … The 3 R’s • Recognize • Reward • Retain

27. Last but not the least… • Some critics have a challenging approach to loyalty programme, but that’s just a way to look • We support loyalty Programme…….after all we get benefits (and business from Airlines IT )

28. Flavor of Loyalty … British Airways (Information shared is highly confidential. This is not to be reused in any form)

29. References • www.google.com • www.wikipedia.org • www.aa.com • www.thewisemaker.com

30. Thanks…