Frequent flyer programmes are hugely popular all over the world, with almost every airline offering some form of loyalty scheme. Nick Rice reports on how they work, what to be aware of, and how you can take full advantage of the best deals around.
Clocking up air miles: taking advantage of the frequent flyer programmes
Many people who fly regularly see the sense in joining an airline’s frequent flyer programme (FFP).
Emirates Airline’s Skywards programme, with membership levels of blue, silver, gold and platinum, has more than 8.6 million members. Etihad Airways’ Etihad Guest is also popular and had 2 million members as of last May.
There are about 92 airline loyalty programmes globally and they all offer a range of customer benefits, such as using accrued miles to gain free flight tickets (excluding taxes), access to lounges, priority check-in and fast track security lanes.
Awards are not even always restricted to people, as Virgin Australia has recently announced a programme for pets.
Airlines are thus able to offer powerful incentives for customer loyalty, even if this means customers pay a premium for some fares compared with alternatives on the same route. Mutually beneficial for both parties, airlines also use FFPs to gain information about customers and, as such, they are a valuable strategic tool for managing customer relationships.
Harish Sharma, the vice president at Mahindra Satyam, a leading software services company in India, says: “Today, airlines know very little about the passenger they are carrying; they are not sure whether they are regular customers or first-time travellers, and if they are repeat customers, whether they belong to them or to the travel agents through whom they booked their flights.”
Mr Sharma says FFPs offer benefits both for passengers who gain from free flights and airlines which can use the schemes to get to know their customer.
“The prevalent joke in the industry is that airlines know more about the cargo they are carrying – where it has come from and where it will go, is it perishable or not, et cetera – than the passengers they are carrying. So if you want an airline to know who you are, you join a FFP,” he adds.
The idea for FFPs dates to 1979, when Bill Bernbach, the chief executive of Doyle Dane Bernbach, the advertising agency for American Airlines, proposed that it provide a reward for the best customers. This was an era when banks offered home wares such as toasters and blankets to new and best customers.
The idea of a “loyalty fare” was floated and on May 1, 1981, American Airlines’ AAdvantage was launched.
This was the original FFP and it followed the deregulation of the domestic air passenger market in the United States, allowing passengers to receive a free flight ticket after travelling a certain number of miles.
United Airlines swiftly followed suit and its Mileage Plus programmed opened five days later.
The total stock of unredeemed frequent-flyer miles in 2005 was estimated to be worth more than all the dollars in global circulation, with more than 14 trillion frequent-flyer miles accumulated by people worldwide corresponding to a total value of about US$700 billion, The Economist reported at the time.
With the ability to earn flight miles extended to the use of credit cards and shopping with affiliated parties, the popularity of FFPs has continued to soar.
So how do you decide which programme is best for you?
Michael Denis, the vice president of customer engagement for the US information management solutions firm InfoTrust, is a regular flyer and clocks up in the region of 150,000 flight miles a year. Mr Denis makes it clear it is often not a case of selecting the FFP that suits you the most or has the best overall deal – it’s simply down to geography.
“I live in Atlanta and travel internationally a lot, so I primarily fly Delta and earn SkyMiles, so I try to stick to the SkyTeam carriers to maximise the best FFP available to me.
“If I lived in Dallas then I’d probably be in American Airlines’ AAdvantage programme and would try to stick with OneWorld carriers, or if it was Chicago then it would be United Airlines’ MileagePlus and Star Alliance.”
In the UAE there are several choices. Emirates’ Skywards was named the world’s leading airline rewards programme at the World Travel Awards for the last two years and the programme offers a network of partners that includes nine airlines, 11 banks, 21 hotel groups and 12 retail and lifestyle brands.
Skywards has also launched a credit card that offers bonus miles.
The Etihad Guest programme is also making advances.
Randy Peterson is an acknowledged authority of FFPs and in 1986 he created Frequent Flyer Services, a company that conceives, develops and markets products and services exclusively for the frequent traveller.
He says: “The last few years have seen Etihad introduce new ideas and certainly execution to be worthy of a comparison when making a single choice … I’ve long liked where Qatar was going with their programme, but today feel comfortable that Etihad and Emirates still deserve first look and choice.”
There is no doubt that FFPs can be worthwhile, if somewhat complex, but customers should also be aware of how it’s possible to get caught out.
Anna Palejowska-Gregory, a Dubai resident, recently wrote to a local travel forum complaining that she and her husband had booked return British Airways tickets from London Heathrow to Abu Dhabi but still paid a significant fee.
“We redeemed coupons resulting from use of our BA Amex card, but although the fare was zero, the taxes and surcharges amounted to almost £1,000 (Dh5,939). On each ticket, there was a fuel surcharge of £319, a service charge of £34.99, air passenger duty of £130 and airport security charges of £13.90” – a total of nearly £500 per person.
Fuel surcharges are unavoidable. However, when choosing an FFP it pays to study the details of accruing miles. FFPs can be notorious by manipulating the actual value of “earning” miles and the “burning” value of miles – you spend US$1 to earn 3 miles but need to redeem at $3 for 3 miles.
It also pays to find out when and how you can use your miles.
According to Guarav Sinha, the managing director of the travel focused creative agency Insignia, “Many airlines are fleet of foot to reward miles but then black out dates during peak season or preferred flight times, leaving customers handcuffed to making additional cash purchases. That eventually damages loyalty as customers end up spending more money and getting little or no relevant rewards.”