Airlines realise value of loyalty

The recent decision by German national carrier Lufthansa to form a loyalty partnership with airport operator BAA's WorldPoints scheme demonstrates the growing need for airlines to adapt to changing consumer habits.

In the past 18 months, consumers and business travellers have cut back on air travel to cope with the economic downturn. Airline marketers have come to realise that offering extra flights as the only form of loyalty redemption makes little sense.

Research from Mintel shows that 3.3% of long-haul travellers view frequent-flyer schemes as the most important factor in choosing which airline they will fly with, a year-on-year rise of 1%.

As well as earning WorldPoints on their airport shopping, Lufthansa's Miles & More members travelling via BAA's UK airports will now be able to redeem their miles for WorldPoints airport shopping vouchers.

BAA already has smaller partner-ships in place with bmi and Virgin Atlantic. The company's head of CRM, Jason Willicombe, says other airlines are queuing up to partner Worldpoints.

'WorldPoints members are flying less, but spending more,' says Willicombe. 'Today we have 100,000 members, so in 2010 we will use deals like this one with Miles & More to achieve a critical mass, where we can put out more personalised messages.'

However, two airlines unlikely to expand further into this space are the major carriers Virgin Atlantic and British Airways.

Virgin Atlantic has long allowed customers to redeem points from its Flying Club programme in other areas. Yet according to Chris Hare, client services director at direct marketing agency Gyro:HSR, which handles the Flying Club account, the carrier is making no short-term changes to the scheme.

'The airline industry works in long-term cycles, rather than worrying about 18-month recessions,' explains Hare. 'Some airlines have reduced their loyalty programmes, but Flying Club is an incredibly important part of Virgin Atlantic's product.'

While BA would argue it has not reduced the backing for its frequent flier programme Executive Club, it has certainly redirected the focus toward its most loyal - and lucrative - customers.

The fact that BA unveiled a pre-tax loss of £401m for its most recently completed financial year is largely due to a 13% fall in business travellers.

With the appointment of Ogilvy-One to its loyalty account in June 2008, BA launched the biggest-ever review of its loyalty set-up.

After a six-month deliberation, the airline concluded that it would move away from its former focus on BA Miles points, and instead improve its rewards for loyal leisure and business customers.

'In order to retain customers, and customers' hearts, BA needed to ramp up the recognition part of its loyalty programme,' says Jo Coombs, managing partner at OgilvyOne.

Customers can now earn tier points on every flight, which allow them to progress from a basic Blue member-ship to Silver and Gold. Additional benefits have been written into the very top end of Gold membership, known as the 'Gold guest list'.

According to Coombs, the big focus for BA in 2010 will be shedding its image as a corporate-only carrier and improving its appeal to small and medium-sized enterprises.

In September, the airline launched its Business Opportunity Grant, a competition for smaller businesses to win 10 round-trip Club World business-class flights; it is set to steadily bolster communications around such offers.

No one is certain when the aviation market will hit its stride again.

In the meantime, airlines will continue to tighten relationships with long-standing customers in the downturn, more in hope than expectation that consumers will reciprocate that loyalty once the global economy improves.

This article was first published on marketingmagazine.co.uk