Monday, July 27, 2009

Loyalty Programs in Tough Economic Times

A new article up online today discusses the role of airline customer loyalty programs in generate revenues during the current worldwide economic downturn.  See Ian Wylie, Flying Far and Wide on the Back of Airline Loyalty, Fin. Times, July 27, 2009 (available here).  As the piece notes:

[I]n this recession, the real value to airlines of loyalty programmes lies in their ability to generate cash rather than loyalty. "Frequent flyer programmes no longer serve to drive brand loyalty alone, but rather to deliver extra cash, mostly through the sale of miles to card-issuing banks," says Jay Sorensen, a former Midwest Airlines executive and now president of IdeaWorks, a consulting company.

At Delta alone, Mr Robertson says the SkyMiles and WorldPerks programmes are expected to generate more than $2bn (€1.4bn, £1.2bn) in revenue in 2009. United and Continental each raised cash last year from the advance sales of miles to their card partner, JPMorgan Chase.

"Tough economic times have encouraged airlines to rely upon this kind of short-term gratification," says Mr Sorensen, who reckons that when investor confidence returns some of the biggest airlines will try selling off their programmes.

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