Qantas Loyalty chief executive Lesley Grant refers to the airline’s Frequent Flyer program as the glue that holds the airline together. “It’s very integrated because we provide valuable insight to the airline and we create reward and recognition for members of the program, who are obviously frequent flyers,” Grant says.
The vast amount of data that can be gathered from an airline’s millions of members creates a competitive advantage and can inform the airline’s business decisions, she says.
The airline knows which passengers flew which segments and when and why, and how much they paid. “The important thing is to understand how they’re behaving and being able to target offers that are relevant to those segments,” Grant says.
Loyalty schemes are invaluable to airlines’ marketing efforts because they provide access to millions of receptive flyers – although aviation analyst Chris Tarry says airlines have yet to take full advantage of the highly detailed data they have on the flying and spending habits of their loyalty club members.
“You look at airline marketing, it’s all pretty general stuff,” says Tarry, founder of British aviation consultancy CTAIRA. “The real opportunity is to use your particular travel behaviour to either upsell or sell better.” For example, rather than cutting fares across the board, airlines can offer individuals special deals without showing the rest of the market.
Frequent flyer schemes have also become an important means of communicating with passengers, to let them know of flight delays or changes to their flight schedule.
Alongside a contribution to airlines in terms of market intelligence, marketing opportunities and driving customer loyalty, frequent flyer schemes have become profitable businesses in their own right.
The airlines make money by selling points to their partners, which the partners can then hand out to their own customers in exchange for purchases.
For instance, Qantas sells points to Woolworths – one of its 450 partners – which then gives them out to its own customers as part of its Everyday Rewards program.
Qantas is one of the few airlines to reveal its frequent flyer scheme earnings, which show how valuable the schemes can be.
In the past financial year Qantas Frequent Flyer earned A$1.2 billion from the sales of points and membership fees and A$231 million in earnings before interest and tax.
Qantas (and its competitors) won’t reveal the value it attributes to each point in its financial statements. At any one time the airline is carrying a A$2 billion liability for outstanding points on its books.
“It doesn’t matter whether you’re flying or not,” Grant says. “As long as you’re earning and we create ways for you to be able to redeem, then you’re very engaged in the program.”
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