Summertime and the reading is easy. What better time to sit down with marketing executives of frequent flyer programs around the world and ask the questions you want answered?
“Ladies and gentlemen, welcome aboard, these are your programs speaking…”
Air Canada Aeroplan
No major North American program has undergone more change in the past two years than Air Canada’s Aeroplan. The program continues to re-invent itself, most recently with a complete re-branding, and with the introduction of more non-flight award possibilities.
Though Air Canada itself may be struggling, Aeroplan continues to thrive.
We spoke with Liz Graham, chief operating officer, and Michele Meier, manager, corporate communications, about the state of the program.
InsideFlyer: Aeroplan has begun to offer much more in the way of non-flight awards. Is this a way to reduce demand for seats or overall liability?
Aeroplan: Neither. We introduced the non-air awards because that’s what our members have told us they wanted. So clearly, our members’ main interest may be air travel, but we did extensive research last year with over 5,000 responding, and that research told us that more and more they want choices and they want other reward opportunities.
So we developed the “Your Style” rewards that we launched in February. That has what we call over 150 experiential reward options like golf getaways, in-home dining and spa treatments. It was built on some non-air rewards that we’ve been playing with over the last two years. It’s in no way expected to reduce the demand for seats, but rather to contribute to the growth of the program.
IF: What has been the overall response?
AP: The ones that are really taking off are the golf, dining, and going to the flight simulator. We didn’t expect it to have overwhelming pick-up, but again, it was in response to people wanting to be able to do other things than just take trips.
IF: When you introduced the Your Style rewards, it was only a temporary thing. Has it been extended past October?
AP: We are looking at extending it beyond October. We’re in the process of that evaluation.
IF: How do you go from a strict frequent flyer program to a broader loyalty program? How has the transition been, and beyond the transition, what other things can we look forward to out of Aeroplan?
AP: The transition started back in 2000. In 2000, Air Canada created a separate division to basically focus on creating even greater value for this program in terms of the airline. Commencing in 2000, we started the deal with some of the real infrastructure challenges that we had at that time. There were two airlines, Canadian Airlines and Air Canada, and we integrated two frequent flyer programs into one. What we have done over the last several years is to focus directly on the fundamental issues in terms of what the members are looking for.
One of the things members are looking for is accumulation opportunity. Members wanted to be able to accumulate miles from other activities — not just flying, which is a surprise. And they wanted to be able to integrate those activities into their normal lives. So, in the last two years we’ve now become a limited partnership, co-owned subsidiary of Air Canada.
We have dealt with our fundamental issues, we’ve improved dramatically access to the call center (we used to have waits in terms of hours, now it’s in terms of minutes and seconds). The capacity issues we’ve dealt with in terms of the launch this spring of Avenue.
And we’ve accumulated over 100 partners. Not only did we have a very large financial partner in terms of CIDC, which has been a partner for over 10 years, we have acquired another very big financial partner in terms of American Express. Our three largest partners at this time are Air Canada and those two financial institutions.
IF: There is a perception among some members that the growth of the Aeroplan program is a means of distancing the program from the airline, which we all know is struggling a little bit. Would you like to address that at all?
AP: I believe it is an unfounded perception. We are very loyal readers of FlyerTalk and we see those comments. A bit of this I think is an urban legend. It goes to that thing about capacity, and people’s concerns about there being more members than individual access, so that the capacity will be lessened. And that’s an urban legend, because it’s easier with Aeroplan than any other program to get access to a seat. We’ve got three times more rewards per member than the leading U.S. airline program; we’ve got the highest proportion of available seats than any North American program. The reward capacity that has been used has grown by 20 percent over the last four years. Last year, our members redeemed over 1.4 million tickets. We’ve continued to grow at 30,000 members a month.
IF: It’s fairly common for members to gain elite status early in the year, then go off to another airline to obtain elite statue with that program. Do you have any plans to reward those members who fly Air Canada throughout the year?
AP: The number of individuals that accumulate 100,000 miles on several airlines is relatively small. We have in place a threshold program that rewards the member with bonus gifts at every threshold level. That program continues to serve us well.
IF: In the future, should we look forward to Aeroplan rewarding their members on dollars spent versus miles flown?
AP: We have some of that in place now. If you look at Air Canada’s fare structure that they introduced a few months ago, I think there is even a greater move to that view. We’ll never be able to exactly match miles per dollar spent because of the challenges that exist within the airline industry as it relates to the confidential program agreements.
IF: Overall, statistically speaking, has loyalty increased or decreased as a result of the program changes?
AP: We’ve got more miles accumulated and redeemed every year. We’re handling more calls and more Web booking than ever before. The percentage of members who start to accumulate again after claiming their reward has been stable and the growth in membership continues to be strong.
IF: We understand that members are limited to two Executive-class reward seats per flight. How do you reconcile this restriction with members who wish to redeem awards for family travel?
AP: It is not accurate to say they are limited to two seats in Executive class. It is a percentage of the cabin, and the Executive cabin on a lot of the aircrafts is smaller. It really is that the airlines are trying to maintain a policy of a minimum of two seats in Executive, but it certainly isn’t the maximum. We know that in terms of seat utilization we, in fact, use closer to 12 percent of Executive capacity.
IF: How far in advance is an Aeroplan member allowed to book their award travel?
AP: With Avenue, we’ve got a product that gives members more choice. Some people like to do their planning in advance, and for those customers the allocations are loaded as far away as 330 days.
IF: Is the $25.00 award booking fee going to stay?
AP: It’s free on the Web. It has allowed us to fund major development on the Web. You’re going to see a more personalized Web experience.
IF: In general, is there anything you want to get across to your members?
AP: We very much value our members and we are very committed to listening to what they tell us. Through many vehicles we’re committed to building our business into what members tell us that they want. We are excited about the opportunities for this company and we think that our members will benefit from a strong company going forward.
Northwest WorldPerks
To judge from the media (including us, at times), you might be tempted to think that the nation’s largest frequent flyer programs are constantly under fire from angry consumers.
Not so.
Some programs, including Northwest’s WorldPerks, continue to offer a high-value product to members who by-and-large appreciate it. Certainly, there’s some nit-picking here and there, but for a program as large as it is, WorldPerks has found a way to keep the vast majority of its 25 million members content.
Interestingly, much of that satisfaction has come not from innovation or change, but rather from a steady adherence to the status quo. Northwest has seen competitors and partners make drastic revisions, but has stuck to its guns in terms of benefits.
Russ Hinckley, managing director of the Northwest WorldPerks program, took some time to speak with us about the program and its future.
InsideFlyer: What plans are in the works, if any, to improve the award ticket search-and-book option on the nwa.com Web site? More to the point, will members one day be able to book award flights on partner airlines and put together valid itineraries that do not conform to the default system requirements? What’s the timeframe in which these types of changes can/should be expected?
Hinckley: This summer you will see a significant enhancement to increase flexibility in award ticketing functionality. In the fall, we will expand our search window for award tickets. We already have award ticketing on nwa.com with our largest partners, including Alaska, Continental, Delta and KLM. We will continue to add more partners in the future.
IF: Many airlines maintain an international upgrade award waitlist, yet Northwest seemingly does not. As a result, WorldPerks members find themselves making repeated calls to the service center to find out if a seat has been made available. What is the rationale for the current system?
Hinckley: Our World Business Class product is in very high demand. Given that the cabin space available for World Business Class is rather small, upgrade space is admittedly quite limited. We feel that it is poor customer service to provide waitlists that allow little chance of ultimately becoming confirmed. Waitlists also require many other business rules in their own right. For example, would they clear in tier order, how do they price if not all segments in the itinerary clear, and how will partner members be treated, etc. Additionally, we have found that customer anxiety is not really eased by being waitlisted as they continue to call reservations to see if their waitlist request has cleared.
We have reviewed some of the waitlisting procedures that other carriers use for international upgrading and they seem cumbersome. We recognize and accept that this is a program challenge that needs to be addressed and a combination of many alternatives are under review. Waitlisting may play a role in the solution, but it is not a complete fix in and of itself.
IF: Many frequent flyers, upon achieving the highest-level status in their primary program, will then divert their flying for the remainder of the year to another program to build status there. Have you considered any type of incentive to encourage your Platinum Elite members to continue flying Northwest after attaining their status (e.g., rolling over excess elite-qualifying miles year to year, awarding additional system-wide upgrades for every X number of miles flown, or perhaps creating another, higher level of elite status)?
Hinckley: We have considered a number of alternatives to address this issue. Some of these alternative ideas would be quite popular, while we believe others would be greeted with limited enthusiasm. In fact, this is part of the reason we introduced the Platinum Points promotion. The Platinum Points currency continues to accrue beyond the traditional mileage thresholds for achieving the Platinum Elite tier and the high-end rewards for Platinum Points are extremely lucrative.
We are closely watching how Platinum Points addresses this issue for our customers.
IF: Over the course of many years, and through many changes, Continental and Northwest have remained steadfast partners. Recently though, a growing thunder of complaints can be heard from OnePass members regarding a lack of award and upgrade availability (be it perceived or real), and many WorldPerks members are expressing concerns about the relative value of this ongoing relationship. How would you respond to these concerns?
Hinckley: In general, our customers tell us that our partnership with Continental is quite valuable. The major point of our partnership with Continental was to create a domestic partnership to provide our frequent flyers with the scope of service that would be competitive with larger network carriers. We have accomplished this goal. For instance, if you consider the way our combined complimentary domestic upgrade programs works, it helps us to compete effectively in this very competitive industry.
Managing partnerships is always a challenge and there are always opportunities for improvement. We would say the work we have done with Continental and KLM to provide seamless service to our members and broaden our program scope is some of the best work being done in the industry. We look forward to achieving this same level of success with Delta and SkyTeam in the future.
IF: Could you foresee a day when you might lift the Saturday-night stay requirement for award travel?
Hinckley: This restriction still makes sense to us. The intention of a WorldPerks award is to provide incremental leisure travel opportunities for our loyal members. They are not intended to be substituted for business travel. The Saturday-night stay requirement helps make it more difficult to use WorldPerks awards for business travel.
Iberia Iberia Plus
When asked to name European airlines, most Americans will think of the more familiar players: British Airways, Lufthansa and Air France, for example. Precious few are aware of one of the largest and most profitable airlines on the continent — Iberia.
The Spanish carrier — the first European airline to establish a frequent flyer program — has consistently found a way to remain profitable, and they’ve done it their own way.
Iberia Plus, for example, has stuck to a points-based, rather than miles-based system. It imposes no blackout dates and no capacity controls. And it does all of this while maintaining membership in the oneworld alliance — a group of decidedly more “traditional” programs.
We chatted with Javier Deleito, loyalty programs manager for Iberia, who explained a little about the Iberia Plus philosophy — why the program does what it does.
InsideFlyer: Some claim your earning and redemption tables are not as generous as those of other airlines with whom you partner; therefore, there is little incentive to earn Iberia Plus points. How would you respond to this?
Deleito: The extra points or miles in excess that may be generated from other airlines do not really account for the difference. Neither do the effort and ratios (number of flights/accrual) needed to be awarded a redemption ticket. Some airlines may be more generous than Iberia awarding miles on accrual … so what? I’ll give two good reasons why this is not all too important.
Iberia Plus is one of the few frequent flyer programs that grants points/miles even in the lowest fares — that is very well appreciated by our clients in these “low-fares times” we are involved in.
Secondly, I’d always recommend that customers use their Iberia Plus card to accumulate points in their account regardless of the airline flown, because Iberia will facilitate your redemption ticket with no limitations through Iberia Plus. Smart clients that have already tried it are no longer hesitant or disappointed with our program’s redemption possibilities. Isn’t it better perhaps to fly instead of just accruing all the time? Think about it.
The amount of extra points accrued for flying other airlines is not worth the difference. Redemption opportunities really make it.
It is a question of being either generous with accrual or redemption. We are aware of the benefits of being aggressive and generous with accrual as a promotion to get more paid tickets (income), but we are not doing bad there at all, and we are very generous on redemption opportunities.
We see the difference in two very important concepts: “frequent” and “loyal.” We like to manage both concepts; therefore, we think Iberia Plus is the loyalty program for the frequent flyer clients of Iberia. It is better to keep them “loyal” than “frequent.” It is just a question of balancing both concepts.
IF: You refer to your seat-availability policy as “yield management.” What does that mean? How is it different from what your partner airlines do?
Deleito: Iberia Plus has no limitations of seats or blackout dates for redeeming tickets. We are very comfortable with our policy. Iberia Plus just buys the tickets from Iberia at market prices (with, of course, a good yield management policy between Iberia Plus and the Yield Management Department). It’s profitable for both Iberia and Iberia Plus.
This policy (profitable redemption tickets) makes Iberia Plus one of the most important clients of Iberia as a group, and companies normally react very well to their most important group of clients, especially when these clients are the core of the frequent flyer program of the airline.
To be able to apply this redemption policy, there must be a certain balance between the total number of points pending redemption and the size of the airline. Points/miles you may have in your airline may grow in excess of the capacity available for redemption, therefore disappointing even your core clients — even the ones that fly! Maybe other programs have been promising trips to Jupiter someday, a trip that may take a little bit of time. They may never see that client again.
We prefer to go step-by-step with the clients that “just fly,” focus on their trips of today, and see them again the next day all over again.
Why accumulate so many miles and become a miles tycoon with almost no option to use them “for fun and enjoyment” before you get too old and have to seriously consider travel to Jupiter to spend your miles?
IF: Why do you allow your elite-level members priority in redeeming award tickets? Does this create problems with lower-level members?
Deleito: Top-tier clients have some preferences when flying either for accrual or redemption, and one of them is the priority reservation rights. Iberia often gives higher priority to a top-tier client flying on redemption rather than a lower-tier client flying on accrual.
We do not have problems of this kind with lower-level members.
IF: You’ve recently introduced some enhancements on your Web site, including online award booking. What has your members’ response been to this — are they using it, or are they sticking with the telephone?
Deleito: We are happy with the use our clients are making, and our feedback is very positive. Clients are combining online reservations, electronic ticketing and permanent accrual of points (even on redemption tickets).
Acceptance is very high, reaching more than 25 percent at the end of the second month of this new service. Obviously, the phone will remain important in the short term, but we foresee it becoming marginal in one or two years. We will, of course, promote redemption though our Web site with new value-added redemption features coming, in order to ease the process.
IF: Iberia Plus is one of the few programs that uses a point system instead of miles. Does this present difficulties among other oneworld members? If so, how?
Deleito: We do not think the points system represents any difficulty for our clients or even the oneworld scenario. Our accrual/redemption table of points based on geographical areas is simple, and easy to remember for our clients. In several questionnaires our clients have told us to stick with the points and geographical areas. We would not hesitate to change it if we saw some strong value added in doing so. We frequently ask our clients about it.
This system has been kept very easy to adapt to and to gain credit from. We have some other advantages of being different from most of the airlines’ programs.
United Mileage Plus
Even though the carrier itself remains mired in bankruptcy, United’s Mileage Plus program has distinguished itself by actually increasing benefits at a time when the industry seems headed in the opposite direction.
Whatever else might be discussed in the smoke-filled rooms in Chicago, one point seems to have been made: When revenue is needed, don’t make the customer mad.
We spoke with Arnold Lewis, vice president, Marketing Programs, and president, UAL Loyalty Services, to get his take on where the program stands now, and what members might anticipate in the future.
InsideFlyer: Here’s a question we hear a lot: Why aren’t members allowed to make changes to Star Alliance award reservations after departure?
Lewis: Star Alliance awards are a very attractive benefit provided to Mileage Plus members. With just one call, you can book an award seat at a single price on any one of 15 Star carriers to any one of 755 airports in 132 countries. As is standard across the industry, the award seat is ticketed on the host carrier’s ticket stock to allow for quick and accurate member account management. Since it is not possible to re-ticket on United stock in all of those 755 locations, re-ticketing after departure is not offered at this time. At a nominal fee, re-ticketing is allowed all the way up to departure of your first leg.
IF: Are there any plans to resume your arrangement with Hilton, which allowed the conversion of Mileage Plus miles to HHonors points? Taking this one step further, have there ever been discussions about allowing a transfer of miles to Starwood, or another hotel program (besides Hilton HHonors)?
Lewis: We are in discussions with Hilton about restarting the conversion of Mileage Plus miles into HHonors points. In addition, we are exploring similar opportunities with other frequent guest programs. Stay tuned. Currently, miles are transferable into Diners Club Rewards and can be redeemed for dining certificates with Rewards Network and for downloadable music from Sony Connect.
IF: Have you thought about offering two-class upgrades on coach fares for a three-cabin plane (pay for coach, sit in First for a higher amount of certificates or miles)?
Lewis: Our current upgrade program rewards loyal Mileage Plus customers while still encouraging the purchase of First- and Business-class fares. The Economy-to-Business and Business-to-First upgrades are priced to reflect the comparative value of the service received. The opportunity for a double upgrade is there by redeeming miles for a First Class award.
IF: With regard to flight awards, members have the option to use more miles to secure a seat free of capacity-control restrictions. Why is there not a similar option when it comes to upgrade awards?
Lewis: That is an interesting idea, and is something we can consider as a future program enhancement.
IF: Would you consider allowing 1Ks to choose their rewards, say Region Ones rather than System Wide Upgrades, or vice versa, at maybe a two-to-one exchange rate?
Lewis: United’s Confirmed Regional Upgrades (CRUs) are unique among U.S.-based carriers and a reward that is valued by our 1K customers. We have considered offering the choice, but given current domestic and international average fares, the exchange rate is not attractive. We will, however, continue to consider it.
IF: Are there any plans to enhance the United.com Web site to allow members to book and confirm upgrades using miles?
Lewis: There are many enhancements planned for the Web site this year and in the future. We recognize the importance of being able to offer this capability to our customers and have included this in our planned enhancements.
IF: From discussions with Mileage Plus members, there seems to be a general perception that awards in international First class have become less available as of late. How would you address your members who are concerned about this?
Lewis: With the addition of Star Alliance awards, the availability for international First awards has, in fact, increased across all Star carriers, as a member has the opportunity to secure a premium cabin seat on any of the 15 Star carriers.
IF: According to your 10K reports filed with the SEC, you’ve issued 2 million award seats a year for the past three years. What does that number represent, and why has it stayed the same for three years?
Lewis: That number represents the number of awards redeemed by our Mileage Plus customers for award travel. The fact that this number has remained the same for the past three years despite a 17-percent reduction in United’s flown-mile schedule during that same time indicates that customers have been able to still get their awards.
Zevez
If you haven’t heard of Zevez, don’t worry, you’re not alone. But that is about to change. This recently launched company is on the verge of making a very large splash in the world of miles and points.
Zevez is in the business of helping small- to mid-size companies leverage reward programs to get the most out of their accounts payable — and business is booming. With its help, Zevez claims the companies it works with can increase profitability by up to 10 percent.
To find out more about this intriguing and innovative concept, we went directly to the source, Zevez CEO and Corporation Founder, Joe Graziano.
InsideFlyer: How has the reception of Corporate America been when you show them how to get a return on their accounts payable?
Graziano: Overall response has been very positive. We are finding that businesses have very little difficulty understanding the idea of turning their accounts payable (i.e. bills) into a new source of profits. It’s something like turning on the light in a dark room you have been in before and seeing something NEW. Ok … I have a Mileage Plus credit card in my pocket I use all the time … Ok … I have a bunch of bills at work I pay all the time. … Coincidence? Why haven’t we thought of this before!
IF: We noticed that you try to match the client’s interest in rewards. To date, what percentage of them are interested in frequent flyer miles vs. cash-back or even merchandise?
Graziano: We all know “Cash is King;” however, we are finding that “Miles Rule.” Eighty to 90 percent of our customers are choosing air miles and other travel-related rewards like hotel stays and rental cars. Fifty percent of our miles hounds are using these rewards to make their business more profitable by significantly reducing their business-travel cost, and through employee and customer incentive travel programs. The other 50 percent use them for tax-free personal and family travel.
IF: Are companies leery about earning miles? Do you get a lot of questions about award availability? The ol’ “why earn more if you can’t use what you have?”
Graziano: Early on in Zevez development, we asked our would-be users, “where are the pain points?” Sure enough, easily converting their points into trips was right at the top of the list.
We address this concern in two ways.
First, each account is assigned a “coach” whose role is to ensure our customers reach their goals. To reach their goals, we work together to set their goals.
Our customers use a budget or business plan to forecast their company’s goals and performance. By applying the same principles to their travel plans we can better hit the target. Remember these words of wisdom: “No one plans to fail, but many fail to plan.”
Second, we have partnered with “Award Planner,” a seasoned reward-travel booking company, who boast a 87-percent trip fill rate over the past 15 years.
This will provide our clients with a “one-stop redemption service center,” where travel, merchandise, and fantasies can all come true.
IF: In the 19 years that credit cards have been part of frequent flyer programs, why do you think no one had yet identified the niche that Zevez has identified in this industry?
Graziano: This is a great question! My answer: timing is everything. In 1975, less then 10 percent of all retail transactions were paid by credit cards; today, less then 10 percent is cash. Individually, we are a society of credit and the personal Visa, MasterCard, American Express, Discover, etc., is an everyday tool. In the mid-to-late 90s, profits in business and stock markets soared — watching our pennies took a backseat to 401Ks and 40-percent returns.
When the financial bubble burst in 2001, we were a country in shock and survival crisis management. Today, in 2004, we are back to minding our P’s& Q’s — meaning watching our expenses and managing profitable businesses.
Comfort with the value of reward card points and being good business managers put all the planets in line for the Zevez idea and success.
IF: We’d think that credit card companies would be knocking down doors to partner with you, since they all want to move people and now businesses from writing checks to using credit cards. Do you think that day will come?
Graziano: We see ourselves as the credit-card issuers “dream come true.” Within five years our service will move hundreds of billions of dollars from the banks’ check channels to the credit card channels. We plan to help engineer the best cards with the best issuers, building alliances to achieve the greatest products for our customers.
Swiss TravelClub
The airline industry in Europe is anything but boring. New programs, partnerships, alliances and mergers are springing up like tulips in Holland.
And perhaps no other program is a better example of that change than Swiss TravelClub. Seasoned program-watchers will recall that TravelClub began as one of three offshoots of the now-defunct Qualiflyer program (TAP Air Portugal’s Navigator and SN Brussels Privilege were the other two).
To add even more spice to the mix, a recent proposal for British Airways to acquire SWISS International Airlines has been tabled, largely due to TravelClub’s refusal to roll over to the larger Executive Club program. The sun may never set on the British (Airways) empire, but it’s clear now that some will certainly turn their backs to it.
We spoke with Urs W. Eberhard, head of partnership marketing for TravelClub, about the plucky program that refuses to bow to pressure.
InsideFlyer: With future oneworld membership still under review, and integration into British Airway’s frequent flyer program an uncertainty, members are understandably anxious about the future of their TravelClub miles. Is it reasonable for members to assume future membership in the oneworld alliance?
Eberhard: A frequent flyer programme is one of the most important, but also one of the most sensitive sales tools that an airline can possess. A careful and thorough examination of all the circumstances and likely consequences of integrating the Swiss TravelClub (STC) into the BA Executive Club has revealed that the likely costs and drawbacks of such a move are greater than the potential mid- to long-term benefits. The agreement with BA was a precondition for oneworld membership. Thus SWISS will not be able to join oneworld for the present.
IF: How has STC been established as a business entity? In other words, does SWISS wholly own STC, or is it a legally separate entity in a similar manner to the way Qualiflyer was independent from Swissair?
Eberhard: When Qualiflyer ended in December 2002, STC was launched seamlessly as an independent, but fully SWISS-managed and branded frequent flyer programme.
STC is administrated by Loyalty Gate Ltd. (former Qualiflyer Loyalty Ltd.) — a legally separate company owned mainly by SWISS.
IF: Your practice of crediting full miles for all, even discounted, economy fares is becoming an increasingly rare benefit in today’s world of frequent flyer programs. Is this a benefit you believe you can continue to offer for the foreseeable future?
Eberhard: This observation is very true. Whereas most of our competitors (e.g. Lufthansa, BA, Air France, Alitalia, Finnair, Iberia, etc.) reduce considerably the mileage accrual on discounted economy tickets, STC has continued to grant full mileage on all fares.
It is our credo to best meet the high expectations of our 2 million members. In the coming months, STC will be unveiling a number of new benefits and attractive mileage promotions.
Qatar Airways Privilege Club
Despite continuing political turmoil, the Middle East has seen considerable growth in its airline industry in the past few years. Indeed, far-sighted planners have been quietly beefing up the region’s tourism trade, in preparation for a less petroleum-based economy.
Less-turbulent nations like Qatar, heavily invested in foreign labor, have turned their attention to their airlines, to no one’s surprise.
Qatar Airways, one of the world’s fastest-growing carriers, is a prime example. Heavy initial capitalization has created a modern, efficient, perk-laden carrier seemingly out of nowhere. The airline’s loyalty program, Privilege Club, has likewise been able to take advantage of solid financing to become a world leader in terms of benefits.
We spoke with Greg Epps, Manager of Privilege Club, about the state of the young (four-year-old) program.
InsideFlyer: Currently, what percentage of award-travel requests are able to be filled?
Epps: Right now, it’s turning at 92 percent. At the top tier, 98 percent.
IF: Does that apply to a member that wants to take a family of four on an award trip?
Epps: When I say request, that is every single request that comes in, whether it is one person or six. Award tickets are no freebies. We very much try to get the thinking across that it is an award for loyalty and not a free ticket. Our tickets are treated as a revenue ticket, for example, if a flight is cancelled, as opposed to a free ticket, where you’re told to go away. As far as we are concerned they are considered revenue tickets once they have been ticketed.
IF: Basically then, 92 percent of the time your members will get award travel for the date and destination they want?
Epps: Yes, you will get what you want. Ninety-two percent will get exactly the flight they ask for. Two to three percent will be disappointed. The rest will be a combination. Maybe it will be another flight that day or a few days from what you want. The issue is the region we’re operating in. It’s very much a last-minute market.
IF: Have you considered some type of early bird booking bonus to encourage members to book early?
Epps: That’s something we’re looking into. It will be announced five to six weeks in advance.
IF: And when that is announced should members expect to receive bonus miles, or a reduced mileage cost for the early-bird booking?
Epps: Reduced cost.
IF: The numbers you mentioned — 92 percent and 98 percent for elite members — is there a similar percentage figure when it comes to upgrade availability?
Epps: Ten percent less.
IF: Ten percent less than the overall 98 percent?
Epps: Yes, because premium travel here is in high demand, because of the customer base we’ve got. This is one of the richest countries in the world. The demand for premium cabins is far greater than anywhere else in the world.
IF: Given Qatar is a very wealthy country, do you find that people feel they do not need to earn miles?
Epps: Yes, (as compared to) the Europeans and North Americans. There are three things we want. We want favors when we fly and all the benefits that come with that. We also want the miles for our leisure travel. With the Qatar market you will find that the redemption rate is one of the lowest accruals against redemption. So you could say it’s very much the status and not the miles.
IF: So you could say generally the majority of your members are not residents of Qatar?
Epps: Qatar has four foreigners to every local. If you’re just looking at the local population I would say there is a very sizeable portion that collects miles and never uses them. I worry about the day they want to use them to fly.
IF: Outstanding liability is a big problem for U.S. airlines, and European airlines are beginning to experience this as well. Do you have plans in place to minimize the effect of all those outstanding miles?
Epps: I think the tier at the top will never use the miles, and they will evaporate after the five years. The rest is an education process, once they understand the benefits of it and what they can be doing with it. We need to make sure that when they do use them, we want them to use them when we want them to use them.
IF: How do you expect to accomplish that?
Epps: We will have higher rates in the peak period. The availability and the higher rates will kick in at sometime in the year when the capacity has reached about 80 percent.
IF: Award redemptions in the Privilege Club program grew by 50 percent last year. To what do you attribute this growth?
Epps: Maturity of the program. We’ve only been around four years. There is a point where people are acquiring before they can use the miles. Fifty percent is still not enough; we need it to go higher.
IF: Any plans to offer different types of awards in the future?
Epps: Possibly. There is more and more demand now to convert miles to redemption tickets. One thing here, which I think will be big, is charity donation. People are looking for an all-in-one solution. Duty free vouchers, lounge passes, we’re the only airport here. Using your miles for a car to the airport. Using your miles to pay for extra baggage.
IF: Qatar Airways is one of the fastest-growing airlines in the world. Are the Privilege Club member numbers reflecting that fact?
Epps: Our membership has grown 180 percent from last year. And this year it will be higher. It is actually way ahead of the airline growth. One of our growth problems is that some people here live on $250 a month and travel very little.
IF: Do soaring fuel prices affect Qatar Airways as far as award travel surcharges in the same way they affect other airlines?
Epps: We pay the same price as you in Colorado. It is a lot cheaper to put in my car than it is in an airplane. But we have no real benefits here.
IF: Is there a possibility then you may impose a surcharge on award travel?
Epps: Yes, charges are being introduced in this region and award tickets will not be exempt from it.
IF: Are there any plans to offer online award booking?
Epps: Yes. Sixty-five percent of our members prefer booking on the Web. We have members worldwide, so online award booking will simplify the program.
IF: Has there been any talk around the office about joining an alliance?
Epps: Yes, I think we’re still deciding whom to “sleep with.” I think in a couple months’ time we will decide whom to join with.
American AAdvantage
It’s the oldest one in the book — literally. The American Airlines AAdvantage program was the first modern-day frequent flyer program, launched in May of 1981. Not surprisingly, then, it’s also the largest, with at least 46 million members (roughly 25 percent more than the population of Canada).
And AAdvantage has not allowed its size to go to its head, nor prevented it from being a remarkably efficient operation. Its neck-and-neck finish with Northwest in Freddie Voting indicates that its enormous membership still find it to be one of the top programs of the Big Six.
We spoke with Jeff Zidell, vice president AAdvantage Partner Marketing, about some issues of interest to AAdvantage members.
InsideFlyer: Are there any plans to extend the complimentary upgrade policy for Executive Platinums to international routes?
Zidell: Our new unlimited complimentary upgrade benefit for AAdvantage Executive Platinum members in qualifying markets has been warmly received. However, this program enhancement has been in effect for only a few months, so we’re not considering additional changes at this time. As many of your readers already know, the system-wide upgrades that AAdvantage Executive Platinum members receive can be used internationally.
IF: It is our understanding that the new electronic VP upgrade awards are earned as soon as a member attains Executive Platinum status, and are valid for 12 months from the date of attainment. Are you concerned this will encourage members to divert some of their travel to other airlines in an effort to stave off the attainment of said status until year end? Or, will the new upgrades, in effect, be non-expiring, as the 500-mile segment upgrades seem to be, in practice?
Zidell: System-wide upgrades have always been valid for 12 months. For re-qualifying members, we’ve simply accelerated the distribution of the upgrades, rather than waiting until February to send them out. We feel it is better to reward our customers as closely to the time of their re-qualification as possible. This should also mean that the use of these upgrades will be better distributed throughout the year making them, if anything, more valuable.
IF: Some AAdvantage members have criticized your policy with regard to award redemption to the Indian sub-continent. Specifically, can you explain why travelers on the West Coasts of the U.S. and Canada are required to travel via Europe when using an award ticket, rather than a more direct route over the Pacific?
Zidell: As a percentage, very few AAdvantage awards are claimed to India, and there are some good reasons for routing over Europe rather than over the Pacific. Two of our AAdvantage participant airlines, British Airways and SWISS, offer more frequency and more capacity to India than do our participant airlines based in the Far East. So overall, even though the distance is farther, it’s just as convenient for our customers.
IF: Is there any chance we might see a one-way, reduced-mileage award offered on the AAdvantage award chart in the near future? Clearly this is something a large majority of frequent flyers would like to see. What are/have been the obstacles to making this type of award a reality?
Zidell: While we are always looking for ways to enhance the AAdvantage program and add value for our customers, I don’t see the addition of a one-way award in the near future. For your readers who are interested in reduced-mileage awards, I’d recommend that they check out AAdvantage Net SAAver Awards and Special Mileage Awards on AA.com.
IF: There is always speculation among elite travelers as to the “best” ways to secure a high position in the upgrade queue. Perhaps you could provide some clarification. Specifically, is position in the queue based on time of ticketing or the time one asks to be placed in the queue? And, how does Internet check-in affect queue placement? Are there any other tips you could provide your elite members as far as bettering their queue placement?
Zidell: When requesting complimentary or 500-mile upgrades, a higher elite status helps, and making your upgrade request as early as possible helps. Prioritization on the upgrade queue is based on when the upgrade is requested, not when the trip is booked. For example, if you book a Sept. 1 trip on July 11 and request an upgrade, you’ll have a higher priority than others in your elite level who book the same trip on July 12. All AAdvantage Executive Platinum members are automatically processed first (at 100 hours prior to departure), followed by AAdvantage Platinum (at 72 hours) and AAdvantage Gold (at 24 hours) members.
Flight check-in also allows a member to request an upgrade if an upgrade has not already been requested. An upgrade request made at the time of check-in would be prioritized with the date and time associated with the check-in entry.
Continental OnePass
Continental OnePass is a program that seems to inspire tremendous loyalty, while at the same time garnering its fair share of grousing. Members have complained that the rules are too complex, and that awards are difficult to get.
We sat down with Mark Sullivan, senior vice president for Marketing, and Victor Llana, manager of OnePass Programs, to get some answers.
InsideFlyer: Some members have told us that the program’s rules are too complex. Are there any plans to simplify?
OnePass: We’re always looking at ways to simplify our program. Simplicity does not always mean there will be more award seats, though. A couple of things we’re doing, maybe not to make it more simple, but we’re coming out with new technology at the end of the year which will let people search for award seats. We also plan on reducing the hold time allowed for award seats from 10 days to three or four days. That way if a shorter time is allowed for holding it will allow the seats to go back into inventory.
IF: In the past, “standard” awards were categorized as without restrictions and typically could be had for 50,000 miles. These days the average member thinks of the “regular award” as 25,000 miles. Is there anything that OnePass is doing to alleviate that misconception?
OP: The standard reward as we define it is 25,000 miles. We define our non-restricted reward, EasyPass, as 50,000. We don’t try to tell the customer that 50,000 really is standard and that 25,000 is discount. We don’t approach it that way. We think we’re able to get a lot of customers on our airplanes on standard rewards. Seventy five percent of all rewards redeemed are standard rewards.
Look at the track record on standard awards, which is public — it’s up over six percent. All rewards are up almost 15 percent overall. We offer EasyPass as a way for people to make sure they’re able to use miles as a way to fly. We offer bonus miles, and those bonus miles can help customers justify using EasyPass miles. It makes it easier to get on the airplane than finding a standard award seat.
IF: Does the increase in reward redemption go hand-in-hand with your membership increase? In other words, are there more new members per year than rewards available for them?
OP: Not necessarily. Just because a customer is a member of our frequent flyer program doesn’t mean they have enough miles to redeem for a reward. And EasyPass rewards are always available to our customers.
IF: So, if you have the miles, you can get the seat.
OP: Our program allows you lots of flexibility. You can combine the standard reward with the EasyPass if you wish, if you cannot find standard in both directions.
IF: With regard to international rewards, we’ve heard from many OnePass members who say that when they try to book in advance these awards are never available; however, when they book closer to the travel date they have more success. What is the reason for this?
OP: Upgrades are made available up to nine months in advance, 270 days. Now, for reward tickets our Platinum members can start at nine months in advance in BusinessFirst. At five months, (150 days) for all other OnePass members they release seats. Those are the facts for BusinessFirst.
IF: SkyTeam — Is there still a possibility you will be partners?
OP: Yes, we’re looking at sometime this fall.
IF: Why would someone want to become a OnePass member, opposed to becoming a member of another program?
OP: Our program is the most generous. When we join SkyTeam they will have even more ways to earn and burn. We really try to focus on the customer.
