InsideFlyer
How does your program look now?
James Abbott
The program now is actually doing really well! We realized that we had a traditional mileage-based frequent flyer program and our members were telling us that it was more and more difficult to get a seat on a plane. So what we did was ask our customers what type of program they actually wanted. They wanted to be able to fly more regularly and earn points with dollars based on how much they paid us rather than how far they flew. We took this idea to our management team to push the boundaries and make a program that our customers wanted. That’s when they came up with an idea of Airpoints Dollars which is currency based on the New Zealand dollar. The response has been fantastic! So now, they are earning and burning more consistently, and we’re engaged in a larger number of redemptions.

IF
Wasn’t your redemption prior to that mostly long haul?
Abbott
Yes it was. More and more members were saving up points to take the traditional long haul flights with us — the former network cost us more money to actually redeem those. But with a more efficient short haul network, it’s much cheaper. And if a member with us is redeeming more often it’s going to make them happier.

IF
Was there any change in your program in the use of upgrades?
Abbott
Upgrades in redemption haven’t changed that much, members see full value in being able to upgrade from economy to premium economy and to premier.

IF
When you first announced the change, we received a lot of input from members. Lots of people don’t like change, but over the last year we haven’t heard from anyone who doesn’t like the new Airpoints system. Is that what you’re finding as well?
Abbott
We took an audit and we found that 66 percent of our members were better off, 24 percent worse off and 10 percent were the same. We were upfront and honest that some people would be worse off and some would be the same. But the bulk of the people would be better off.

IF
Were the ones that lost a little bit from the upper or lower end of the program?
Abbott
The people flying long haul in economy and then trying to redeem for long haul are worse off because it’s not a distance-based program anymore, it’s based on value now.

IF
How has this effected your partners?
Abbott
We’re seeing quite a large growth in the number of Airpoints being given by partners. Members want to redeem their points quicker so this gives them a real drive to earn more points. So the partners have noticed a real change. There is one real change in culture. Beforehand with the more traditional frequent flyer program, staff always said a number of customers couldn’t actually find a seat. Now, members are literally redeeming Airpoints Dollars for a seat you could buy for cash. Because Airpoints Dollars is a form of payment for a richer day revenue booking, it’s much easier to make customers happy. The way the program works now, we’ve got a lot happier staff working for us.

IF
Was there any change with the qualification status for your elite members?
Abbott
We’ve had a good growth in tier membership, especially in the top end. More members saw value in our program because it is a lot easier to understand and use.

IF
In the gold and gold elite tiers, I know you always included the lounge benefit. Will this be included in your future plans for the program?
Abbott
The next stage of development will be to put more benefits back into the program. Being a small airline, it’s crucial for us to have our members in the Star Alliance network. So for us it’s very important that our tier program is merged into the future.

IF
You have always given very good gifts to your gold elite members at Christmas. What’s this year’s gift going to be?
Abbott
This year’s gift is a designer laptop bag — our staff can recognize these members at the airport without having to ask for their card.

IF
When you changed your program, did you get much feedback from other programs?
Abbott
We did get quite a few calls from other programs. This all comes down to a really strong team that really believed in Airpoints. The point of difference for us, being a small airline, is that we need to move as fast as we can. The bigger carriers are slower to react to the member’s needs. It’s really an endorsement to our team that recognized an opportunity, saw a rip in the market and took that leap of faith. We do continue to talk to a number of our Star partners on how they can make this change and the type of impact it can have on their members and staff.

IF
I know that members can use their Airpoints Dollars to redeem for hotel nights. Has there been a change in hotel redemptions?
Abbott
There has been a drop in the usage of hotel and non-air redemption products. I guess the reason for that is because our members can actually fly, which is what they want to do. Now that we have given them the option to fly more easily, they have moved away from what a lot of the other frequent flyer programs have to offer. It’s been a real benefit for us as well, because we have decided to remove some of those costly third party items and give them what they actually want.

IF
This seems to be a return to loyalty for the Air New Zealand program.
Abbott
That is correct. That’s what our members told us back in 2004 when we changed the program.

IF
Beyond Air New Zealand, how is the frequent flyer program industry doing and how do you fit into the Star Alliance?
Abbott
On how we see the frequent flyer industry, we’re concerned that a number of programs are not retaining customer loyalty. The reason for this is that so many programs are being seen as hard to use. They are complex and members are telling us that loyalty programs are literally losing the overall effect. For Star Alliance, there’s been a reduction in the amount of Star Alliance redemptions that our members take because they find it more difficult to redeem through the Alliance than they do with us.