U.S. Losing Global Dominance

Strange headline for an editorial about miles and points you might say, but stay with me on this one. Recently, I was chatting with Andrew Swaffield, the Managing Director of The Mileage Company, the company recently charged with the change from British Airways Executive Club miles to the new Avios brand of loyalty currency that is shared between British Airways and Iberia–and no doubt airlines that the new ownership might acquire in the future. The Mileage Company is a wholly owned subsidiary of British Airways, similar to the early days when Air Canada spun off Aeroplan in 2002, later selling off 12.5 percent for $250 million in a public float. The Mileage Company isn’t there yet, but they have some similar aspirations as Aeroplan and TAM Airlines Multiplus Fidelidade, and that is to extend their loyalty currency into a coalition loyalty program and thus provide their services and currency to others, including other airlines. Swaffield seemed to be surprised that the U.S. programs haven’t pushed their expertise outside their box over the past 30 years.

So, what has this to do with the price of tea in China? Well, these entities, Aeroplan, Multiplus Fidelidade and The Mileage Company/Avios, are not originators of frequent flyer schemes. Mileage-based frequent flyer programs were invented in the U.S. and remain the home of the largest travel rewards programs in the world. Yes, they celebrated their 30th anniversary in 2011, but what’s new with U.S.-based programs? How is it that programs such as Aeroplan, and now Multiplus Fidelidade, have such clear visions as to where these programs are going? And why are these successes appearing outside the birthplace of the frequent flyer mile?

The success of these entities is nothing short of sensational, with Aeroplan seemingly set to own the world. Then why is it that U.S.-based programs never made the decision to market their expertise to run other frequent flyer and leisure reward programs for worldwide airlines and brands? Even partner American Express has ventured into monetizing their loyalty expertise outside of Membership Rewards with LoyaltyEdge. And while it’s true that U.S. programs provide a service in helping their partners attract and retain customers vis-a-vis the frequent flyer mile currency, other than the selling of miles and opportunities to partner with these programs, they haven’t yet leveraged the value of the enterprise like others such as Air Canada and TAM did when they floated their loyalty programs.

In five years Aeroplan went from $21 million in annual revenue to over $2 billion, and in 2012, will likely close in on $2.5 billion in annual revenue. And their stock is currently rated as a strong buy from seven out of 10 brokers following their stock. Years ago both American and United did exactly what Air Canada did with Aeroplan, spun the frequent flyer program off as a separate operating division. But then they did not move on from there.

I guess what I’m wondering is what happened to the global dominance that U.S. ingenuity had, even in a topic as far off the economic charts as frequent flyer miles? While I haven’t asked myself if it would be a good decision for American and United to spin off their frequent flyer programs in years, I’m just wondering what of the world will be left to split up when you have to go up against Aeroplan and the like. Yes, it took a cheeky comment from The Mileage Company for me to question whatever happened to U.S. global dominance in frequent flyer programs.

And that leads me to the year 2012.

In this new year, I’m prepared for many things. There is simply too much edginess in the world of miles and points to have it be just another year. The current position of American Airlines leads me to think something will change. The positioning of Southwest taking on the business traveler in their new Rapid Rewards program leads me to think they have influence in this industry beyond low fares. None of these topics keep me up at night, but I do think readers of InsideFlyer will want to use the resources we have built for the frequent flyer to keep up with what looks like an interesting year ahead.

And while I’m looking at the year ahead, let me acknowledge the year just past. My newest venture, milepoint.com, became the fastest frequent flyer forum to ever reach 1,000,000 posts and I’m even more proud that milepoint also became the fastest of over 21,000 lending teams on Kiva.org to donate $1,000,000 in loans to help others via microloans–many of them at $25 each. These double milestones were achieved in December and it is something I’m very proud to be a part of.

So, off you go, into a new year–and thanks for letting InsideFlyer be one of your guides.