Is this the end of the frequent flyer programme?
In 1979, Texas International Airlines were the first airline to launch a mileage-based reward programme for frequent flyers, a move that would change the aviation industry forever. This was swiftly followed by Western Airlines “Travel Bank” and American Airlines programme, offering low fares to frequent flyers. United, Delta, Continental, Air Canada and British Airways quickly followed suit and loyalty points became the new marketing currency. Today these frequent flyer schemes are big business with trillions of points, worth billions of pounds accumulated across numerous frequent flyer schemes each year.
But a recent report by the CCC (Committee on Climate Change) to advise on Net- Zero emissions – the UK’s contribution to stopping global warming, has caused controversy by advising frequent flyer schemes to be taxed, and now axed completely, the theory being that they encourage jet-setters to take extra flights in a bid to maintain their privileged traveller status.
When it comes to zero emissions, I don’t believe cutting points is the solution. Loyalty points were launched to build loyalty with business travellers, to switch sell when multiple airlines offered the same route, rather than drive new traffic. If a business traveller needs to travel long-haul, there are few alternatives and when time is of the essence, air travel is often the only option. There of course some flyers who flaunt their cards, but I suspect the majority of business travellers value the schemes for shorter security and boarding queues and the chance to freshen up and enjoy the lounge access.
While loyalty programmes remain one of the strongest challenges travel managers have to face when steering their programme and enforcing lowest logical airfare policies, there is little likelihood that miles will disappear, since they remain a strong lever for traveler loyalty. There are however huge discrepancies across companies and countries on the treatment of points. Some companies, particularly in Germany, are investigating the opportunity to turn the points into the company’s property, or at least mitigate the impact of the points in the traveller’s choice. In other companies, the points are considered as a way to give travelers enhanced services, and therefore loyalty programme, status acceleration or status matching are part of the supplier contract negotiations.
Norway tried banning frequent flyer schemes from 2002 to 2013 on domestic flights, its aim was not environmental protection but to encourage competition on domestic routes due to the dominant foothold of SAS. The SAS loyalty scheme was thought to be the main driver of this market dominance. The ban was lifted in 2013 as new airlines entered the market, lowering ticket prices. The ban succeeded in increasing the number of flights, not reducing them. Norway is now pioneering a different tact on air miles gained through business travel by taxing them like an employee benefit and Norwegian companies are now required to tell the tax authorities what air miles their employees have earnt.
What’s more would a ban on frequent flyer schemes be possible? Air Miles programmes are international so no single government could do this alone. Most airlines are also members of alliances, which share points so banning schemes in one country would be totally ineffective.
Penalising loyalty points is not going to stop the necessary travel required for business. Budget-driven corporate travel freezes and the desire to spend more time with family are more powerful reasons for staying home. And the leisure trips you supposedly get from frequent-flyer points are often limited and hard to find. There is no doubt that the we need to challenge the norm of “unlimited flying” being acceptable. Re-education and giving travellers choice to access the need to travel or look at alternative travel options is the only way to drive different behaviour and cut emissions in this sector.