Looking at the Future of Frequent Flyer Programs By Watching Experiments in Europe and the Middle East

Etihad Guest is one of the most innovative programs in terms of monetizing their product and their frequent flyer program.

They offer a bidding system for flight upgrades.

They also offer LoyLogic’s PointsPay system where you essentially carry your points with you in you wallet and use them to buy whatever you wish — though never as good a value as using miles for flights.

When points are redeemed for flights they are both a rebate and leveraging deep discounts the program makes on the bulk purchase of inventory which would otherwise spoil. When points are used as cash to buy other things, they’re just the rebate without the leverage.

It’s useful to look at the experimentation that programs around the world are engaged in. While the US has historically been the leader in frequent flyer innovation, international programs often experiment with new technologies first now. Program leadership all attend the same conferences, and are pitched by the same consultants. New products often come from outside providers, rather than being generated in a single competitive market like the U.S. and there’s no reason then that U.S. programs would necessarily be the early adopters (and in fact in a more mature industry are often more conservative with changes since they have more — current profits — to lose).

Miles from Blighty reports that Austrian AIrlines is adding bidding for upgrades to some routes.

That’s worth watching because it’s the Etihad idea, spreading.

And because Austrian is a part of the Lufthansa group of airlines, there’s a clear mechanism for the idea to spread further. Lufthansa has a strong interest in further monetizing its premium cabins, they’ve announced plans to shrink their first class cabins but also to begin offering discounted ‘leisure’ first class fares. While it’s hard to imagine Lufthansa auctioning off empty seats (on average they only sell a handful per flight) it’s not impossible.

Revenue-based frequent flyer programs, something we’re just now starting to see as Delta makes some announcements with more anticipated about how they’ll be changing the Skymiles program, aren’t new ideas — Air New Zealand did this nine years ago.

So keep your eye on these changes at Austrian and elsewhere, international frequent flyer programs matter even if you don’t participate in them yourself, they’re a window into some of the things that might find themselves a part of your U.S. frequent flyer programs in the not-too-distant future — not all of the changes, of course, but the ones that drive revenue.

And auctioning upgrades is one of those, which offers an inherent tension of course with elite upgrades. Just as we’ve seen United selling domestic upgrades to non-elites at checkin for “tens of dollars” at the expense of heavy frequent flyers getting complimentary upgrades, so too could this represent a shift away from elite frequent flyers upgrading internationally when ‘tens of dollars’ with perhaps another zero are available from occasional flyers.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

More articles by Gary Leff »

Comments

  1. The “inherent tension..with elite upgrades” is quite clear. But what about mileage awards? Is it possible airlines will become more stingy with the amount of award seats they make available, in order to auction off those seats instead?

Leave a Reply

Your email address will not be published. Required fields are marked *