“With the deepening of the COVID-19 crisis, a visit to the local supermarket has taken the form of an adventurous outing as nearly all travel further afield ground to a halt. Confronted by such a radical shift in routine accompanied by an unknown outcome, I found myself asking embarrassingly selfish questions. Will I lose status? Which ones? By how much? Yet, as is often the case with us humans, the personal soon became collective.”
I have a lot of nicknames. Though I feign offense, one of the most relished is assuredly “Kambr Diva.”
A quick scan of my occasionally used Instagram account should reveal that the moniker is more than warranted. A fact reinforced by the companies I keep in a digital wallet of frequent flyer/guest program memberships. At one time, I counted top-tier status in all three global alliances with a touch of Emirates Gold on the side amongst my prized possessions. After all, on average I settled into an airplane seat every three days for the past decade. And then, there’s accommodation; I’ve laid my head to rest in hotels or Airbnb properties a majority of nights over the same period.
Life at an industry start-up enhances the value of elite status. While the frequency and breadth of travel remain steady or even increase in comparison to previous jobs, the availability of travel dollars adopts a decidedly different trajectory. With the deepening of the COVID-19 crisis, a visit to the local supermarket has taken the form of an adventurous outing as nearly all travel further afield ground to a halt. Confronted by such a radical shift in routine accompanied by an unknown outcome, I found myself asking embarrassingly selfish questions. Will I lose status? Which ones? By how much? Yet, as is often the case with us humans, the personal soon became collective. New questions came to the fore. What are airlines doing to alleviate this customer concern? More importantly, will such measures be effective, and if not, what should they do instead?
Like most – travelers, observers, operators – I was pleased by the expedient and far-reaching response of airlines in the wake of coronavirus upheaval. Fees were slashed, conditions waived. Most carriers have followed with flexibility guarantees, a sort of warranty against the unforeseen in uncertain times. To curb supply in the absence of demand, vast quantities of capacity were pulled from schedules. The world’s airports are littered with parked aircraft.
However, until recently, only a select few had enacted temporary revisions to status-level earning/retention requirements.
Impacted early, Cathay Pacific introduced monthly bonus points for Marco Polo Club members. By mid-March, Emirates had announced a 20 percent reduction in thresholds and bonuses for flights. European heavyweights Flying Blue (Air France / KLM) and British Airways offered lower requirements but limited to members with renewal expiration dates in the next few months. Qantas and Qatar Airways generously issued blanket extensions. As of 31 March, many airlines, including all of the US majors have yet to implement any adjustments. For a solid list, see The Points Guy (TPG) Guide. The varied approaches suggest that – unlike fare rules – the best practice remedy is less evident. Potential solutions are complicated by a series of nuanced and diverse loyalty policies.
To start, while annual is the credits, points, miles status accrual norm, there is no uniformity for when a year starts and ends. Some programs stick to calendar years; others apply annual ranges based on sign-up or promotion (moving up to a higher level) dates. A few have rolling timeframes. The available time to ‘make up’ for the dearth of travel depends greatly on these dates as illustrated below.
The above was likely considered by carriers choosing reductions for members with years ending soon. But this basic example includes an assumption we all to know to almost never be the case: that each person’s travel proceeds at the same rate throughout the year.
- Member A: accrual year from 01 July through 30 June
- Member B: accrual year from 01 January through 31 December
At first, Member A appears most disadvantaged, and in most need of relief. Yet, if Member A flies most often in Q3 and Q4, then he/she has likely already requalified and is presently minimally impacted. Member B, who travels most often in Q2, has few future opportunities for substitution. These variances in individual – as well as regional and seasonal – travel patterns also blunt the effectiveness of any across-the-board cuts to threshold requirements. And there are still other factors at play.
Most prominent, it remains unclear for how long lockdowns and travel restrictions will remain in force. Afterwards, budgets and travel activity will not instantly return to “normal.” This lack of clarity supports the argument for monthly bonuses and/or rolling reductions, but that methodology also exposes carriers to a communications burden that necessitates repeated updates that can instill confusion. Even “extension-for-everyone” has pitfalls: this unsegmented remedy does not help members progress to a higher level and rewards members whose travel may have naturally declined pre-crisis.
Suffice to say, no single solution will address all the issues. Speed and optimization are also at odds. One-size-fits-all is the faster way, but undoubtedly underwhelms some members and overdelivers for others.
But airlines are correct to act with alacrity to reassure as many people as possible in this audience, as they are always critical to revenue performance. Paying attention to that key segment is especially crucial in a recovery.
As for the future, the question before the industry is clear: how can airlines better balance efficiency/simplicity with targeted response?
Airlines are not strangers to customer lifetime value. Tying benefits to spend rather than miles/points is one step some carriers have taken to refocus towards value. Many airlines also operate lifetime status schemes, which provide members with an escape path from the annual rat race while guaranteeing benefits for the most loyal. Still, in many cases, these tracks remain siloed.
Take Members X and Y. They both joined the same loyalty program on the same day. Ten years later, they board the same flight. Member Y receives preferential treatment thanks to extensive flying in the early years that resulted in reaching a lifetime tier while Member X has provided consistent revenue each year, but with a recent upswing that remains short of that higher level. Could a weighting that incorporates both revenue and trend solve for value – and the associated status and benefits?
Trend could be established as a rolling period: biannual, annual, biennial, etc. – specific to each airline’s (or potentially, customer’s) seasonal or market environment. Following exceptional events and/or demand shocks, a simple and efficient segmentation could be applied to response mechanisms.
Such a matrix – or at least actions that are similarly categorized – would better align the airline’s available levers with primary customer needs by type and value of program member; travel business and traveler in harmony.
As an #avgeek who is both an industry insider and a frequent flyer, airline loyalty programs – the set-up, rules, maintenance, benefits – have many times posed a personal conundrum cited often in the frequent-travel community. What is in the best interest of the airline is not good for the loyalty member and vice versa.
COVID-19 has sown chaos in aviation and the wider travel industry. Looking forward to recovery, airlines will have many opportunities to pivot and transform stagnant policies, programs and systems. Loyalty is one such area in need of new thinking and methods. Airlines will benefit, and so too will their loyal customers.