Frequent flier programmes generate profits for airlines

| Updated: October 22, 2017 17:39:07

Frequent flier programmes generate profits for airlines

Alaska Airlines employees have long received bonuses for helping reach on-time arrival goals and improve passenger satisfaction scores. And they recently got a new way to earn a pay bump: If more travelers sign up for the carrier's frequent flier programme.
Airline loyalty programmes, which began nearly 40 years ago as a promotional gimmick, are becoming increasingly lucrative for carriers, according to Los Angeles Times.
Such programmes can bring in as much money as all those fees that passengers complain about, including charges for checked bags and onboard food and drinks. Some analysts estimate that as much as half of all airline profits come from frequent flier programs.
But the programmes are a growing source of frustration for airline passengers.
In the last few years, most airlines have dramatically overhauled their frequent flier programmes. The latest is United Airlines, which as of Nov. 1 will require more mileage points to fly some of its most popular routes.
For many fliers, the industry-wide changes have sharply reduced the value of reward points and made them harder to redeem.
Samuel Engel, head of aviation at the management consultant ICF, compared the devaluation of frequent flier reward miles to extreme inflation.
"It really looks like the hyper-inflation of Zimbabwe or Venezuela," he said.
Kerry Welsh, a retired entrepreneur from Rancho Palos Verdes, Calif., is a member of several airlines' frequent flier programs but said he is frustrated by the extra cost and lack of available seats when he tries to redeem his miles.
"Many frequent fliers are like me," he said. "We have millions of miles, but we don't use them, because using the miles is a big rip-off. So instead we accumulate more miles."
Frequent flier programs began in several forms in the late 1970s and early '80s as a way to give incentives to keep fliers loyal. American Airlines launched what many consider to be the first airline loyalty programme in 1982.
Since then, the programs have surged in membership and revenues thanks to mergers and acquisitions in the last few decades that created a handful of giant carriers that dominate the industry.

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