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Analysis
Harvey also suggests that the future for such loyalty schemes could “see some distribution channels offering different rewards to both corporate and individual travellers, providing greater incentives to move beyond product and attract loyalty by channel instead.” But there could also be a more fundamental shift ahead in the way frequent flyer rewards are calculated. At present they are effectively based on the number of flights and distances travelled rather than the amount actually spent, as is the case with hotel reward programmes. Rewarding frequent flyer loyalty
should, it is argued, be based on actual spending.
Signs that the airlines are already considering this are shown by the new Delta and United scheme changes, which include requirements for minimum annual spending for frequent flyers to earn and maintain elite status within their programmes.
TERMINAL BENEFITS Yet for all the current concerns over frequent flyer schemes, a new worry is apparently hitting American business travellers who have accumulated many millions of miles over the years and
may not live to spend them: what happens when they die? Perhaps surprisingly to us on this side of the Atlantic, many US airlines generally allow reward points to be passed on to virtually anybody in a deceased member’s will, although the rules for ownership and transfers are said to be inconsistent and complicated. But British Airways is in no such quandaries with its Executive Club membership and Avios rewards programmes: they are both swiftly terminated when a member passes away, however many are left unused.
LOYALTY: WHO’S THE REAL WINNER?
THE KEY ISSUE over frequent traveller reward schemes for many travel buyers and managers is: whose rewards are they? Are they an individual perk for the recipient to do with as he or she wants, even though paid out of company funds? Or are they ‘owned’ by their employer? This is still such a
controversial topic in the corporate world that, not surprisingly, some companies are reluctant to talk about frequent traveller rewards because of the impact on employees who do not benefit from them. One travel manager of a major European manufacturer says the corporate policy is clear: “All frequent flyer miles are used to keep travel costs down and all employees have to give them back to the company,” he says, adding that in the past year alone “we will have saved close to €200,000 and bought 400 tickets with the reward points.” Yet not all companies are willing to take a hard line on reward points, acknowledging
that they have a role to play in maintaining staff morale. Roger Peters, purchasing manager at consultants Capgemini UK, says, for example, that the corporate policy is for employees to keep their rewards, which mainly comprise hotel points, given the fact that staff are away in the UK, on average, for three nights a week.
“This is seen as a ‘soft dollar’ benefit to the employee, and we are happy to promote loyalty schemes for suppliers in our preferred programme,” he says. “But it can also be something of a double-edged sword because this can be a factor when trying to move people out of one brand to another.” Another relaxed stance
towards employees keeping reward points is adopted by a UK software company, whose travel manager says: “We allow our travellers to retain their rewards for their personal use, which suits our business style and level of spending.” And the European travel
co-ordinator of a midscale UK- based engineering firm says that “employees may retain frequent
flyer benefits for personal use, although airline selection must not be compromised by this”. The reason, she explains, is that “having a frequent flyer or hotel reward card may help them get additional benefits such as an upgraded room or flight – it is important for them to feel ‘recognised’ when travelling”. A more traditional approach is
followed by Chris Day, strategic procurement manager at Peterborough-based charity the Royal National Institute of Blind People. “Our policy is to use any rewards obtained during travel to reduce the overall cost of staff travel, an approach that we think is the responsible one,” he says. “This has always been our policy but it has just been much easier to manage over the past five years as we work with our travel management company to identify these rewards.”
A FINE BALANCE Australian flag carrier Qantas will in March become the latest international airline to offer small- and medium-sized enterprises (SMEs) a new rewards scheme to help resolve
the dilemma for companies over who benefits from frequent flyer miles that are paid for out of the corporate pocket.
The Qantas scheme – called
Acquire – will enable SMEs to earn reward points towards paying for flights and upgrades, as well as gifts such as electronic goods or luggage; but individual travellers will also be able to accrue reward points for the same flights and earn the same benefits via a consumer- focused loyalty scheme. The Qantas initiative comes
five years after British Airways developed the concept of a rewards scheme for SMEs who did not have sufficient volume of business for a traditional corporate deal with the carrier. BA’s On Business programme enables small companies to earn points for flights, upgrades or hotel rooms, while employees registered with BA’s Executive Club also earn Avios points. Other airlines have launched similar programmes, either on their own or as part of an alliance – Company Plus for some Star Alliance members, or Blue Biz for Skyteam.
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