ANALYSIS
BY DAVID CHURCHILL
AMERICAN HUSTLE
For many, the golden era of frequent-flyer benefits is over – with implications for business travellers and their managers
THIRTY-FIVE YEARS AFTER AMERICAN AIR- LINES launched the world’s first major frequent-flyer rewards scheme – AAd- vantage – it is poised to become the last of the ‘big three’ US legacy carriers to complete a fundamental revamp of its particular loyalty programme. Unlike the initial scheme offered back in 1981, allocating reward points to flyers based on the distances involved, American is now introducing a system from this July onwards that tilts the rewards earned to those who pay more for their tickets. Both its main rivals, Delta Airways and United Air- lines, have already pivoted in this direction. This radical reshaping of the frequent- flyer rewards landscape is, not surprisingly,
26 BBT MAY/JUNE 2016
causing concerns among many travellers who are seeing the ability to achieve reward miles or points significantly reduced and the cost of redeeming those they already have rising.
Social media comment from travellers who opt for the lowest fares and get the least rewards has, predictably, been highly criti- cal; those with elite status who pay higher fares and get the best rewards, less so. But as the global airlines have shown with their egregious pursuit of ancil- lary fees, they’re very much focused on increasing revenues. Total ancillary fees levied by the world’s airlines last year reached a record US$59.2 billion according to the consultancy Idea Works, with US
airlines alone accounting for a third of this revenue stream. Ancillary fees, moreover, are one of the
key reasons why global carriers are now making bumper profits: the International Air Transport Association (IATA) says the world airline industry collectively achieved record net profits of US$33 billion last year, with US$36 billion pencilled in for 2016.
PROFITABLE CHANNELS While ancillary fees now cover much of what airlines used to include in the fare – from baggage to priority boarding, extra legroom to in-flight food – some 38 per cent of ancillary fee revenue last year came from the airlines’ frequent-flyer
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