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Airlines Upgrade Loyalty Programs and Perks to Meet Millennial Tastes

Airlines Upgrade Loyalty Programs and Perks to Meet Millennial Tastes

U.S. airlines are updating their loyalty programs to appeal to younger consumers, both despite and because of the pandemic’s effects on travel. Some c

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U.S. airlines are updating their loyalty programs to appeal to younger consumers, both despite and because of the pandemic’s effects on travel. Some carriers are adding perks such as e-book and virtual-exercise subscriptions, while others are overhauling the way frequent fliers earn and spend air miles.

The shake-up comes as airlines broaden their focus from older business travelers to millennial and Generation Z customers, who are more likely to catch flights during the pandemic and after it as well.

Younger fliers care more about quick, flexible ways to redeem and spend air miles than they do about their steady, predictable accrual, and they also care about the perks that come with membership in loyalty programs, said Sid Krishna, head of loyalty and co-brand at Spirit Airlines Inc.

“They want that instant gratification,” Mr. Krishna said.

Spirit on Jan. 21 updated its Free Spirit frequent-flier program to shift its emphasis from distance traveled to how much members spend. Members can earn credits from buying upgrades for baggage and seat selections as well as flights. The switch aims to help customers accrue points and more quickly improve their status level in the program, gaining access to better perks, Mr. Krishna said.

The airline also introduced a “points pooling” program that lets its premium Free Spirit members with Spirit credit cards combine and share points with up to eight friends and family members.

“We didn’t want to restrict it to just family, like points pooling traditionally does, because we know that Gen Z and millennials love traveling with friends,” Mr. Krishna said.

Air travel largely remains grounded by world-wide lockdowns and border closures implemented to fight the coronavirus. The International Civil Aviation Organization last month reported 1.8 billion passengers took flights in 2020, compared with 4.5 billion in 2019.

The changes follow airlines scrambling early in the pandemic to placate existing loyalty members by locking their statuses and broadening the ways they could earn points while not flying, often with their co-branded credit card providers, who were rewriting their own rewards programs to keep customers

Airlines are focusing on their membership programs because they generate useful customer data for sales and marketing departments and serve as assets to help secure financing.

“Essential to our ability to go out and raise that is the performance and resiliency of these loyalty programs,” said Luc Bondar, vice president of marketing and loyalty at United Airlines Inc. The company, which last month reported a fourth-quarter net loss of $1.9 billion, last year leveraged its MileagePlus program to secure a $5 billion loan.

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Millennials were the largest generation flying before the pandemic, accounting for 25% of the 4.3 billion passengers that flew in 2018 globally, said Alexander Grous, a lecturer in digital e-commerce at the London School of Economics. Concentrating loyalty programs around their behaviors, as well as the younger Gen Z, is a prudent strategy for airlines, because of their size, lifetime spending potential and behavior, Dr. Grous said.

“This cohort takes the most trips per annum,” he said. “They are four times less likely than non-millennials to be loyal to one or more airlines, and are less likely to collect frequent flier miles than older travelers.”

Younger passengers have been flying with American Airlines Inc. more than older ones during the pandemic, said Alison Taylor, the company’s chief customer officer. The airline reported an uptick of people joining its AAdvantage program as a new, younger cohort signed up, she said. American, which reported a record $8.9 billion loss last year, declined to share further details on the loyalty program’s growth.

“The number of new, young leisure customers that we’ve had from secondary and tertiary cities during the pandemic has been such a positive thing for us, and we want them to be engaged,” Ms. Taylor said. In response, American has added more perks to its loyalty program, including a selection of free e-book titles from Oprah’s Book Club via an Apple Books subscription.

American last month also introduced a subscription wine delivery service, Flagship Cellars, that lets members earn 2 miles for each dollar they spend on an order, the company said.

United last April began offering its MileagePlus members perks via new corporate partners, such as a 30-day free subscription to Alo Moves, which offers virtual yoga, fitness and meditation classes, Mr. Bondar said.

Perks not directly related to travel are beginning to appear in more airline loyalty programs, said Clare Lawson, chief customer officer at advertising agency Ogilvy.

“We’re seeing a divergence for travel companies to play a greater role in people’s lives as opposed to focusing and doubling down on travel,” Ms. Lawson said. Millennial and Gen Z customers, she added, buy into brands with a “holistic return on a number of different levels.”

Write to Katie Deighton at [email protected]

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

This post first appeared on wsj.com

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