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30 years of frequent flyer programs

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  • de Boer, Evert R.
  • Gudmundsson, Sveinn Vidar
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    Abstract

    Since American Airlines launched the first frequent flyer program in the US on May 1, 1981, the programs have ballooned in size leading to skepticism around the airlines' ability to manage both liabilities and members' satisfaction. Over time program changes have addressed a number of idiosyncrasies in the original model by aligning customer value better to rewards offered. More appropriate earn and reward structures were developed and clearer reporting standards introduced. In this article we review how the programs evolved over the last 30 years and introduce three typologies of frequent flyer programs: legacy programs, advanced programs and autonomous next generation programs. The article concludes that airlines operating autonomous next generation programs are more likely to run a frequent flyer program that is sustainable and transparent, resulting in increased profitability.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Air Transport Management.

    Volume (Year): 24 (2012)
    Issue (Month): C ()
    Pages: 18-24

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    Handle: RePEc:eee:jaitra:v:24:y:2012:i:c:p:18-24

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    Web page: http://www.journals.elsevier.com/journal-of-air-transport-management/

    Related research

    Keywords: Airline marketing; Frequent flyer program; Marketing program; Yield management; Loyalty programs;

    References

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    1. Hess, Stephane & Adler, Thomas & Polak, John W., 2007. "Modelling airport and airline choice behaviour with the use of stated preference survey data," Transportation Research Part E: Logistics and Transportation Review, Elsevier, Elsevier, vol. 43(3), pages 221-233, May.
    2. Leonardo J. Basso & Matthew T. Clements & Thomas W. Ross, 2009. "Moral Hazard and Customer Loyalty Programs," American Economic Journal: Microeconomics, American Economic Association, American Economic Association, vol. 1(1), pages 101-23, February.
    3. Carlsson, Fredrik & Löfgren, Åsa, 2004. "Airline choice, switching costs and frequent flyer programs," Working Papers in Economics 123, University of Gothenburg, Department of Economics.
    4. Gudmundsson, Sveinn Vidar & de Boer, Evert R & Lechner, Christian, 2002. "Integrating frequent flyer programs in multilateral airline alliances," Journal of Air Transport Management, Elsevier, Elsevier, vol. 8(6), pages 409-417.
    5. Nathalie C. McCaughey & Christiaan Behrens, 2011. "Paying for Status? - The effect of frequent flier program member status on air fare choice," Development Research Unit Working Paper Series, Monash University, Department of Economics 04-11, Monash University, Department of Economics.
    6. Mara Lederman, 2007. "Do enhancements to loyalty programs affect demand? The impact of international frequent flyer partnerships on domestic airline demand," RAND Journal of Economics, RAND Corporation, vol. 38(4), pages 1134-1158, December.
    7. Klophaus, Richard, 2005. "Frequent flyer programs for European low-cost airlines: Prospects, risks and implementation guidelines," Journal of Air Transport Management, Elsevier, Elsevier, vol. 11(5), pages 348-353.
    8. Martín, Juan Carlos & Román, Concepción & Espino, Raquel, 2011. "Evaluating frequent flyer programs from the air passengers' perspective," Journal of Air Transport Management, Elsevier, Elsevier, vol. 17(6), pages 364-368.
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    Cited by:
    1. O'Connell, John F. & Warnock-Smith, David, 2013. "An investigation into traveler preferences and acceptance levels of airline ancillary revenues," Journal of Air Transport Management, Elsevier, Elsevier, vol. 33(C), pages 12-21.

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