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30 years of frequent flyer programs

Listed author(s):
  • de Boer, Evert R.
  • Gudmundsson, Sveinn Vidar
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    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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    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
    DOI: 10.1016/j.jairtraman.2012.05.003
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    1. Fredrik Carlsson & Åsa Lofgren, 2006. "Airline choice, switching costs and frequent flyer programmes," Applied Economics, Taylor & Francis Journals, vol. 38(13), pages 1469-1475.
    2. Klophaus, Richard, 2005. "Frequent flyer programs for European low-cost airlines: Prospects, risks and implementation guidelines," Journal of Air Transport Management, Elsevier, vol. 11(5), pages 348-353.
    3. 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.
    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, vol. 8(6), pages 409-417.
    5. 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, vol. 43(3), pages 221-233, May.
    6. Leonardo J. Basso & Matthew T. Clements & Thomas W. Ross, 2009. "Moral Hazard and Customer Loyalty Programs," American Economic Journal: Microeconomics, American Economic Association, vol. 1(1), pages 101-123, February.
    7. Nathalie C. McCaughey & Christiaan Behrens, 2011. "Paying for Status? - The effect of frequent flier program member status on air fare choice," Monash Economics Working Papers 04-11, Monash University, Department of Economics.
    8. Martín, Juan Carlos & Román, Concepción & Espino, Raquel, 2011. "Evaluating frequent flyer programs from the air passengers' perspective," Journal of Air Transport Management, Elsevier, vol. 17(6), pages 364-368.
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