Frequent Flyer Programs (FFPs) are the airlines’ way of giving something back to their loyal customers, to let them know that they are valued.
FFPs are a virus for which there is no vaccine and from which there are few routes of escape. The merest brush with an airline will result in immediate infection; lending institutions pelt the thing at future patients in the hope it’ll distract them from the depth of their debt enslavement.
It is now carried in an always-growing number of everyday exchanges and, yes, I “convert” my Woolworths points to an FFP like a total mug.
I am in the grip of a fever dream of luxury travel that will never take place. I am Part of the Problem.
WHY IT MATTERS
FFPs matter more the more closely they resemble a commodity, or the money commodity. They’re a bit like the Bretton Woods system of gold convertibility: both dollars and points were ostensibly backed by a valuable, finite commodity. But redeemable points (dollars) quickly outnumbered the available seats (gold) they could buy.
It is a deliberate decision by the central banks (airlines) to make their currencies (points) worth less, if not actually worthless. So, opting for a high-interest credit card in order to get points is like investing in a fund that promises only to ever lose you money, or swapping your US dollars for German marks in 1919.
Since FFPs now reward customers based on how much money they spend, rather than the distance they fly, points function like a means-tested welfare payment system in reverse, with the freebies awarded increasing in accordance with one’s ability to pay for them.
They might be taxable soon.
Travellers are apparently abandoning loyalty schemes in droves. We’re annoyed by things such as: the depreciation or seemingly arbitrary value of points; requirements that we obtain the right high-interest co-branded credit card; the near-impossibility of actually using points for their ostensible purpose — i.e. buying airline tickets; and the mysterious carrier-imposed surcharges that can render “free” tickets just as expensive as bought ones.
- The deregulation of the domestic US air transport passenger market in 1978 and the commercialisation of flight reservation systems enabled airlines to launch FFPs.
- The 1978 Airline Deregulation Act limited the laws US states could pass relating to airlines’ operations as well as the types of lawsuits US passengers could file against airlines. States can no longer regulate the price, route or service of an air carrier, and frequent flyer programs may remove members “at their sole discretion”.
- Established airlines developed loyalty programs in the early 1980s as an attempt to defend their market shares as low-cost carriers began entering the marketplace. Results were mixed.
- There were 14.6 million domestic trips taken by Australian airline passengers when the Airline Agreement (Termination) Act 1990 came into effect. By 2015 it was 57.1 million.
THE LAST WORD
The depth of the dive needed to discover the true business of business-to-business points exchange is a guess best left to economists. But any everyday person can quickly learn that the trade has taken on a life well beyond everyday persons.
FFPs are no longer customer loyalty programs, and despite public charges by customers that the programs are themselves “disloyal” to their promise, they are likely to continue in loyalty to themselves.
It would take the simultaneous refusal by a mass to crash the mini-market of FFPs. As a revolution led by the anger of middle management seems unlikely, businesses will continue to trade in these trillions and trillions of promissory points until the last flight is hijacked by the last ticket-holder in history.
Sheftalovich, Z & Castle, J (2018). Frequent Flyer Points—Are They Worth It? Choice, 9 April.
de Boer, E R (2018). Strategy in Airline Loyalty: Frequent Flyer Programs. Cham, Switzerland: Palgrave Macmillan.
Peterson, R (2001). History of Frequent Flyer Programs. WebFlyer, May.
de Boer, E R & Gudmundsson, S V (2012). 30 Years of Frequent Flyer Programs. Journal of Air Transport Management, 24, 18–24.
Reaves, C N & O’Connell, J F (2017). An Examination of the Revenue Generating Capability of Co-branded Cards Associated with Frequent Flyer Programmes. Journal of Air Transport Management, 65, 63–75.