Airlines make bid for shrinking loyalty with new programs

The travel industry has taken its share of lumps in the recession — including, according to new research from Colloquy, a precipitous drop in active participation in travel rewards program — but new programs from Delta and United might help the airlines win loyalty among frequent fliers.

Colloquy’s latest survey research on US consumer attitudes and perceptions in the recession reveals that active participation in travel rewards and loyalty programs has dropped 31.2% since 2007. On average, the general population now participates in only 1.5 travel-related loyalty programs, compared to 2.18 in 2007. The drop is even more striking when compared to loyalty programs in other verticals: overall, US consumer participation in rewards programs has increased by 19%.

“We’re seeing growth in loyalty program memberships overall, fueled a lot by the financial service and specialty retail sector,” said Kelly Hlavinka, a Colloquy partner. “In travel, while there are pockets of growth, like in hotel membership, many program members have had to make cutbacks in their vacation plans or business travel. It makes perfect sense that the savviest travelers are going to consolidate whatever travel spend they have left with their favorite providers.”

“The marketers that are taking the time to really think about retaining their best customers and really showing them the love now are going to benefit,” Hlavinka said.  “Delta is really consolidating benefits around its most profitable customers. They are savvy loyalty marketers, and they realizes that if they invest now, while people are consolidating, they can really lock them in.”

Delta is stepping up its SkyMiles Medallion frequent flier program as it integrates with Northwest and Northwest’s World Perks program. It is now allowing travelers to roll over miles for elite qualification, meaning once they reach the necessary level for this year, any extra miles can be put towards qualifying next year. The idea is to keep elite travelers hooked into Delta, rather than spreading their valuable miles among multiple airlines.

“Our overall focus is primarily on keeping the benefits we have across both programs today as we integrate,” said Jeff Robertson, VP of loyalty programs, Delta. “Our World Perks customers are very passionate about World Perks, and SkyMiles are very passionate about SkyMiles, so we’re keeping the things they have and adding new benefits to keep a couple steps ahead of our competition.”

Delta is also publicly promoting its highest, “Diamond” loyalty tier for the first time. Diamond, which Robertson said was an “underground” program before, requires 125,000 “elite-qualifying” miles and offers free airport club membership and other perks. In addition, the airline is waiving ticketing fees for Diamond, Platinum and Gold Medallion members and is offering a menu of benefits to its Diamond and Platinum members, allowing them to create personalized rewards programs.

“Having the best network helps, but having the best loyalty program moves you much further,” Robertson said.  

The formal Medallion program takes effect early next year, but the rollover miles offering is available now. Other benefits will roll out over the next 6-9 months. Robertson said Delta would be communicating with customers, largely through e-mail, as each new benefit was released. The airline will also use mass advertising and its Web site to promote the program.

“I think people will notice that we provide additional incentive to stay more loyal, and it definitely keeps our active members more engaged and more loyal,” Robertson said. “At the same time, those active members talk, so people that may not be engaged might start saying maybe I should be a part of this.”  

Delta will be completing its full integration with Northwest over the next 9 months, which will create a combined loyalty program with around 75 million members. In 2010, the focus will be on expanding the loyalty program and the ways that members can earn and spend rewards points.

United Airlines also announced an initiative designed to woo loyalty members: doing away with the last-minute booking fees it used to charge passengers who used frequent flier miles to buy last-minute trips.

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