In the midst of checking a slew of emails, it would have been easy to ignore this short message from American Airlines:

“We would like to provide you with an important update to the American Airlines AAdvantage® program. Effective July 1, 2010, the Marriott Rewards program will no longer offer AAdvantage miles for stays at Marriott hotels. All qualifying stays at participating properties completed by June 30, 2010 will be eligible to earn AAdvantage miles. It is also important to note the final date to convert your Marriott Rewards points to AAdvantage miles will be June 30, 2010.”

The news registered on several levels. As a consumer and member of both programs, I was disappointed. From a business standpoint, I immediately began to think through the reasons that motivated the end of this alliance between two big travel brands. From a social media point of view, I was not surprised by the immediacy of reaction from frequent flyers but was amazed at the nature of fingerpointing taking place.

I’ve said it myself – establish a loyalty currency in the market with widely recognized value and liquidity and a sponsor’s loyalty model will be turbocharged for profitability. Advocacy aside, my take is that “Rewards as a Business” (the sale of miles to third parties) has its limits and can be jeopardized if not managed carefully.

There are two cautions worth noting:

1. Remember the importance of “liquidity”. The most recognized currency in the world isn’t worth much if it can’t be redeemed easily and for items of high perceived value. The liquidity of airline mileage rewards is an obvious challenge as consumer cynicism over redemption continues to erode the perceived value of frequency flyer miles.
2. How much is too much? There is a threshold at which the price of the miles to partners becomes so expensive that the partner is forced to consider alternatives for investment of marketing dollars as well as which brand they are promoting (mine or yours). It’s quite possible that Marriott was presented a cents/mile price that crossed this threshold and decided to focus on its own brand and points currency to gain additional leverage.

It’s unfortunate that frequent flyers are directing their ire principally at Marriott when it just might be that American Airlines is equally responsible for this divorce.

Marriott would be wise to launch some new travel related promotions around the June 30 deadline that deliver great value and make travellers forget all about AAdvantage miles, just like contrails evaporating in the sky.

Important or Ignored?

Actually, I’m just scratching the surface, but pose a few questions to improve frequent flyer programs and make airline travel a bit more bearable for the masses.

What if the airlines …… ?

1. … would allow frequent flyers to use miles to pay for a bag check charge or, better yet, waive them for higher tier members? (They could burn mileage balances and make my flight experience a bit more pleasant)
2. …  made their airport lounges available for ad-hoc visits, not for a ridiculous daily fee or mileage exchange, but with variable exchange rates on traffic? (They could burn more miles while making the best use of a perishable resource)
3. …  permitted higher tier frequent flyers to make an itinerary change within a specified time (48 hours?) without incurring a $150 charge plus difference in airfares? (Their “best” customers would actually feel appreciated)
4. … sent an occasional email with deals on flights between city pairs that I am actually interested in instead of sending a list of 30 where only two include my home departure airport? (They would be taking advantage of easily accessible data from my flight history)
5. … sent me correspondence addressed to my “real” name instead of “Dear Mr. Hanifin”? (I’ve participated in plenty of surveys and they don’t know this yet? All they have to do is ask)
6. … stopped sending me irrelevant coupons for golf and ski vacations when I don’t play golf and haven’t skied in years? (They would build relationship with me with better prospect of creating loyalty while suppressing a mercenary mentality about frequent flyer programs)
7. … start using their data to build predictive models that encouraged more business? (The flow of business dictates my choice of airline more than any other factor. Can’t they remember me as the Platinum I was two years ago and offer incentives as a “welcome back” when they notice I’ve flown their airline 20 times in 6 months?)
8. … were gracious enough to send their frequent flyers an email explaining their decisions to change program rules, charge for bags, eliminate pillows and blankets, etc? (They would be fostering relationships rather than treating all customers the same)
9. … realized that the friendly-voiced announcements inviting passengers to take a cobrand credit card application or join their frequent flyer program are negated by the flight attendants who insist that the aisle is theirs and rip your kneecaps off if you dare stray past the invisible line? (They would be acknowledging that customer loyalty is the quotient of a great customer experience equation)
10. … admitted that travel between the US & Canada is not “domestic”? (It is only so as defined in baggage charge policies. Travelers would appreciate an explanation, the more transparent, the better)
11. … found a way to be profitable without using their customers – even the best ones – as their path to profitability? (Flyers are weary of the continual excuses about saving costs while they shoulder more charges and endure diminished in-flight experience)

Don’t mistake these questions as whiny complaints from a shattered frequent flyer.

The airlines could answer each question, except the last one, without much fuss and discover new ways to engage their best customers, burn mileage liability, and improve the flight experience.

What do you think? Does this fly?

Not only are the airlines missing a significant opportunity to engage their best customers based on data they already possess, they are eroding their value proposition by adding fees to multiple aspects of the in-flight experience as well as their frequent flyer programs.

In a WSJ “Middle Seat” column dated 2/3/09, I was reminded of the airline’s proclivity to invoke the Loyalty Asterisk™. Did you know that the standard “Contract of Carriage” used by United Airlines is the equivalent of 49 pages and that Delta’s “General Rules Tariff” is a bloated 58 pages?  These are the documents which govern fares, refunds, baggage handling, and virtually all other rules which travelers must live by. One can only imagine that the airline’s lawyers must view their customers as such an evil lot that they devised these heavy tomes to protect the business.

In reality, these documents do not include all the rules governing flight as employee manuals and directives go further to dictate how specific complaints and situations should be handled.

In effect, the airlines hold all the cards in resolving any customer dispute and, like any benevolent dictator, it is incumbent on the airlines to exercise delicate judgment in rules enforcement.

The airlines which hope to emerge from this current economic cycle with their image and brand in tact should carefully reevaluate their approach to nit-picking fees related to checked baggage and potato chips. They might also take caution while they deflate the value of their loyalty marketing (frequent flyer) programs.

Airline industry profitability will be found in more meaningful budgetary line items ranging from union contracts to equipment cost and fuel management. Most flyers would rather keep the relationship simple. If fares have to rise a bit, so be it. But let there be one charge for the flight, provide high quality service, and reward flyers for their patronage.

Anything less will compel flyers to think only of price, price, price and loyalty to the livery will be a thing of the past.

That’s the cry heard from an increasing number of frequent flyers today. When primary research is commissioned to help diagnose the complaint, it may be surprising to learn that the same program features are often reported as both a Key Complaint and Delight.

Three examples:

Program Feature	Delight or Complaint
Options to earn miles	Lots or not enough
Ability to redeem miles for desired travel	Satisfactory or Impossible
Value of miles beyond air travel	Wonderful or Nil

These consumer opinions form a classic two edged blade that slices for or against depending on your point of view. To a great extent, the airlines and issuers of cobranded airline cards could do more to relieve frequent flyer angst.

Let’s take the issues sequentially:

In defense of the airlines and their card issuing partners, options to earn miles have grown to the point of near saturation. Miles can be earned on activities as diverse as sending flowers or obtaining a mortgage. It is well publicized that many airline cobrand cardholders earn the majority of their miles without stepping on an airplane. As a consumer, the complaint that not enough options exist falls on deaf ears. By making this statement, you serve witness that either you are not paying attention to program communications, or that you are not the best candidate to benefit from a frequent flyer program. In this case, your failure to redeem can’t be blamed on the Loyalty Asterisk™.

Consider the options to redeem mileage beyond air travel and hotel stays. After nearly wearing out my calculator, I can’t make the math work in favor of swapping miles for merchandise and magazines. In fact, the only time I have gone the magazine route is when I was striving to beat an expiration date on mileage earned with an airline I no longer frequent. In that case, I was willing to ignore the value exchange and was satisfied to get something for what otherwise would have turned to dust.

The complaint that “I can’t use my miles when I want” is the most delicate to correct. The early premise of frequent flyer programs was “travel now and take your family to Hawaii next Christmas” (fill in your own dream destination). And over the years, the sense of entitlement created by loyalty program sponsors has created a difficult fan base to satisfy. Let’s face it, the air travel experience has changed and consumer expectations for using miles should change as well.

The perceived value of air travel rewards has always been measured in emotional terms. Redeeming to attend a family reunion or take a vacation increases value, while redeeming to attend yet another business meeting is evaluated through careful fare comparisons.

I have not experienced difficulty redeeming miles for my desired travel destinations. It’s not because I am lucky, just that I try to match the destination with the season and am flexible on dates. Applying common sense to the process would help consumers tremendously and reduce frustration, but the airlines can play a big role in the process.

The challenge for the airlines is to tone down the aspirational messaging that has driven demand for frequent flyer programs since their beginning, and subtly reposition with a more practical approach to mileage redemption. Flying the family to Cleveland to visit friends may not play well in full page advertisements, but in today’s economy it represents a valuable savings to a family of four.

I humbly suggest that the airlines limit their promotion of exotic destinations where obtaining a seat with miles carries the same odds as hitting the lottery. Traveler preferences can be refined through use of the massive data the airlines possess and would allow the suggestion of secondary destinations to meet the needs of frequent flyers, reduce frustration, and increase the perception of value across the flying base.

The change is subtle and not easy to execute, but will pay off through higher customer satisfaction over time. The airlines have contributed to the present frustration with their yield management systems and can just as directly relieve the pressure by changing the focus on what constitutes a worthwhile reward.

Bill Hanifin