Airline Roulette and the Value of Loyalty

The airline business is an intricate and multi-faceted industry, especially for unassuming flyers. In an earlier blog post, I wrote about the complexities of the wireless carrier industry and how those companies have adapted to rapid technological advances over recent years. Aviation fits the bill for this description too, with a healthy side of ins-and-outs designed to maximize carrier profits, often at the flyer’s expense.

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Over the years though, airlines have become more consumer-centric, with the philosophy that more engaged and happy customers will be more valuable to the airline. Those loyalty programs you sign up for and forget about can be quite lucrative, and the miles you accumulate through flights you’re already taking can add up to something truly worthwhile. You might be rolling your eyes while reading this, thinking that the airline propaganda has gotten the better of me, but there is a lot of money in the airline rewards business if you play your cards right.

 

What’s in it for you?

Depending on the type of flyer you are, getting value out of your purchases may be more attainable than you think. And, of course, there’s plenty for the airlines to gain from you too.

 

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The First Time Flyer

Airlines have more to gain from you than you do from the airline. You’ve just learned that anything more than a middle seat costs extra. Your carry-on has every prohibited item going and is probably as big as your costly checked bag. You haven’t developed your boarding etiquette yet, but you fell for the “perks” of priority boarding. The sound of a $4 water bottle, $10/hr Wi-Fi, and $5 bag of chips sound strange, yet perfectly reasonable at the same time.

Aside from these incidental fees, though, the airlines aren’t celebrating your presence all that much (not yet, at least). The real value in a flyer comes from loyalty and that’s where the frequent flyer programs come in. The general practice of wooing a new customer to build loyalty isn’t unique to the airline industry by any means, but loyalty sure has its perks when you’re flying at 10,000 feet. More on this later.

 

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The Occasional/Non-committed Flyer

Aka, ballin’ on a budget. These flyers go right to Google Flights or Expedia to find the cheapest flight. Even the dreaded Spirit Airlines is an option (think a glorified tin can in the air). They might have a preference for a particular airline, but price tends to outweigh any of the perks that might come with that airline.

As an aside, here are the major U.S. airlines, with notable features of each:

  • American Airlines. The world’s largest airline, American and U.S. Airways joined forces several years ago in a surprising mega merger. They recently unveiled Basic Economy and boasted the fact that customers are now paying more for less.
  • Delta Air Lines. Runner-up to American in global scale, Delta’s slogan is “building a better airline, not just a bigger one.” In my experience, Delta’s overall experience (as an occasional, non-committed flyer) is far better than American’s, though the frequent flyer tiers are more abundant on American than on Delta. Delta offers Basic Economy fares for the price-conscious consumer as well.
  • United Airlines. United’s mission to “fly the friendly skies” has been called into question with a string of corporate crises over the past year, with a doctor being dragged off of an oversold flight topping the list. However, United has since rolled out significant policy changes to improve its customer service; having flown United both before and after this incident, I’ve noticed a difference I was generously compensated (without even contacting the airline) for a minor delay and inoperable Wi-Fi while en route. United also offers Basic Economy fares.
  • JetBlue Airways. What’s not to love? Free snacks, free Wi-Fi, the most legroom in coach (no, I’m not a paid spokesperson), and a customer-first business model are some of the perks JetBlue has to offer. However, as with all airlines, JetBlue has retracted on some of its key differentiating factors, such as that beloved extra legroom and that free checked bag.
  • Southwest Airlines. Perfect for the overpackers of the world, Southwest offers a generous two free checked bags for every customer. They also differentiate themselves with a first-come-first-board queueing system, and they let you pick any open seat at the time you board the plane.

 

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The “Frequent” Flyer

If you patronize your favorite airline enough, they’ll patronize you right back. Hence why JetBlue’s new Mosaic program offers dedicated check-in and free alcoholic drinks (#lit), Delta’s four-tiered Medallion program provides first class ticket upgrades and SkyClub access, and American’s highest of four AAdvantage statuses is valued at close to a whopping $7,500 in benefits. Of course, once you’ve spent such a large amount of money with a single airline, committing your loyalty is seemingly effortless, and airlines go to great lengths to keep you (and your money) for as long as possible.

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What about the Average Joe?

While elite status is largely reserved for frequent travelers (aka, “business people”), lower-tier rewards programs are well within reach, even for the occasional traveler.

For example, I only fly a dozen or so times a year, but I take advantage of airline credit cards (which is a story for another day). Not only does this help establish loyalty with your preferred airline, but it also helps you enjoy perks right out of the gate. For example, by flying Delta and JetBlue over the years, and taking advantage of Delta SkyMiles and JetBlue TrueBlue bonuses through their respective credit cards, I’ve been able to:

  • Fly back from Mardi Gras on JetBlue with accumulated points a $600 flight otherwise;
  • Travel to Washington, D.C. on JetBlue to witness the Presidential inauguration with a friend who studied in the city; and
  • Fly roundtrip from Boston to Rome, Italy using just Delta SkyMiles  a flight that would have otherwise costed $1,200.

 

As you book your next flight, take a second look at that airline’s rewards program. Those miles accumulating virtual dust might be of value — perhaps you can use them to forge a bond that’s rewarding in the long-term for both you and the airline. And maybe, just maybe, you’ll one day be the high roller you never thought you’d be just let me know when so I can fly with you for free.

 

 

Further reading: The Points Guy is an incredible resource for up-to-date airline news, rewards valuations, and tips for maximizing your credit card use for free flights. I learned much about the airline industry from their New York City-based team. I highly recommend reading their articles: https://thepointsguy.com/

12 comments

  1. Interesting article! In an industry where profit margins have been squeezed dry, customer loyalty definitely seems to be a priority for these airline companies. It is no wonder companies like LifeMiles leverage this opportunity by serving as the middle man between the customer and the airline. Their margins are extremely high precisely because there are so many average Joes who just sit around until the miles expire, which turns into solid cash for companies like LifeMiles. You’re spot on when you say airlines have a lot more to gain from us than we do from them–granting incredible privileges to a select few and taking advantage of the majority is a pretty good trade-off from their perspective.

  2. It’s crazy to see how each airline approaches locking in their customer…at all levels as you touched on. I am curious to see whether the airline industry will be effected in general given the technological advancements of autonomous driving, i.e. commuter flights from Boston to NYC (1 hr.) could decrease if someone can get into a self-driving car and get to Boston or NYC for cheaper and less of a hassle. Great article!

  3. Great post! It’s super interesting to see how much airlines try to differentiate themselves by offering different amounts of free baggage, snacks, etc. Because the overall service of an airplane ride is essentially the same, I think that’s why the brands are SO receptive to maintaining a good brand image and responding to PR. Just looking at United’s twitter account under “Tweets & Replies” shows them almost exclusively responding to disheartened customer complaints. This, along with @mariellemarcus1‘s tweet to American Airlines to get on an earlier flight, displays how important it is for them to strengthen their brand perception in such a competitive industry.

  4. As someone who flew often abroad, it’s interesting that you’ve mentioned Spirit here for the price conscious fliers. I’ve flown once, and I vow to never fly again. However, what amazes me is that RyanAir in Europe is essentially a Spirit that has its act together. I flew RyanAir for over a dozen flights and I had delays once or twice. It seems as though there’s a large, untapped market here in the states that’s being failed by Spirit, one that I believe another airline can profit off of.

    1. I flew Ryanair over the summer in Barcelona and braced myself for the absolute worst. It actually wasn’t bad – perhaps the checked bags and priority boarding that my family added made the experience a bit better. For the price, Ryanair is filling a void in the market that Spirit could do, but is – in my opinion, and to agree with you – not doing it right.

  5. Super relevant as I just flew this past weekend! My family is a big United family because of my dad’s status through work. I went to LA this past weekend to see my brother and unfortunately United doesn’t fly this route often. This meant I was forced to fly a different airline with no hopes of getting upgraded. I flew Jetblue largely because the DirectTV (yes this was important to me because I was flying on Thursday night and the Pats were on). I was SO mad when they announced that the TVs were not working…. luckily the wifi was so I could track the game. I didn’t have many expectations because airlines are rarely customer first, but I received a travel credit AND an apology for the broken TVs the next day. Definitely a great business model.

    1. I was blown away by JetBlue’s response to the first time my flight was delayed when flying them. One of the many reasons I’m loyal to JetBlue!

  6. Between hotels and airlines, travel loyalty programs really are king. I was fortunate enough to sign up for an upgraded Delta SkyMiles program this summer through my internship employer. Much to my surprise, I was able to earn SkyMiles on flights that I booked using my company’s corporate account that I could use in my personal life which is a huge incentive for me to select Delta on future personal flights. I plan to sign up for JetBlue’s Mosaic program once I return for full-time so I can continue taking advantage of these loyalty programs!

  7. Like @andrewmanginelli, I also have flown Spirit and refuse to ever fly it again. Similarly, as he also mentioned, RyanAir is a glorified Spirit. I hated RyanAir, but what is a college student supposed to do when you just decide to fly to Paris on a whim and only RyanAir has flights? I am a JetBlue TrueBlue member, but since I don’t fly that much (pretty much only for Thanksgiving, Christmas, and Easter), I haven’t seen any of the benefits of my membership. I would love to figure out how to take advantage of it!

    1. You’d be surprised what a couple of flights could add up to in terms of miles. Couple them with booking directly on the airline’s website (which, in JetBlue’s case, is 2x points) and airline credit cards (JetBlue’s free credit card comes with a 10,000 point signup bonus, and paid card 30,000), and you’ll have free flights before you know it!

  8. Interesting post. Just be sure it’s focused on the digital business angle!

  9. Interesting blog post. I have heard of all these loyalty programs, but are they really worth it? I think that they are only when you fly with one airline 100% of the time to get miles, perks and discounts. The interesting thing is that the airline will know your every move. They will understand your schedules and study you with thousands of data points you are willing to give them. I do believe in those programs but since I am not a frequent flyer i chose all credit cards, all airlines and basically have miles in all companies.

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