Frequent flyer programmes have morphed into significant profit centres for the airlines industry over the years. With changing traveller behaviour, carriers are rethinking customer engagement and enhancing different touchpoints to stay relevant and appeal to younger generations. Offering mobile-led loyalty propositions that leverage the latest technologies, alongside the establishment of strategic partnerships away from their immediate industry, is on the roadmap for many carriers as a differentiator to help generate sustainable profits.
Amid changing traveller expectations, new business models gain momentum
The global airlines industry is expected to recover to pre-pandemic levels in 2024 and record a 6% CAGR to reach USD1 trillion by 2028
Source: Euromonitor International
As a result, there is an increasing appreciation of frequent flyer programmes to drive significant revenue growth and act as bottom-line enhancers. For instance, Delta successfully boosted the appeal of its scheme, increasing the co-brand spend. In 2023, the airline moved to an ecosystem loyalty programme model, driving value through shopping across partner companies. As a result, its SkyMiles loyalty programme revenues grew by 11% and delivered USD6.8 billion, representing 12% of the airline’s revenue in 2023. Changing traveller behaviour in the post-pandemic world is forcing airlines to continuously refresh their loyalty programmes and adapt to new customer demands.
Exploring Generation Z and millennial touchpoints is essential
According to Euromonitor International’s Voice of the Consumer: Lifestyles Survey (fielded January to February 2024), 34% of Generation Z and millennials will increase spending on travel globally, compared to 26% of Generation X and baby boomers. These results highlight the importance of capturing the attention and spend of younger generations by introducing new amenities and partnerships with popular brands to capitalise on the growth in the industry.
Only 13% of Generation Z participate in airline loyalty programmes
Source: Euromonitor International’s Voice of the Consumer: Loyalty Survey fielded March to April 2024
This low participation rate indicates that airline frequent flyer programmes are losing relevance and must innovate to build trust with these cohorts. To unlock much deeper engagement with younger generations, which globally, are projected to reach 1.8 billion (Generation Z) and 1.6 billion (millennials) by 2040, carriers must improve their digital presence and provide diverse experiential rewards, alongside continuous personalised offering.
Revamping loyalty programmes to stay relevant - who is doing it well?
- Boosting mobile app propositions
Mobile apps are an important touchpoint for engaging with younger generations. The strong growth of mobile penetration globally is expected to positively impact mobile travel bookings, which are projected to record a 10.5% CAGR over 2024-2028, according to Euromonitor International. In fact, half of all Generation Z and millennials research and purchase travel products through mobile phones in 2024, according to Euromonitor International’s Voice of the Consumer: Digital Consumer Survey (fielded March to April 2024).
- Ramping up AI capabilities for a seamless customer journey
Embedding disruptive technology such as generative AI is part of an ongoing digital transformation for many carriers. 87% of Generation Z and millennials acknowledge the benefits of shopping with embedded Generative AI tools, according to Euromonitor International’s Voice of the Consumer: Digital Survey (fielded March to April 2024). Incorporating AI tools into airline’s loyalty programmes can support seamless operations and increase programme appeal.
Through active application of the latest technology in their loyalty programmes, airlines can build an innovative brand image to establish closer emotional connection with their tech-savvy members. Over one third of Generation Z and millennials stipulate that they purchased more frequently with brands which offer positive technology-led experiences, according to Euromonitor International’s Voice of the Consumer: Digital Consumer Survey (fielded March to April 2024).
- Delivering meaningful interactions through personalisation
Personalisation is another key differentiator to pursue customer loyalty as most frequent flyer programmes currently offer similar rewards and recognition structure.
One in every four Gen Z and millennial members believe loyalty programmes should be more personalised
Source: Euromonitor International’s Voice of the Consumer: Digital Consumer Survey (fielded March to April 2024)
In a trial-and-error phase, airlines aim to provide greater personalisation while observing return-on-investment. For example, Sky Airline, a low-cost airline in Chile, launched a blockchain loyalty programme Sky Plus in April 2024 that offers personalised rewards. The launch of this innovative scheme is in response to rising customer demand for greater personalisation of loyalty experiences, and thus allows the carrier to diversify away from lower prices while building enhanced value.
Read our insights The Transformation of Customer Loyalty: A Pan-Industry View, and Reimagining Tourism: Top Three Travel Trends in Asia Pacific 2024 for further analysis on trends in loyalty and travel.