Airlines Look to Wider Redemption Options for Loyalty Programs

Airlines and consumers are considering new ways to use frequent flyer miles outside of award ticket bookings, according to new research from Collinson Latitude and recent movement within the industry.

Delta's incoming president Glen Hauenstein summarized the airlines' approach to its loyalty programs: “We want people to be able to use those miles not to fly for free but to control your experience,” he said in a recent interview with Bloomberg. In short, airlines are increasingly interested in driving consumers to spend more miles on ancillary point-related products such as magazine subscriptions or day-of-travel experiences rather than award bookings, effectively freeing up those seats for revenue purchases.

Already, the trend is starting to surface across multiple consumer touchpoints. Late last year, Delta started allowing customers to pay for drinks in its airport SkyClubs with frequent flyer miles at a rate of 100 SkyMiles per $1 spent. The airline also broadened the number of fare classes available for upgrades using miles, though some of the upgrades are expensive.

On the consumer side of the equation, however, frequent flyers still seem to be eager to engage. According to the Collinson Latitude report on loyalty published earlier this month, 61% of travelers look for loyalty programs with a broad spectrum of rewards, while 71% think that the value of a loyalty program decreases if it offers a limited range of rewards.

Part of that sentiment may be driven by the lower volumes of miles and points that are now being circulated throughout the travel industry. With the adoption of revenue-based loyalty programs, many consumers are struggling to save up enough points to redeem for a free ticket, so any sort of redemption option is perceived as positive.

But part of the positive response towards diverse award programs is simply about having a choice when spending miles. Like customers enjoy going to a supermarket for multiple canned tomatoes or grated cheese options, they also like multiple options for spending their miles. And if they airlines can make their customers happy and boost revenue in the same move, then all parties can walk away happy.