Colin Nagy, head of strategy at Fred & Farid, a global advertising agency, writes this opinion column for Skift on hospitality, innovation, and business travel. “On Experience” dissects customer-centric experiences and innovation across hospitality, aviation, and beyond.
Executives at airlines in the United States should go re-read the children’s classic, The Giving Tree.
Everyone has the general gist rattling around in the corners of their brain, but the story is about the relationship between a tree and a small boy. One may take an optimistic view on the book, viewing it as a tale about selfless love where the tree gives everything it has. The darker interpretation of the book is exploitative and ends with the tree having nothing more to give aside for a stump for the now-grown child to sit on.
Maybe I’m being melodramatic, but there’s parallels towards the state of loyalty at airlines. With the customer as the tree.
At the top-end, fliers are logging 100k miles a year in a less-than-welcoming confines of domestic carriers, satiated occasionally by an upgrade here and there, and other ever dwindling benefits that end up just being the baseline of a civilized travel day.
If we zoom out several years, we can see that airlines have been slowly eviscerating the benefits of loyalty for these fliers in favor of short-term thinking. It is a trend that, while easy to explain to the Street in terms of spreadsheets and earnings per share, may have longer-term and unintended consequences.
Of course, the airline industry is no stranger to cuts for operational efficiencies and cost savings. But airlines fail to adequately price in the second and third-order effects of their actions.
Sure, you can charge for the first bag that was previously free, but when everyone then brings their unwieldy luggage on board, what does that do for boarding, employees that now have to be the bad guy/luggage cop/porter, and for on-time departures?
American recently followed Delta and others in slashing benefits for its top-tier elites, removing systemwide upgrades for re-qualification, selling domestic upgrades that were previously given to their best customers, and also moving to a revenue-based system for mileage in 2017, whereby cheaper tickets earn fewer miles (elite qualifying and otherwise).
This may make sense on the balance sheet. But it begs the question, what is the breaking point for people who have been very loyal to an airline, opting to fly it over other, often better options on certain routes?
Have the legacy carriers priced in the potential consequences of cutting these benefits too much? What does it look like if a sliver — or even a quarter — of their loyal fliers decide their loyalty is no longer worth it and become free agents, selecting the most convenient times and the better, newer plane when possible?
True, a lot of these top-tier fliers are not always your premium cabin passengers paying full-fare business tickets. The corporate world has tightened belts as to what types of fares and cabins are allowed. But these travelers are the ones doing the hard yards, week in and week out. You can recognize them by their tired faces in O’Hare, Kennedy, and SFO. They are important, and mistreat them at your own peril.
These passengers often overlooked the scruffy product shortcomings on airlines like American for the fact that the loyalty program actually meant something. Really great customer service on the Executive Platinum desk, reasonable exceptions made by senior agents with good judgement, and generosity in terms of treatment and upgrades.
So it begs the question: when do these fliers just give up, feeling like their loyalty is worthless?
Friends of mine who were loyalists on the AA transcon from JFK to SFO or LAX have discarded that flight in favor of moving to Jet Blue’s Mint class, eschewing their chase for perpetual Executive Platinum status for a flight that is a third of the cost if you book in advance, with no change fees. Other travelers may choose a Virgin or even a Southwest on shorter-hop routes. A better plane with friendly flight attendants on the former, less restrictive change fees and consistent, homespun cheer on the latter.
Everything has its breaking point in the world, and I often wonder how close we are in the airline space.