American Airlines knows a lot about its frequent flyers. Now it wants to use that data to improve revenue. That's sound strategy.
Travel bloggers love nothing more than amassing millions of frequent flyer miles while buying the cheapest fares.
There’s nothing wrong with that — in fact, my side hobby is leveraging points into impressive redemptions — but the old paradigm never made much sense. Why would a company reward its most frugal customers?
We know now most major airlines have re-jiggered their programs to reward big spenders, and customers who earn points via credit cards. That has set off an arms race among major U.S. airlines, all trying to attract big spenders by improving premium seats and adding new lounges.
During a recent visit to American Airlines headquarters, I spoke with Bridget Blaise-Shamai, the carrier’s vice president for loyalty, and Alice Curry, managing director for customer loyalty and insights, about how American seeks to win and retain lucrative flyers. Among the insights: American sometimes can learn a customer is likely to decamp for a competitor even before the customer leaves for another airline. It’s all about data. “I often joke, even when we as an industry are a bit cash poor, we’ve always been rich in data,” Blaise-Shamai said.
Also this week, we followed the American versus United drama at Chicago O’Hare, looked at new technology from SkyTeam, published a video interview with Bonny Simi, president of JetBlue Tech Ventures, and explained how International Airlines Group’s distribution model could evolve.
— Brian Sumers, Airline Business Reporter, firstname.lastname@example.org
STORIES OF THE WEEK
American Airlines Knows if You’ve Been Cheating on It With a Competitor: If you want to wring extra revenue from your frequent flyer program, one of the best ways to do it is through data analytics. American long has known more about its customers than most businesses. Now, it wants to use what it knows to improve its relationship with its most loyal (and profitable) customers.
Gogo Replaces CEO With Its Largest Shareholder: Gogo’s new CEO, Oakleigh Thorne, controls the family office that owns 30 percent of the company’s shares. Why would he make sense as a new leader? Perhaps to sell the company? Or is there another reason?
SkyTeam Eases the Hassle of Getting Rebooked When Flights Get Disrupted: It is one of the worst kept secrets in alliances — some airlines are tight with others, and others are fierce competitors. But SkyTeam would prefer its member airlines cooperate more. It recently introduced a platform that allows any SkyTeam member to rebook passengers on any SkyTeam itinerary. It’s a great idea in theory. But will it work?
British Airways Wants to Get Smarter About Selling Airline Tickets: Airlines have long hoped for a technological development that would enable them to take back control from travel’s middlemen. IATA’s New Distribution Capability was supposed to be that solution, but change of this magnitude takes time. Skift Europe Editor Patrick Whyte looks at the latest developments in Europe.
American Air Is Battling Chicago Over a ‘Secret’ Deal With United: Apparently, nothing has changed in my hometown since I left in 2005. American and United Airlines are still sniping over who gets a better deal at Chicago O’Hare. American has complained United got a “secret” last-minute deal for five extra gates as part of the airport’s $8.5 billion modernization plan. United says there’s nothing secret about it and Chicago’s mayor has suggested the city won’t change its plans. Will American close its hub? Highly doubtful.
JetBlue’s Venture Arm Expects Blockchain to Be a Major Disruptor: You might not know exactly what blockchain is, but you know it’s supposed to be important. So be sure to watch this video interview with JetBlue Technology Ventures President Bonny Simi. My colleagues taped it last year, but it’s still germane. “Blockchain will be to travel what the internet was to travel,” Simi said in the interview. “Right now, we are in like the 1990s for the internet, where people are like, ‘Uh, what is this?’”
U.S. and UK Airlines Should Retain Lucrative Transatlantic Air Rights After Brexit: Brexit is a mess, and some airlines could lose their rights to fly some routes because of it. But I’m betting regulators will keep UK-U.S. Open Skies. There’s no other possible option. London will not be closed to U.S. airlines.
American Airlines Will Bring Basic Economy to Transatlantic Routes: Some consumer-rights groups think basic economy is a travesty. Maybe they’re right. But the market has spoken. People want cheap, no-frills fares. So why shouldn’t American sell them? Bloomberg has some details on American’s plans.
United Hits ‘Pause’ on Its Bad Idea to Replace Bonuses With Lottery-Style Perks: This story proves I never know what’s going to go viral. When a United employee sent me information on the airline’s new bonus structure last week, I ignored it. A day later, it was international news. Employees were outraged United was taking away their bonuses for hitting various operational marks, in favor of a lottery system, where people could win cars. United took so much flak over it that it pressed the “pause button” on Monday.
Delta May End Discounts for All ‘Politically Divisive’ Groups After NRA Controversy: How many more news cycles will this Delta Air Lines/NRA fracas take up? Surely this is enough already, no? Let’s go back discussing emotional support animals.
What’s coming up
I had an interesting discussion last week with Andrew Watterson, Southwest Airlines’ chief revenue officer, about why the airline flies where it does.
Yes, Southwest adds routes where it expects paid demand is high. But I didn’t realize how much it takes into account frequent flyer redemptions. If customers demand a new leisure route and want to redeem for it, Southwest might add it. This is part of the thinking for Southwest’s new Hawaii routes, which should start next year.
Remember, this is not just about rewarding frequent flyers, who earn miles based on flights. The credit card game is lucrative, and Southwest sells points to Chase, and the bank uses them to reward its high-spenders. When a Southwest customer redeems a flight to Hawaii next year, it might be “free” for the customer, but Southwest will still get paid in a roundabout way by Chase.
“It’s not just for credit cards but it is part and parcel of it,” Watterson said. “We view Hawaii expansion as something that will ignite credit card applications.”
Look for my full story soon.
See you in Hamburg?
The Aircraft Interiors Expo in Hamburg is roughly a month away, and I’m looking forward to attending for the first time. Will you be there? Do you have a story to pitch? Do you want to say a quick hello? Email me and let me know. [email@example.com.]
Skift Airline Business Reporter Brian Sumers [firstname.lastname@example.org] curates the Skift Airline Innovation Report. Skift emails the newsletter every Wednesday. Have a story idea? Or a juicy news tip? Want to share a memo? Send him an email or tweet him.
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Photo Credit: American Airlines is using data to try to attract and retain high-value customers. Pictured is a customer using the carrier's Admirals Club. American Airlines
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