Frequent flyer programs are a money maker for airlines. In the US, the Department of Transportation is now looking closely at this. The focus is on demonetisation measures.
This concept is already 230 years old. As early as 1793, a retailer in Sudbury, New Hampshire offered his customers metal chips for each purchase. They can then be transferred to objects. It is believed to be the world's first registered customer loyalty program.
From the corner bakery to the supermarket to the hairdresser – loyalty programs are ubiquitous today. Also on the plane. In 1979, Texas International Airlines became the first airline in the world to reward and retain passengers based on distance flown. In 1993, Lufthansa also introduced a frequent flyer program called Miles & More.
Projects are worth billions
This gives airlines a very powerful tool. Not only do they retain customers. You will also earn extra income. On the one hand, credit card companies do this when they buy points or miles to distribute them to cardholders. You can also earn by selling points to partners like hotels, car rental companies, fashion brands and retailers. It turned the new business segment into a cash machine.
American Airlines, for example, earns an extra $29.10 per passenger through its frequent flyer program, according to data from consulting firm IdeaWorks. This adds up to $5.8 billion in additional annual revenue. At Lufthansa Group it is $3.66 per guest, so $372 million per year. Consulting firm On Point Loyalty estimates that the loyalty programs of the three largest U.S. airlines are worth more than $20 billion, with Delta leading the way at $27 billion. Miles & More from Lufthansa Group brings in around $8 billion, Avios from IAG and Flying Blue from Air France and KLM bring in around $7 billion each.
Fight against unfair demonetisation
But now the US Department of Transportation is keeping a close eye on these cash machines. It is scrutinizing programs of major U.S. airlines for misleading or unfair practices, the news agency said. Reuters Confident. Specifically, it verifies transparency, transfer of miles and advance notification of changes when booking award tickets. “We plan to carefully review complaints about loyalty programs and will use our authority to investigate airlines for unfair and deceptive practices that harm passengers when warranted,” a spokeswoman told Reuters.
The Department of Transportation's action comes after Senators Dick Durbin (Democrat) and Roger Marshall (Republican) called for an investigation in late October. Above all, they pointed out that the terms and conditions of frequent flyer programs lead to unfair devaluations.
Ability to withdraw bonus
“In practice, this means that airlines can change their point programs without prior notice to consumers, as long as the program terms and conditions allow it. “As a result, these programs encourage consumers to purchase goods and services, obtain credit cards, and redeem those credit cards in exchange for promised rewards — At the same time it reserves the ability to withdraw those rewards from consumers at any time,” the senators said.
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