Loyalty programs: the vital safety feature for airlines to survive COVID-19

Manuel E Pascual,Lisa Nicole Cain

doi:10.1108/ihr-03-2021-0017

Manuel E Pascual, Lisa Nicole Cain

Open Access

https://doi.org/10.1108/ihr-03-2021-0017

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Abstract

PurposeThe airline industry has been severely impacted by COVID-19 due to widespread travel restrictions. Its current response is crucial to ensure continued operations after the global pandemic is resolved. One resource the airlines are leveraging is loyalty programs. This study aims to examine the viability of leveraging loyalty programs in times of crisis.Design/methodology/approachThis study employs a case study methodology to examine how one company, American Airlines, has used its loyalty program to survive a pandemic and alleviate the financial costs associated with limited and restricted travel.FindingsAmerican Airlines' AAdvantage loyalty program structure may be used as a benchmark to understand how airlines can anchor their loyalty base to reinvigorate travel interest and use these programs as safeguards in critical instances that may arise in the future.Research limitations/implicationsThe case was bound by the fact that the pandemic was still a threat during the time of analysis. The findings of this case study go beyond the airline industry and may inform other hospitality and tourism organizations on the benefits of loyalty programs in times of financial distress.Originality/valueThis is the first known case study examining the strengths and opportunities of the structure of the American Airlines' AAdvantage program as a means for surviving in a time of crisis. Moreover, understanding how to mitigate the long-term effects of crises may help to inform future short-term strategies of airlines and other hospitality and tourism organizations for navigating unexpected shocks to their ecosystem.

Highlights

Within the hospitality industry, the travel and tourism sectors are among some of the most negatively impacted by the COVID-19 pandemic, with the US airline industry alone incurring $46bn in pre-tax losses ($35bn net losses) in 2020 (Airlines for America, 2021)
The US Travel Association estimates that the travel industry provided employment for one in ten Americans prior to COVID-19 and further estimates that half of all travelsupported jobs have been lost from the onset of the pandemic through May of 2020
Loyalty programs create a safeguard that airlines can count on for providing liquidity by using their captive target audience base who can aid in creating a sense of stability during unexpected shocks

Summary

Introduction

The travel and tourism sectors are among some of the most negatively impacted by the COVID-19 pandemic, with the US airline industry alone incurring $46bn in pre-tax losses ($35bn net losses) in 2020 (Airlines for America, 2021). Travel restrictions and health concerns associated with spreading the virus created a stigma that many analysts/experts are concerned will long outlast the end of the pandemic. These concerns are associated with customers returning to airline travel with a sense of ease and comfort previously felt and the long-term impact of job losses within the travel industry. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/ legalcode

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