Frequent Flyer Programs Research Articles

Virtual currencies as a quasi-payment tool: the case of frequent-flier programs and money laundering

PurposeThe purpose of this paper is to explore the various characteristics of frequent-flier programs and the threats they pose to the Australian anti-money laundering regime.Design/methodology/approachA thorough literature review was conducted on frequent-flier programs and the associated money-laundering threats. Money laundering (ML) risks were identified in relation to the three stages of ML and effective law enforcement.FindingsThe findings indicate that as ML continues to gravitate towards the weaknesses in the financial system, frequent-flier programs provide yet another avenue for criminals to exploit. The risk factors associated with frequent-flier programs – specifically, anonymity, elusiveness, the rapidity of transactions occurring in a digital environment, ambiguity regarding responsibility for compliance, the global network of participants and members, difficulty in accessing records and an overall lack of oversight – were all integral considerations in establishing the ML risks of such programs.Practical implicationsThe global environment in which individuals conduct financial transactions continues to evolve rapidly, exacerbating ML risks for regulators and governments alike. Unless there are globally unified efforts to heighten awareness, the threats posed by virtual currency will increase at a rapid rate. With this in mind, the starting point of this paper is an attempt to analyse the ML risks pursuant to frequent-flier programs in Australia.Originality/valueThe findings from this study can be used to gain greater insights into frequent-flier programs and can have broader application for evaluating other similarly structured loyalty programs, both in Australia and globally. Additionally, the findings from the study can enhance overall awareness of the ever-increasing threat to global financial integrity through the expansion of virtual currency.

Designing Frequent Flyer Programs Effectively - a Market-Research- and Interview-Based Study for the German Aviation Sector

In the face of growing competitive pressure and the dilemma of revenue-cuts due to the Corona lock-down airlines have to question their marketing activities. Frequent Flyer Programs (FFP) of German airlines have to date been an important element of customer relationship marketing in the brand-airlines segment, but recently have been cut back due to doubts on their profitability. 
 
 The study refers to a comprehensive review of empirical studies in FFP to classify design characteristics of international programs. Referring to this classification it analyses the design framework of Germany’s predominant Frequent Flyer program (Miles & More) in the form of a case study, and compares the approach to international standards. Five insider expert interviews are conducted to evaluate the effectiveness of the concept and derive development options to secure the sustainable effectiveness of the program in a changing aviation market.
 
 The study finds some adaptations to Miles & More indispensable to make the program future-proof. A comprehensive and convincing framework comprising status, monetary and service rewards is essential to ensure consumer attractiveness and continuity. The partner network has to be expanded globally to ensure the programs international attraction. Bonuses have to be amended to particularly address frequent and international flyers Considering this advice, Miles & More can become an important building block in a post-Corona airline marketing setup.

항공사 상용고객우대제도의 혜택이 지각된 가치와 지속사용의도에 미치는 영향

The purpose of this study is to analyze the mediating effect of perceived value of relationship between benefits of airline frequent flyer programs and intention to use those continuously along with differences by grades of its members. The empirical data of study was collected through an online survey of participants who have used airline frequent flyer program for one year, and the hypothesis was tested by using Part 236. Hypothesis 1, 2, and 3 were adopted to show positive effect with all variables in the verification of relationship between benefits of the programs and perceived value, along with intention of its continuous usage. Comparative analysis on differences among grades was conducted in terms of benefits, perceived value, and intention of continuous use of existing programs. As a result, there is a partial mediating effect of perceived value between benefits of the programs and the intention of its continuous usage. Also, by analyzing differences between groups by grades, it has been shown that there were significant differences among those groups. In conclusion, it is crucial for airlines to consider customer segmentation to establish differentiated strategies.

The Effect of frequent flyer programs on consumer behavior in the German airline market

Due to growing competitive pressure, brand airlines seek to distinguish themselves from low-cost carriers. Since the 1970's, Frequent Flyer Programs (FFP) have been established as popular incentive schemes combining monetary rebates, service, and status awards. The effectiveness of FFP to gain and retain airline customers, however, is questioned in the face of growing cost pressures in the aviation sector. This study evaluates the impact of FFP on consumer behavior. It assesses determiners and moderators of effective FFP design in a representative customer survey (n = 502) of Miles & More members in Germany. The study finds that FFP impact all levels of the customer behavior chain, particularly customer attitude, brand image, booking behavior, customer loyalty, sustainable customer relationships, and passengers’ value perception. FFP building blocks interact: Service, status, and monetary awards have to be effectively combined to maximize customer impact. A broad and far-reaching partner network, as well as transparent redemption options, are essential to convince customers of the program value. Airline safety and quality are essentialessential additional determiners of customer booking and loyalty behavior. FFP mainly addresses frequently flying business customers on short-distance flights. Airlines should develop their programs to appeal to this customer group and ensure perceived FFP honesty by transparent and reliable redemption conditions and a comprehensive service package awarding loyal customers reliably.

항공사 상용고객우대제도에 따른 관계혜택이 몰입에 미치는 영향

In this study, we investigated the differences in the relationship benefits according to the frequent flyer program of airlines. The relationship between relationship benefits and immersion was identified.In order to achieve the purpose of this study, a questionnaire was conducted for airlines’ passengers with boarding experience in the last two years. A total of 402 questionnaires were distributed, and 386 samples were analyzed using SPSS for Window Version 21.0.The results of regression analysis between variables for hypothesis testing are as follows. First, according to the frequent flyer program, the verification for differences in relationship benefits, consisted of one main hypothesis. As a result of the analysis, depending on whether or not to join the frequent flyer program, the psychological benefit was more recognized than the non-subscription. Second, as a result of analyzing the effect of relationship benefits on immersion, all three factors which are social, economic, and psychological benefit, had significant influence on emotional immersion. Economic and psychological benefits were found to have a significant effect on computational immersion.

Switching Costs in the Brazilian Airline Sector

This paper calculates the switching costs in the context of the Brazilian airline industry by considering an indirect approach, and econometrically evaluates its determinants during the 2005-2017 period. Evidence suggests non-negligible switching costs that display a decreasing trend over time, which is consistent with an increase in the competition in the sector, as also exhibited in other countries. An instrumental variables estimation suggests that variables referring to the number of flights, a frequent flyer program and the entry/presence of competitors play a role in determining the magnitude of switching costs.

A conceptual framework for valuating airline frequent flyer program miles

A conceptual framework for valuating airline frequent flyer program miles

Estimating the sensitivity of small airport catchments to competition from larger airports: A case study in Indiana

An accurate estimation of airport catchment area enables airlines and airport operators to make informed decisions and to target potential markets precisely. This study uses the state of Indiana as a case study to estimate traffic leakage from the local airport, Indianapolis International Airport (IND), to two large hub airports in Illinois, the neighboring state of Indiana, namely Chicago O'Hare International Airport (ORD) and Chicago Midway International Airport (MDW). By using a decision making model that considers flying cost and access cost, this study simulates from local passengers' perspective which origin airport delivers the most cost effective flight itinerary. Using the top 20 routes of IND in 2018 as model inputs, the catchment area of two Chicago based airports in Indiana with variable coverage is plotted for different traveling scenarios. The analysis shows that an airport catchment area is sensitive to location, service level and traffic volume of competing airports nearby, as well as purpose of travel (business or leisure), number of travelers in a group (single, couple, family or multiple), length of trip, destination (domestic or international), preference of airlines (network carrier or budget carrier), and frequent flyer program status (premier member or general member). These findings could be valuable to all three aforementioned airports as well as airlines serving these airports when allocating operational and marketing resources. More importantly, this study creates a generic model that could be used by virtually any airport to estimate scenario-based catchment area using readily available itinerary and spatial data without resorting to expensive passenger surveys.

FREQUENT FLIER PROGRAMS OF LOW COST AIRLINES THE WORLD AND TURKEY

ABSTRACT Airlines often use Frequent Flyer Programs (FFPs) as one of marketing tools. Traditional airlines had started to use FFPs after airline deregulation against low cost carriers in order to get competitive advantage. The main purposes of the FFPs are to provide extra services to passenger who fly very often and maintain the loyalty of passengers creating the main income for the airlines. FFPs helps traditional airlines a lot to get advantages in competition to the low-cost carriers (LCCs). Although traditional airlines started to use FFPs at first, with the on-going update of system, even if it is against the nature of LCCs, FFPs has begun to be used for LCCs as well for last two decades. In this study, try to examine the LCCs use FFPs effectively and the differences between the FFPs used from the LCCs in the World and Turkey. In this context, the best LCCs in 2017 selected by Skytrax and Turkish LCCs FFPs examined as a case study. Search results indicate that only one LCC don’t have FFP and The World and Turkish LCCs has similar FFPs. Keywords: Frequent flyer programs, low cost carriers, tourism, airline

Pengaruh Customer Relationship Management (CRM) Terhadap Loyalitas Pelanggan pada Maskapai Penerbangan Garuda Indonesia Melalui Program Frequent Flyer

The aim of this study is to examine the effect of Customer Relationship Management (CRM) on customer loyalty on Garuda Indonesia airlines through frequent flyer programs. The study sample was taken from Garuda Indonesia passengers over the age of 18 years. Primary data was collected through convenience sampling. Regression analysis is used to test hypothese. There is the influence of Customer Relationship Management on Customer Loyalty on Garuda Indonesia airlines, there is a Frequent Flyer influence on customer loyalty on Garuda Indonesia airlines, there is a frequent flyer influence to moderate Customer Relationship Management to Garuda Indonesia Customer Loyalty, there is the effect of Customer Relationship Management, Frequent Flyer for Garuda Indonesia airlines. It is better if further research is conducted in the long term, so that Garuda Indonesia CRM can be explored more far. While Garuda Indonesia's services cover almost all of Indonesia and several other countries. The literature that discusses CRM is still not much so that the dimensions of dimension elaboration are still limited. Research findings reveal the need and importance of a company to continuously improve Customer Relationship Management. This study shows the need to emphasize the use of critical customer loyalty and to recognize the nature and importance of frequent flyer moderation effects. The value of this research is a combined and practical theory and finds four management implications and three practical implications.

Creating a prediction model of passenger preference between low cost and legacy airlines

The airline industry is highly competitive, and in order to increase profits, airlines are always looking to better target key customers. Increased understanding of customers also helps improve the product from the customer's perspective. This study aims to determine which factors predict airline passengers' preference between legacy and low-cost carriers. The correlational design used creates a prediction model for passengers from the United States. Through two stages of this study, 936 participants (379 females) from the US were utilized for the linear multiple regression analyses to build the model. In the first stage, the regression analysis was used to generate a regression model of passenger preference, which was then tested in the second stage, thereby validating the prediction model. Samples for each stage were independent and subjected to a backward stepwise regression analysis. To determine the influencers of passenger preference, nine potential predictors were surveyed. The predictors were age of the participant, gender of the participant, yearly income of the participant, education level of the participant, seat type, purpose of travel, frequency of travel in a year, category of frequent flier program, and risk-taking tendencies of the participant. The results of the data analysis showed frequency of travel in a year, yearly income of the participant, seat type, and education level of the participant as significant predictors of passengers' preference between legacy and low-cost carriers. This research has practical implications for the airline industry in better understanding the consumer base, which could lead to increased profitability for the carriers.

A REVIEW OF RECENT TRENDS IN AIRLINE ANCILLARY REVENUES

Airline ancillary revenue which refers to non-ticket revenue sold directly to passengers or indirectly as part of their travel experience, has become a mandatory component for the revenue mix of all airlines as well as a key reason for the improved financial performance of the airline industry in the recent years. It is generated by a large amount of activities that include „a la carte” services such as fees for checked bags, frequent flying miles to airline partners, miscellaneous sources like advertising and commission-based products such as inflight retail, and car rentals - virtually any service added to the core transportation service. Contribution of ancillary services to the total revenue streams of airlines has been increasing substantially over the past decade. In 2007, the top ten airlines, as rated by total ancillary revenue, generated $2.1 billion, while ten years later, the top ten airline total has reached $29.7 billion. The paper explores the recent growth and trends in ancillary revenue in the airline industry, particularly within in the last ten years and identifies significant differences in ancillary sources with regard to carrier type. Low-cost carriers pioneered the practice of charging for supplementary services that were previously provided free of charge by seeking revenue from checked bags, assigned seats and extra leg room seating. Traditional airlines moved from all-inclusive booking arrangement and started to adopt add-on bundling practice when selling flight tickets taking advantage of low headline price. Their ancillary revenue mostly comes from the use of frequent flyer program, a mix of baggage fees and premium seats. Top airlines in overall ancillary revenue performance measured as total revenue, a percent of revenue, or on a per passenger basis are determined in the paper and new trends in creating ancillaries are elaborated. In order to improve profit performance, the airline revenue management and distribution systems should consider total revenue from each passenger, by linking his ticket value and his ancillary revenue potential.

An empirical assessment of willingness to accept “low-cost” air transport services: Evidence from the Middle East

Despite the rapid growth of low-cost airlines in the U.S. and Europe, yet little is known about the feasibility of such services in developing and less developed countries. In such a region, hence, the purpose of this study is to investigate passengers’ preferences and willingness to accept low-cost air transport services. Accordingly, a choice experiment was applied to examine passenger choices associated with a bundle of service attributes applicable to low-cost air transport service. Results of multinomial logit models defined fare, frequent flyer program, food and beverage services, ground services, flexibility, frequency and punctuality as determining factors affecting passengers’ air transport choice in Iran. Results further demonstrated that passengers’ preferences and their willingness to accept low-cost air transport service are associated with their socio-economic characteristics and travel behavior. This study contributes to the relative body of knowledge through offering willingness to accept calculation as a strategic tool to assess the feasibility of low-cost air transport provision in a region where such services are yet scarce.

Determining the antecedents and consequences of the airline brand personality

Purpose: This study investigates air passengers’ perceptions of the brand personalities of airlines and explores the relationships between the brand personality and its antecedent factor, the country-of-origin of the airlines, and the consequent factor which is the purchase intentions to the corresponding airlines.Design/methodology/approach: The study uses a questionnaire survey containing air passengers’ trip characteristics and demographics and three main scales: country-of-origin, brand personality, and purchase intentions to collect the data of 490 respondents flying from Kaohsiung to Macao. The passengers are from three types of airlines: an international airline with a global network, a regional airline, and a low-cost carrier. The analysis of variance (ANOVA) was conducted to investigate the differences in the perceptions of brand personalities of airlines and several models were developed to determine the antecedent and the consequent factors of airline brand personality.Findings: The air passengers’ perceptions regarding the brand personalities of different types of airlines were significantly different. The country-of-origin of airlines was proved as a significant factor for the brand personality. The brand personality also significantly influenced passengers’ loyalty to the corresponding airlines. Moreover, some demographic and trip characteristics such as personal monthly income, memberships in the airline’s frequent flyer program, and experiences with the airlines were also determined as the significant variables to impact passengers’ loyalties.Originality/value: The concept of brand personality has been explored by various researches but few related to airline management and identified as a key element to brand marketing. Particularly, low-cost carriers always implement different marketing strategies to create a distinctive position in their target customers’ mind and legacy airlines are also doing different things to retain their customers. Therefore, investigating passengers’ perceptions of airlines from the perspective of brand personality is also an important issue for airline management. Not only does this study prove the differences in passengers’ cognitions of brand personalities of a global network airline, a regional network airline, and a low-cost airline but conclude the determinants and influences of the brand personality.

Frequent Flyer Programs - Overview of Existing Models

This paper describes three basic models of frequent flyer programs offered by airlines. Based on the definitions of these models an analysis of airline loyalty programs offered by European carriers was performed. The paper contains conclusions regarding the evolution of frequent flyer programs in Europe. The development process was assessed and prospective advances were identified.

Cross-cultural analysis of the Frequent Flyer Programs (FFPs): The most controversial results

Cross-cultural analysis of the Frequent Flyer Programs (FFPs): The most controversial results

Frequent Flyer Program of Airline Carriers of China and Consumers’ Attitude Toward Loyalty Program

Frequent Flyer Program of Airline Carriers of China and Consumers’ Attitude Toward Loyalty Program

항공사 일등석에서 광고 효과에 관한 연구 : 상용고객 우대 프로그램의 조절효과를 중심으로

항공사 일등석에서 광고 효과에 관한 연구 : 상용고객 우대 프로그램의 조절효과를 중심으로

Reaching for Gold: Frequent-Flyer Status Incentives and Moral Hazard

We study how frequent-flyer program members change their purchase behaviors as they progress towards achieving elite status. Using data from a leading U.S. airline, we empirically test the theoretical prediction that travelers' switching costs vary dynamically with their progress towards attaining status. We show evidence for increased switching costs as the consumer approaches the target pace of point accumulation required to attain status. These switching costs reflect changes in booking behavior with the airline: Travelers become more likely to choose the airline even when it is less appealing than its competitors, and to pay higher prices than they otherwise would. These responses are reduced when travelers accumulate points at a rate substantially ahead of the target pace. The increase in switching costs is more pronounced for consumers at a hub of the airline and for business travelers. Moreover, we document a stronger willingness-to-pay response when consumers are less likely to shoulder the ticket costs themselves because they are traveling for business. This response suggests that asymmetric incentives induced by business travel explains much of the heterogeneity between business and leisure travelers, and moral hazard may be responsible for a large part of the profi tability of frequent-flyer status incentives.

Airline loyalty (programs) across borders: A geographic discontinuity approach

We analyze brand loyalty advantages of national airlines in their domestic countries using geocoded data from a major international frequent flier program. We employ a geographic discontinuity design that estimates discontinuities in program activity at the national borders of the program’s sponsoring airlines in the Schengen area of Europe. We document that foreign consumers earn about 60% less miles and are 70% less likely to be a program member. Controlling for self-selection, we also find suggestive evidence for higher purchase frequency and transaction size by domestic members. These results imply that national airlines enjoy a large loyalty advantage in their domestic country, and contribute to an explanation as to why international flights by third country carriers are still a small share of the market.