Loyalty management in the airline industry

Introduction

The airline industry is a unique and thoroughly fascinating industry. Growing numbers of passengers, fuelled by increased mobility, reduced barriers to travel, and the entrance of new companies into the market, have increased the glamour, impact, and reach of this industry even further in recent years. British Airways’ Chief Executive Officer called the industry the ‘flywheel for the engine of the world’s industry’ (Chan 2000). In terms of numbers, the whole industry was worth US$1,000 billion in 1998, employed over 22 million people, and transports over 1,25 billion passengers each year (Chan 2000), with passenger numbers steadily increasing.

In this light, Loyalty Management is becoming an ever more important issue for most major companies, including commercial airlines. Customers often have often a free choice where their custom will go to, making it harder and more expensive for companies to attract new customers and to retain existing ones. This is especially true for the highly competitive field of internationally operating airlines. Airlines around the world are studying, evaluating, implementing, or improving different loyalty strategies aimed at cultivating strong relationships with their customers.

Airline customers are very much like customers of other industries. They make an initial purchase - for whatever reason - with a particular airline. The customer tries to validate his or her choice by judging the airline through certain criteria, possibly overall Service Quality. For subsequent purchases, the customer becomes more critical and reacts stronger to service failures. If performance proves satisfactory however, he or she might eventually move to a point where they become advocates for the airline.

The aspect of advocacy is described in more detail in a later part of this chapter; the crucial point is to ensure that a customer moves from being an irregular customer to the point where he acts as an advocate for the company. This is the test for airline marketers, to manage this ‘rocky period’ (Executive Summary and Implications for Managers and Executives 1998) between initial purchase and a solid relationship between the customer and the company. The management of the customer’s loyalty is a challenge to any commercial airline.

1.1. Aim and Objectives of the Report

The aim of this report is to demonstrate to the airline industry that a successful approach to Loyalty Management consists of variety of different aspects in regards to the customer. The basis for a prosperous airline is seen to be Service Quality. Service Quality itself consists of three pillars. These are seen as:

- Customer Service through optimum adjustment to customer needs;
- Frequent Flyer Programs; and
- Customer Dialogue through active Complaint Management.

The report’s objectives are to analyse these three issues in depths, to show the interdependence of these issues, and to illustrate that only a combination of all three can assist an airline in its pursuit to exercise true customer satisfaction and thus increased customer loyalty. Furthermore, the usefulness of Frequent Flyer Programs will be analysed with regards to loyalty; it will be argued that such programs are seen to be of value for customers in that they can help to increase loyalty. However, it will also be investigated if a Frequent Flyer Program (FFP) alone can be a reason for a customer to choose a particular carrier, or if it needs to be complemented by outstanding Customer Service and fast and efficient Complaint Management.

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