State of the Industry: FFP 2005 Conference Recap

By Roger Williams, Managing Partner,Consulting, Airline Information

In 1980, American Airlines, in the wake of marginalizing their high-yield business traffic by offering “Supersaver” discounted fares to the tourist market, discovered that 40 percent of its business came from about 5 percent of its customers. The discovery of the high-yield customer minority having such a significant impact on the airline’s bottom line was not new, since forty years earlier, under the leadership of C.R. Smith American saw fit to recognise its loyal customers with “Admiral’s Club” wall plaques.

The growth of frequent flyer programs flourished after American launched its AAdvantage frequent flyer program in the early eighties, as airlines scrambled to match the world’s first major currency-based loyalty program. Today with hundreds of millions of frequent flyers accumulating an astounding 14 trillion miles worldwide, the initial benchmark development trend of loyalty programs continues - bringing with it questions of taxation, legality and ethics and even extinction. The premier FFP Conference held in Madrid this past February, among other issues, addressed in detail whether frequent flyer programs or FFPs should be matched or differentiated.

In the grim shadows of the 2001 terrorist attacks in New York, the strategic development of FFPs is in dire need of direction. With airlines haemorrhaging money due to high costs and slashed fares, reaping revenue from the high-yield customer minority has become an all more important task.  But it seemed as if the same programs that were created to serve carriers, helping them to maintain their all-important market share, were also becoming battlegrounds as the programs in themselves developed as separate entities with their own brand equity.

The FFP Conference made its debut just in time to meet airline loyalty decision makers and managers during a period of great uncertainty. FFP is distinct from other loyalty conferences whereas it focuses mainly on the maintenance, strategic development and positioning of the loyalty program itself from an airline perspective. Leaders from more than 60 airlines gathered on February 17 & 18 in Madrid at this first annual international conference to explore future ideas, understand current trends and perhaps most importantly to understand the basics and nuances of a very esoteric field that lends little in the form of literature or learning aides.

FFP Conference attracted all types of FFP-equipped carriers ranging from best practise leaders like Continental, Delta, British Airways and Lufthansa, to carriers from Africa and Eurasia that host programs still in their infancy or plan to launch in the near future. However, regardless of everyone’s relative program advancement there was much to be learned from the presenters on topics including, among others: “Emotional Loyalty Branding”, “FFP Marketing Strategy”, “Award Seat Management”, and “Quantifying Contingent Liability”.  Breakout sessions were dynamic with smaller carriers working side-by-side with decision-makers from the biggest and best FFPs in the world. Some heavyweights, like Delta’s Director of Loyalty, Jeff Robertson, expressed that the open and constructive discussion among a variety of carriers, regardless of their size or FFP advancement, was an eye-opening experience.

The conference also provided airlines with the opportunity to familiarize themselves with FFP-related products and services exhibited by participating industry suppliers, which included CRM companies, Frequent Flyer Systems, GDS and loyalty management consultants and outsourcing companies.  Virtually all relevant companies in the sector were represented, including Amadeus, Carlson Marketing, IBM, Sabre, Siebel Systems, SITA and Unisys. The next FFP Conference will take place in Bangkok on February 21 & 22, 2006.  Many airlines and industry suppliers that participated this year have already committed their participation to next year’s conference.

As a marketing program, FFPs are unique because besides their primary role of retaining revenue, they can also be designed to be financially self-sufficient and in many cases profitable – however, many exist in an corporate environment that may be in turmoil and reactionary - making their development within an airline challenging. Delegates that attended FFP in Madrid arrived there with certain preconceived notions on what an FFP should be and its future growth. Upon leaving, even though some questions remain unanswered, the world’s FFP management has gained the benefit of clear structure, direction, a dynamic peer information network, and a yearly world class FFP Conference upon which to develop the next 25 years of airline loyalty.

Roger Williams, Managing Partner, Consulting

Airline Information

rwilliams@airlineinformation.org

FFP Online is published jointly on a quarterly basis by Airline Information and Global Flight Management. FFP Conference and FFP Online are global copyrights of Airline Information and Global Flight Management. FFPNEWS.com is a registered URL of Airline Information.

Reed Business Information (The Flight Group) provides electronic distribution and promotion through the Airline Business publication brand for FFP Online and FFP Conference. Articles for FFP Online are written by contributing airline personnel, travel and subject area specialists, and the writing staff of FFP Online.

The opinions expressed by contributing writers do not necessarily express the opinions or policy of the owners and officers of Airline Information, Global Flight Management and Reed Business Information (The Flight Group). Comments or questions may be directed to the appropriate editorial and administrative staff listed below:

Editorial Headquarters
Landgrafenring 76
D-63071 Offenbach
Germany

EDITOR-IN-CHIEF
Ravindra Bhagwanani

ADVERTISING AND DISTRIBUTION
Christopher Staab

LETTERS
FFP Online Feedback