Earning to fly. Financial Times.

Financial Times, which I read with my morning coffee, published an interesting article on January 29, 2025, titled “Earning to Fly: How Airlines Got Hooked on Points.” What are its main arguments and key conclusions?

The article by Philip Georgiadis and Rachel Rees examines the evolution and growing influence of airline loyalty programs, highlighting their transformation from simple frequent-flyer perks into highly profitable standalone businesses. It explores how airlines now generate billions by selling miles to banks and credit card companies, how the surge in elite status members is putting strain on these programs, and how airlines are responding by tightening qualification rules. However, the increasing difficulty of redeeming points and the devaluation of loyalty currencies risk alienating customers, leading to concerns about the long-term viability of these programs.

Key Takeaways:

1. Loyalty Programs as a Business Model
   • Initially introduced in the 1980s to retain customers amid deregulation, loyalty programs have become a major revenue source for airlines.
   • Airlines sell miles to banks and credit card companies, turning these programs into multi-billion-dollar businesses, often more profitable than flight operations.
   • The three largest U.S. airlines’ loyalty programs were valued at $73.8 billion in 2023, surpassing the market capitalization of the airlines themselves.
     
2. Challenges and Strains on the System
   • Post-pandemic, more travelers have accumulated points and elite status, leading to overcrowded lounges and difficulty in redeeming miles.
   • Airlines are adjusting their programs, making it harder to achieve elite status, with a focus on high-spending travelers rather than frequent flyers.
   • British Airways and Delta have introduced changes that require passengers to spend significantly more to reach top-tier status, alienating leisure and economy travelers.
     
3. Consumer Frustration and Declining Loyalty
   • Many customers find it increasingly difficult to redeem air miles due to fuller flights and airlines’ ability to predict which seats will go unsold.
   • U.S. authorities have launched investigations into loyalty program practices, focusing on points devaluation and unfair pricing disparities.
   • Surveys indicate a decline in customer satisfaction with airline loyalty programs, especially among younger travelers who are less brand-loyal than previous generations.
     
4. Adapting to Changing Consumer Expectations
   • Airlines are introducing more flexible ways to redeem points, such as online stores, luxury experiences, and sports event tickets.
   • British Airways has introduced Avios-only flights, while Virgin Atlantic offers points redemption for VIP experiences.
   • Subscription-based loyalty models, like those from Alaska Airlines and AirAsia, are emerging as new ways to maintain customer engagement.
     
5. The Risk of Losing the Core Purpose of Loyalty Programs
   • Analysts warn that airlines may be focusing too much on monetizing loyalty programs rather than using them to build customer relationships.
   • If customers find it too difficult to earn and redeem miles, they may abandon the programs altogether.
   • Airlines must balance profitability with customer retention to ensure the long-term success of their loyalty businesses.
     

Conclusion

While airline loyalty programs have evolved into lucrative financial operations, the shift toward revenue generation over customer satisfaction risks undermining their original purpose. Airlines must strike a balance between profitability and accessibility to maintain long-term customer engagement and brand loyalty.

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