How Analytics Are Changing Frequent Flyer Programs

Airlines gather and analyze more data than ever before to improve operations and deliver better travel experiences. One of the most effective data-gathering tactics has been the establishment of frequent flyer programs.

In the beginning, those programs enabled the airlines to identify their "best" customers -- those who flew more than others or spent more for seats than others. Today, frequent flyer status is determined by a much more sophisticated calculus that involves many data points , some of which are very creative. The data provides insight into customer behavior and preferences, as well as operational issues that need to be addressed for compliance or competitive reasons.

Like other businesses, airlines use increasingly sophisticated website analytics to better understand customer behavior and preferences. They also use mobile app data and social media data and they've structured partnerships with other airlines and businesses.

In short, airlines have more insight into travelers' preferences and behaviors than ever before.

More Perks Mean More Data

Airlines offer branded credit cards because they provide insight into customers' purchasing habits. Their partnerships with other airlines provide additional information.

Meanwhile, airlines continue to expand their frequent flyer programs beyond hotels and rental cars to include all sorts of things including flowers, a marriage proposal kit, wine and even a dog sled ride. Apparently one gentleman managed to rack up over 1.2 million miles purchasing massive amounts of pudding. If you're interested in earning up to 250,000 Qantas Frequent Flyer program miles in a single purchase, buy a Jaguar.

Interestingly, Qantas Frequent Flyer members can use their miles to pay for the healthcare insurance Qantas offers. (Imagine that on the US Congressional agenda!) As part of its Wellness program, parents and their kids can earn points just by downloading the app and staying active.

Every swipe, every click, every soccer ball kick now matters.

Analytics Means Business for Some Airlines

Qantas' Loyalty department is so effective, the company made the group available for hire so other businesses can maximize the ROI of their marketing and loyalty programs. Its strategy caused Virgin Airlines Australia to acquire an analytics company rather than building an internal capability.

Air Canada's Aeroplan story is also interesting. In 2002, the airline spun off its loyalty program as a separate company. However, in 2020, Air Canada will launch its own loyalty program -- again.

"The new program, launching in 2020, will offer additional earning and redemption opportunities, more personalized service and a better digital experience for Air Canada customers," said Benjamin Smith, president, Passenger Airlines at Air Canada in a press release. "[B]y managing our own loyalty program, we will be able to take better care of our customers by making decisions in real time that address specific needs."

Mr. Smith makes a good point. Fast data and combined data sources enable airlines to provide contextual experiences. Text alerts of flight delays or gate changes are just two examples. Airports have their own analytics infrastructures which feed certain information to airlines. Not surprisingly, airlines are also monitoring what's happening in their member-only lounges so they can provide additional competitive benefits and improve operations.