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62-438: A frequent-flyer programme ( FFP ) is a loyalty program offered by an airline . Many airlines have frequent-flyer programmes designed to encourage airline customers enrolled in the programme to accumulate points (also called miles, kilometers, or segments) which may then be redeemed for air travel or other rewards. Points earned under FFPs may be based on the class of fare , distance flown on that airline or its partners, or

124-421: A rewards program is a marketing strategy designed to encourage customers to continue to shop at or use the services of one or more businesses associated with the program. Loyalty programs may be either: Single-brand programs, such as Starbucks ) In 2020 McKinsey spoke of loyalty program "ecosystems". A loyalty program typically involves the operator of a particular program setting up an account for

186-444: A business (usually a defined percent which may be higher than usual during promotions). The "cash back" is rarely actually cash money, but rather takes the form of a transfer of the "cashback" amount to the customer's bank account. Examples in the U.S. include Rakuten Rewards , a coalition reward program, and many banks that give their clients cash back for using their debit cards to pay for various products and services. Depending on

248-408: A certain amount of flying within a certain very short timeframe (usually 90 days), to earn elite status. The higher status may or may not be given immediately if it can be seen that qualifying travel (particularly travel that is non-refundable) has already been booked before the challenge was offered, otherwise higher status will be conferred once the challenge is officially completed. In some instances,

310-485: A certain number of points for each purchase, in the US often per $ 1 or $ 10 increment of spend. Once they have enough points, clients can redeem them for either: Programs with tiers define levels (such as silver, gold, and platinum levels) that customers are upgraded to when they spend enough with the merchant(s), usually over a certain period of time such as a year. For example, Sephora gives 1 point for $ 1 spent. Once customers earn

372-417: A certain type of virtual currency , one with unidirectional flow of money to purchase points, but no exchange back into money. FFPs have become an important part of airlines' economic models, with for example United and Delta both able to earn more than $ 1 billion in 2015 because of their FFP. Although United Airlines had tracked customers as far back as the 1950s, the first modern frequent-flyer programme

434-430: A co-branded credit card or the ability to transfer points in their loyalty programme to an airline's program. Large sign-up bonuses and other incentives are common. Accruing points via credit cards bonuses and spending allows infrequent travelers to benefit from the frequent flyer program. With a non-affiliated travel rewards credit card a cardmember can buy a positive-space ticket considered "revenue" class, which can earn

496-486: A code sharing agreement, the airline that administers the flight (the one holding the operational permissions, airport slots and planning/controlling the flight and responsible for the ground handling services) is commonly called the operating carrier , often abbreviated OPE CXR, even though the IATA SSIM term "administrating carrier" is more precise. The reason for this is that a third carrier may be involved, typically in

558-512: A customer of a business associated with the scheme, and then issue to the customer a loyalty card (variously called rewards card , points card , advantage card, club card, or some other name) which may be a plastic or paper card, visually similar to a credit card , that identifies the cardholder as a participant in the program. Cards may have a barcode or magstripe to more easily allow for scanning, although some are chip cards or proximity cards . U.S. supermarkets often issue two copies of

620-465: A desirable employee benefit , which can encourage unnecessary travel within organisations to accumulate them and lead to superfluous personal trips. Business travelers typically accrue the valuable points in their own names, rather than the names of the companies that paid for the travel. This has raised concerns that the company is providing a tax -free benefit (point-based awards) to employees, or that employees have misappropriated value that belongs to

682-419: A fee for a challenge may also be charged. Status challenges are employed by other types of establishments, as well, such as casinos and hotels. Some airlines will match status with that of a competitor upon application, usually to airlines outside of any alliance that the airline used to match status with belongs to. This enables travelers to switch their travel more easily from one carrier to another (e.g., when

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744-480: A frequent-flyer programme until recent years was to fly with the associated airline. Paying expenses using an airline-sponsored credit card, even those charged to an employer, can rack up frequent flyer points. Most systems reward travelers with a specific number of points based on the distance traveled (such as 1 point per mile flown), although systems vary. Many discount airlines, rather than awarding points per mile, award points for flight segments in lieu of distance or

806-465: A given customer's favorite brand of beer, or whether they are a vegetarian. As of the mid-2020s, loyalty program trends include: Loyalty programs are a means of implementing a type of what economists call a two-part tariff . Co-operative Membership: the Co-op Group offers a 2% (previously 5%) refund to members on Co-op branded products with 2% also going to the cardholder's nominated charity. This

868-567: A loyalty point as encapsulated in the FFP premium was estimated to range between AU$ 0.0108 and AU$ 0.0153, depending on the FFP status of a member. The airlines themselves value points in their financial statements at less than one one-thousandth of a cent per points. That loyalty points undoubtedly have an estimable monetary value is also reflected in the fact that some programs allow for the donation of frequent-flyer points to certain charities. The frequent flyer points accumulated through business trips are

930-497: A loyalty program (even with a fake or anonymous card) funds activities that violate privacy. Consumers have also expressed concern about the integration of RFID technology into loyalty-card systems. One may view loyalty and credit-card reward-plans as modern-day examples of kickbacks . Employees who need to buy something (such as an airline flight or a hotel room) for a business trip , but who have discretion to decide which airline or hotel chain to use, have an incentive to choose

992-460: A member to use points to search for and purchase revenue tickets as if using cash. Depending on an airline's program, members can also redeem points toward cabin upgrades, hotel stays, car rentals, and purchase of various retail items. On American Airlines ' AAdvantage programme for example, it is possible to pay for a complete vacation package solely with points. Travelers frequently debate on how much accumulated points are worth, something which

1054-510: A member's status ascension (or retention) by reducing flight mileage requirements. Some carriers also require frequent flyers to spend a set amount of money on tickets before they are eligible for elite status. This is in addition to the miles-flown requirements that are already in place. Delta switched to revenue-based elite status requirements in January 2014, United in March 2015, with American Airlines

1116-635: A modification of a never-realized concept from 1979 that would have given special fares to frequent customers. It was quickly followed later that year by programs from United Airlines ( Mileage Plus ), Delta ( Delta Air Lines Frequent Flyer Program , which later changed to SkyMiles ), Continental Airlines ( OnePass ), Air Canada ( Aeroplan ), and in 1982 from British Airways ( Executive Club ). Frequent-flyer programs have grown since. In 2005, 163 million people were enrolled in frequent flyer programs from over 130 airlines. By then, 14 trillion frequent-flyer points had been accumulated by people worldwide, for

1178-427: A number of ways. It lets them present special offers to the customer (or even push them via push notifications ), tailor customer experience to the individual consumer, and understand customer behavior better, including their purchasing amounts and patterns. At a physical point of sale, presenting a physical or digital card is not necessary at many U.S. merchants, if the customer enters the phone number associated with

1240-411: A representative sample of over 3300 members of that specific FFP showed that a large proportion of leisure and business travelers admitted a willingness to pay a higher fare—a FFP premium—to fly with the sponsoring airline because of their FFP membership. The average FFP premium was estimated to be around 8% and was statistically different between leisure and business travelers. The cash-equivalent value of

1302-664: A single-location business to large chains or membership in a coalition loyalty program. Industries include: The market approach has shifted from product-centric to a customer-centric one due to a highly competitive market and a wide array of services offered to customers, therefore, it's important that marketing strategies prioritize growing a sustainable business and increasing customer satisfaction. Almost all major U.S. casino chains also have loyalty cards, which offer members tier credits, reward credits, comps , and other perks based on card members' " theo " from gambling, various demographic data, and spend patterns on various purchases at

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1364-408: A specific number of points, they can enter a new level with higher discounts and exclusive products. In subscription-based programs, customers pay a fee to enjoy the program's benefits, for example Barnes and Noble bookstores charge members about 40 U.S. dollars per year (as of mid-2024) for its "Premium Membership and Rewards" program, which gives members a 10% discount off most merchandise. There

1426-479: A value of 700 billion US dollars . When United Airlines filed for bankruptcy in 2002, its frequent flyer programme was its only money-making business. Tom Stuker is the world's most frequent flier having logged over 21 million miles with United. Most larger airlines around the world have frequent flyer programs; each has a programme name , and policies and restrictions regarding joining, accumulating, and redeeming points. The primary method of obtaining points in

1488-406: Is also a free tier which does not offer such discounts but does allow members to collect virtual "stamps" (i.e. loyalty points). Depending on the program, rewards may take the form of: In addition to rewards, loyalty cards were may also be used identify consumers for benefits and other services, e.g.: Programs with cashback features give customers a portion of the money that they have spent with

1550-455: Is currently not taking place in the vast majority of countries - a notable exception however being Germany. One of the main arguments against the implementation of taxation is the lack of a monetary tax base. It can however be argued that since the cash-equivalent value of loyalty currency can be reasonably estimated with public data, this value is appropriate as a tax base. Hurdles preventing the taxation of FFP rewards are generally less related to

1612-470: Is highly variable based on how they are redeemed. An estimate is approximately one to two cents per point based on discount (rather than full fare) economy class travel costs. The author of an economics PhD thesis published in 2014 at Monash University , in Melbourne , Australia , examined the cash-equivalent value (purchasing power) of loyalty points, the impact of FFPs on consumer behavior and surplus, and

1674-494: Is often a QR code . Some prominent examples are Austrian based mobile-pocket established in 2009, the US-based Punchd (discontinued from June 2013, ), which became part of Google in 2011. and an Australian-based loyalty card application called Stamp Me which incorporates iBeacon technology. Others, like Loopy Loyalty (HK), Loyalli (UK), Perka (US), and Whisqr Loyalty (CA), have offered similar programs. Passbook by Apple

1736-406: Is only available in Co-op Group stores. It replaced the dividend benefit previously used. Other Co-op chains continue with the dividend scheme, e.g. Midcounties Co-operative. Many of these accept other Co-operative loyalty cards but generally without the same benefits. For instance Midcounties Co-operative accept Co-operative Group cards but there is no charity donation or cardholder refund. Flybuys

1798-416: Is that they generate data, which bring more repeat business and therefore increase sales. Application forms for cards usually entail agreements by the store concerning customer privacy, typically non-disclosure (by the store) of non-aggregate data about customers. The store uses aggregate data internally (and sometimes externally) as part of its marketing research . Over time the data can reveal, for example,

1860-422: Is the first attempt to standardize the format of mobile loyalty cards. With the introduction of host card emulation (HCE) and near field communication (NFC) technology for mobile applications, traditional contactless smart cards for prepaid and loyalty programs are emulated in a smartphone. Google Wallet adopted these technologies for mobile off-line payment applications. The major advantage of off-line over

1922-507: Is the largest loyalty program in both Australia and New Zealand . Loyalty programs have been described as a form of centralized virtual currency , one with unidirectional cash flow, since reward points can be exchanged into a good or service but not into cash. Evidence for the effectiveness of loyalty programs is controversial. Many companies are unsure whether and how to use customer loyalty programs profitably. Many programs (regardless of location, size, or industry) are run without

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1984-458: The UK launched in 2020 which no longer issues physical cards except upon special request. American Airlines no longer sends membership kits to new members of its frequent flyer program. Encouraging or forcing customers to use a mobile app to present their loyalty account number, although criticized for being unfriendly to people without smartphones including many elderly people, benefits the merchant in

2046-405: The major airlines today have code sharing partnerships with other airlines, and code sharing is a key feature of the major airline alliances . Typically, code-sharing agreements are also part of the commercial agreements between airlines in the same airline alliances. In 1967, Richard A. Henson ’s Hagerstown Commuter airline joined with US Airways predecessor, regional Allegheny Airlines , in

2108-667: The regulatory body could end all; in 1999, S. Storm observed loyalty programs were forbidden in Denmark until 1992, instated then because Danish airlines were disadvantaged, as governments can forbid these programs at industry players request and the World Trade Organization could ban all programs. In the U.S. in 1989, Braniff wished for an end to unfair competition from frequent-flyer programs. Precedent exists for ending frequent-flyer programs. In 2002, Norway banned domestic loyalty programs to promote airline competition. In 2005,

2170-746: The Australian federal government travel contract; this was put forward as a system requirement for the competing companies in order to win the contract. In the US, the General Services Administration has regulated, "frequent traveler benefits earned [by federal employees] in connection with official travel, [which] may be used only for official travel, see 41 C.F.R. § 301-1.6(f)." Frequent flyer programme contracts are not generally regulated. These programmes have been studied as anti-competitive practices : in 1989, M. Tretheway found competition prevented an airline to unilaterally end its program, but

2232-834: The Modernization Minister asked the competition authority to consider extending the Norwegian ban on frequent flyer miles to include all of Scandinavia. The country lifted the ban in 2013 when the competitive situation changed. Frequent-flyer programs have been receiving scrutiny because of the prevalence and rapid growth of air travel, in terms of both the frequency that individuals fly and the tendency toward longer distance travel. In 2011, S. Cohen observed both air travel and concern over its climate impacts were growing, balanced by technology and physical resources, self and external regulation and social norms including stigmatisation of excessive air travel. In 2009, Stefan Gössling pointed out

2294-496: The United States do not offer any real value to their customers. Furthermore, commercial use of customers' personal data – collected as part of loyalty programs – has the potential for abuse; it is highly likely that consumer purchases are tracked and used for marketing research to increase the efficiency of marketing and advertising, which is one of the purposes of offering the loyalty card. For some customers, participating in

2356-424: The account on a terminal or tells it to a cashier who enters it into the register. When purchasing online, customers usually must log in to the account on the merchant's website. However, when purchasing airline tickets from online travel agencies, customers can usually enter their airline loyalty number into the agency website and the agency will pass it onto the airline. Programs that feature points grant customers

2418-514: The airline industry revolves around ticket sales (also known as "seat booking") strategies ( revenue management , variable pricing , and geo-marketing ). Criticism has been leveled against code sharing by consumer organizations and national departments of trade since it is claimed it is confusing and not transparent to passengers. There are also code sharing arrangements between airlines and railway companies , formally known as air-rail alliances , and commonly marketed as "Rail & Fly" due to

2480-721: The amount paid. For example, a number of airlines in Europe offer a fixed number of points for domestic or intra-European flights regardless of the distance (but varied according to class of travel). With the introduction of airline alliances and code-share flights , frequent-flyer programs are often extended to allow benefits to be used across partner airlines. Most, if not all, programs award bonus earnings to premium-cabin passengers and to their elite-status members based on tier status; earning an extra 25%-100% of miles flown are common bonuses. While these bonus points may not count toward ascension to (or retention of) elite status, they count toward

2542-551: The amount paid. There are other ways to earn points. For example, in recent years, more points have been earned by using co-branded credit and debit cards than by air travel. Another way to earn points is spending money at associated retail outlets , car hire companies, hotels , or other associated businesses. Points can be redeemed for air travel, other goods or services, or for increased benefits, such as travel class upgrades, airport lounge access, fast-track access, or priority bookings. Frequent-flyer programs can be seen as

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2604-472: The appropriate metrics or target parameters. Some companies complain that loyalty programs discount goods to people who are buying goods anyway. Moreover, the expense of participating in these programs rarely generates a good return on investment. The Forte Consultancy Group regards loyalty programs as bribes . In the case of infrequent spenders, loyalty fees provide a means of subsidizing discounts. A 2015 study found that most supermarket loyalty cards in

2666-462: The card: one credit-card sized and one that fits on a keychain, in addition to providing access to the card via a mobile app, website. As of 2024, most programs in the United States offer a digital version of the loyalty card, accessed via a mobile app, and often customers can scan a QR or bar code from the app at the physical point of sale. Some programs now offer digital cards only or only exceptionally, such as Marks and Spencer 's "Sparks" program in

2728-412: The case that the airline originally planning to operate the flight needs to hire a subcontractor to operate the flight on their behalf (typically a wet lease, meaning an aircraft is leased with crew and all facilities to fly, commonly due to capacity limitations, technical problems etc.) In this case, the airline carrying the passenger should be designated the operating carrier, since it is the one carrying

2790-499: The casino, within the casino network, and with the casino's partners. Examples of such programs include Caesars Rewards (formerly called Total Rewards ) and MGM Resorts International 's Mlife. As of 2011 , some independent coffee shops in Boston, Toronto and London has set up experimental "disloyalty card" programs, which rewarded customers for visiting a variety of coffee shops. Loyalty programs' most important benefit to merchants

2852-601: The company, or even that the rewards acts as a kind of bribe to encourage travelers to choose one particular airline or travel unnecessarily. Most companies consider the miles earned by their employees to be a valuable personal perk that in part compensates for the daily grind of frequent business travel, though some governmental organizations have attempted to prevent their employees from accumulating miles on official travel. Although it has long been recognized that FFP rewards earned on employer-funded business flights should be subject to either income or fringe-benefit taxation, this

2914-489: The conflict caused by air travel growth in a carbon-constrained world, with a minority of hypermobile individuals responsible for a large share of air travel. A "mileage run" is an airline trip designed and taken solely to gain maximum frequent-flyer miles, points, or elite status usually at lowest cost. If a traveler has already achieved some sort of elite status, then that traveler will earn bonus award miles or points on top of their actual flight miles or points. Depending on

2976-451: The last of the three US legacy carriers to switch on August 1, 2016. This has led to some frequent flyers devaluing those programs over others, as the changing model can be less rewarding to frequent flyers. To date no UK frequent flyer scheme has sought to operate in such a fashion, with both Virgin Atlantic and British Airways opting for the traditional method of granting tier points based on

3038-412: The member's total balance for normal redemption purposes. Some programs award a full 500 points (or a similar minimum credit guarantee) for non-stop flights spanning less than 500 miles. An airline's programme can either award this guarantee to all members regardless of elite status, or they can reserve this privilege only for their elite members. Many credit card companies partner with airlines to offer

3100-480: The miles flown and class of travel. After accumulating a certain number of points, members then use these points to obtain airline tickets. However, points only pay for the base fare, with the member still responsible for the payment of mandatory taxes and fees. Although a controversial topic and a source of frustration among frequent flyers, award flights are still the primary commodity purchased by members using points. While alliances and partnerships have facilitated

3162-487: The nation's first codeshare relationship. The term "code sharing" or "codeshare" was coined in 1989 by Qantas and American Airlines , and in 1990 the two firms provided their first codeshare flights between an array of Australian and U.S. cities. Code sharing has become widespread in the airline industry since then, particularly in the wake of the formation of large airline alliances . These alliances have extensive codesharing and networked frequent flyer programs . Under

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3224-434: The online system is that the user's smartphone does not have to be online, and the transaction is fast. In addition, multiple emulated cards can be stored in a smartphone to support multi-merchant loyalty programs. Consequently, the user does not need to carry many physical cards anymore. Today, such loyalty programs cover most types of commerce, each having varying features and rewards schemes, and range from programs of

3286-426: The passenger points with the airline flown. Frequent-flyer programs may offer points through other means, such as purchasing food or merchandise sold by an affiliated company. American engineer David Phillips gained attention in 2000 for purchasing $ 3,140 of Healthy Choice pudding to earn him 1,253,000 AAdvantage miles. Occasionally, airlines may offer double elite-qualifying mile (EQM) promotions, which speeds up

3348-446: The passengers/cargo. When a flight is sold under several designators and flight numbers as described above, the one published by the "administrating carrier" is commonly called a "prime flight" (as opposed to a codeshare marketing flight). Under a code sharing agreement, participating airlines can present a common flight number for several reasons, including: There are several types of code sharing arrangements: Much competition in

3410-568: The payment method that provides the most cash-back , credit-card rewards or loyalty points instead of minimizing costs for their employer. Code sharing The term "code" refers to the identifier used in a flight schedule, generally the two-character IATA airline designator code and flight number. Thus, XX224 (flight number 224 operated by the airline XX), might also be sold by airline YY as YY568 and by ZZ as ZZ9876. Airlines YY and ZZ are in this case called "marketing airlines" (sometimes abbreviated MKT CXR for "marketing carrier"). Most of

3472-492: The program, that traveler will reach their goal sooner if the miles they accrue are elite qualifying miles. A mileage run may allow a traveler to (re-)qualify for a beneficial elite level, which requires a minimum number of miles to qualify. Some airlines have changed their frequent flyer rules to award miles based on ticket expense rather than absolute distance traveled, which may remove the incentive for mileage runs. A status challenge can be an often non-publicized offer to accrue

3534-424: The program, ways that consumers may access their loyalty account (account number, promotions, other information) may include: There has been a move away from traditional magnetic card, stamp, or punchcard based schemes to online and mobile online loyalty programs. While these schemes vary, the common element is a push toward eradication of a traditional card, in favour of an electronic equivalent. The choice of medium

3596-478: The redemption process for some programs, award seat availability is still subject to blackout dates and seasonal fluctuations, as airlines utilize statistics, yield management , and capacity-control formulas to determine the number of seats to allocate for award booking. This lack of availability has since been alleviated by non-airline rewards programs, such as certain credit cards ( see above ) and other corporate programs ( Expedia Rewards, Marriott ) by allowing

3658-563: The taxation issues surrounding FFPs. Unlike most previous research on FFPs, this research used data from an actual FFP. The cash-equivalent value of a loyalty point in 2010 was estimated to range between AU$ 0.0066 and AU$ 0.0084. This range, however, excluded the value of status benefits to the status member. The loyalty point gained by a FFP member per flight equated to an in-kind discount on an average airfare of 3.3% for lowest status members, 3.96% for medium status members and 4.63% for premium status members. A detailed survey undertaken in 2010 among

3720-416: The technical issue of valuation, but have more to do with legal constraints (e.g. "who owns the points") and often a lack of political will (e.g. "who would lose out due to taxation"). Australian and German public servants are not permitted to redeem points accrued from official travel for private purposes. The Australian example occurred in the 1990s when Qantas and the now-defunct Ansett Australia competed for

3782-609: The traveller's employer switches carriers due to a new travel contract's being signed). It does so by maintaining equivalent elite benefits with the new airline, without the need for time to pass while the traveller earns the benefits; this also has the side effect of retaining elite benefits with the previous airline, in order that one does not have to be given up for the other to allow for a more gradual transition. Status matches are employed by other types of establishments, as well, such as casinos, cruise lines, hotels, and rental car companies. Loyalty program A loyalty program or

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3844-474: Was created in 1972 by Western Direct Marketing for United. It gave plaques and promotional materials to members. In 1979, Texas International Airlines created the first frequent-flyer programme that used mileage tracking to give 'rewards' to its passengers, while in 1980 Western Airlines created its Travel Bank, which ultimately became part of Delta Air Lines ' programme upon their merger in 1987. American Airlines ' AAdvantage programme launched in 1981 as

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