The airline industry faces a formidable challenge in an era where customer loyalty is the linchpin of success. Historically, airlines have pioneered the use of points and partnerships to fuel loyalty programs since the 1980s. However, the post-pandemic landscape presents a radically different scenario, with billions in unused frequent flyer points and escalating customer dissatisfaction casting a long shadow over the industry.

A recent analysis by Blackhawk Network (BHN), a leader in partnering with various commercial sectors, including travel and aviation, highlights this emerging crisis. Will Feutrill, BHN RVP of Incentives AU, sheds light on innovative strategies to help airlines navigate this turbulent terrain.

The Mounting Challenge

The COVID-19 pandemic’s ripple effects have been particularly severe in the travel sector. One of the most pressing issues for airlines has been the accumulation of loyalty points liabilities. Australian airlines, for instance, faced a combined liability exceeding $3.2 billion in unredeemed frequent flyer points by mid-2023. This alarming figure underscores the need for a strategic overhaul.

In response to these mounting challenges, some airlines have devalued loyalty points, inadvertently fueling customer ire and prompting them to explore alternative providers. This situation is compounded by operational struggles in the post-pandemic period, including delayed and cancelled flights, which have further eroded customer trust.

The Airline Customer Advocate’s 2021 annual report throws these issues into stark relief, noting many unresolved customer complaints concerning refund requests.

A Smarter Solution

Amidst these challenges, there lies an opportunity for reinvention. BHN’s research suggests a pivot towards offering a diverse range of gift and pre-paid cards could be the key. This approach caters to customer preferences and mitigates points liability effectively.

For instance, BHN’s research indicates that 59% of Australian consumers view gift cards as a suitable reward for brand loyalty. These cards, especially multi-brand and branded pre-paid ones, are gaining traction. Not only do they offer tangible benefits to customers, but they also foster stronger partnerships and customer engagement within the broader ecosystem.

Moreover, in an economic climate marked by rising living costs, gift cards serve as a budgeting tool, with nearly half of consumers in 2022 purchasing them for personal use. By allowing points redemption for such gift cards, airlines can offer valuable and easily accessible rewards, aligning with customer desires for ‘luxury’ purchases outside their regular spending.

Furthermore, these cards present an efficient solution for customer reimbursements. In light of the significant dissatisfaction stemming from refund processes, offering pre-paid cards as refunds can expedite the process, providing customers with immediate, flexible options.

The Path Forward

The path ahead for airlines is clear. By embracing innovative solutions like diverse gift and pre-paid card offerings within their loyalty programs, airlines can address the twin challenges of maintaining customer satisfaction and managing financial liabilities. This strategy not only aids in rebuilding trust but also plays a crucial role in reducing the likelihood of customers switching brands.

In conclusion, the current landscape presents both a challenge and an opportunity for airlines. By reimagining their loyalty programs to align with evolving customer preferences, airlines can navigate their way out of the points crisis, ultimately finding themselves in a win-win situation with their customers. As they chart this new course, the airline industry stands on the cusp of a transformative phase, poised to redefine the paradigm of customer loyalty and satisfaction.

Written by: Michelle Warner

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