Adios to AirMiles?

Avios – the new single currency for IAG

For those of you that look to British Airways for innovation you’ll no doubt have been following the introduction of their new single mileage currency.  Avios is the name of the currency that will be offered not just to frequent flyers of British Airways but also those of Iberia.

The move to a single currency for both companies is not a surprise given that the parent entity of both carriers, International Airline Group, is intent on buying other airlines.  TAP is already in the frame and Aer Lingus has also been mentioned as a potential target (although a bit like BA has been described in the past, they are also being called a pension deficit with wings.)   To be able to add all these companies in and manage it successfully, then a single currency helps on the FFP side of things.

At the moment, there doesn’t appear to be a single FFP program – like UA and CO has done – on offer, just a single currency.  Although BA has not announced all the changes that are coming and time will tell what those are.

AirMiles name disappearing in the UK?

Avios is also the currency that will be offered to collectors of AirMiles in the UK.  This coalition program has the same brand name as the schemes in Canada and the Middle East and those companies all franchise the name.

There has been a lot of negative feedback in the UK about the AirMiles to Avios changes.  Currently, when you redeem for an AirMiles flight, the taxes, fees and charges are all included.  In the new Avios scheme that will not be the case and this has stirred up controversy.  Interestingly enough that was the way it used to be with AirMiles before they changed it to be all inclusive.

However, in midst of all this discussion, very few people have commented about the business rational behind ditching 20 years of brand investment in the AirMiles name.  BA bought AirMiles (in the UK) in the early ’90′s and since then it has grown and developed into a program with multiple partners and millions of active collectors.  So why would you want to change a consumer coalition program with all that brand equity and mix the reward currency with that of Frequent Flyer program?

Maybe it’s because the AirMiles trademark is owned by your arch rival Groupe Aeroplan?  Or maybe that Nectar (also owned by Groupe Aeroplan) has managed in many ways to outpace AirMiles in the UK.  For example, with its supermarket partner Sainsburys, Nectar Points are their currency, but for AirMiles’ partner, Tesco still award Clubcard points (which you then subsequently have to choose to convert to AirMiles.)  On top of that, AirMiles has a stronger flight redemption offer but Nectar has still managed to grab some 18 million collectors – considerably more than their rivals.

Nectar has also been more active in expansion – with both “Nectar for Business” in the UK and also Nectar Italia – something that would be hard under the old AirMiles set up for them to contemplate.  However, coalition schemes aren’t guaranteed to be successful – for a myriad of reasons they aren’t for example, big in the US and other key markets.

As ever with business decisions without public information, one can only speculate to the reasons.  Perhaps, the owner of the trademark was not willing to renew the deal?  So maybe it is not yet adios to AirMiles if the holder of the master trademark sell the rights to another company for the UK?  Only time will tell.

 

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Frequent Flyer program fraud

Treat your FFP account like your credit card!

Fraud is a big issue, especially for online retailers like airlines.  The Airline Information/Cybersource survey of the scale of the problem indicates that it is costing the industry some $1.4 billion a year.  And this is probably an underestimate of the scale of the problem.

However, one area that a lot of the airlines that SeaMountain talks with, that has not received as much attention is FFP fraud.  In the past the issues here have generally been confined to the likes of staff and travel agents finding work arounds to get miles for flights they haven’t been taking.  But, a new type of fraud is starting to emerge.

One example is from the Australian Frequentflyer Gazette where a Qantas FFP member logged on to their account to discover 110,000 points had been spent to buy a computer.  This fraud is one to add to the list of family members gaining access to an account and booking flights!

How safe are sites like UsingMiles?

Part of the advice offered by Australian Frequentflyer Gazette is to treat your FFP account like your credit card (or maybe that should be like your bank account!) Which is sound advice.  However, it made SeaMountain think about sites like UsingMiles that let you see all your accounts in one place.  They do this by you keying in your account number and pin to allow them access into your account.

Now I am sure that there are lots of security features in place on these sites.  Which I am sure is what the likes of Target (a huge retailer in the US for readers who haven’t heard of them) who had their database of credit card transactions hacked thought.  Target is a very reputable company and bad things happen to good people but if it can happen to them (and they have not been the only big company that has suffered this) it can happen anywhere.

With the vast majority of airlines now accounting for miles properly using the IFRIC13 rules, the number of opportunities to redeem for non flights has mushroomed.  Which makes FFP accounts even more attractive to hack and defraud. There are several companies that are providing innovative software to help airlines detect credit card fraud (like Accertify, Cybersource, 192.com and Ethoca – all of whom are attending the Airline and Travel Payment Summit in Toronto on 12/13th of October)  and one of them, 41st Parameter has adapted their product to help FFP schemes help detect this type of fraud.

PS              SeaMountain is now off to change the password to his BA FFF account!

 

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Payment surcharging

All airlines to charge surcharges?

According to the AirPlus Chairman, Patrick Diemer, all airlines will eventually surcharge for using payment cards.  In a very interesting interview with BTN Daily (you can read the full interview by clicking here) Diemer talks not only about the launch of their new debit based travel agency lodge card but also the payment surcharging in all channels (in certain countries) introduced by AirPlus parent company, Lufthansa.

100 million euros from surcharges?

AirPlus also estimate that for a large airline they could potentially earn 100 million euros from payment surcharging.  Not an inconsequential sum and as AirPlus says, the potential difference between profit and loss.

However, what are the knock on consequences of payment surcharging?  If you switch people to debit or alternative forms of Payment like UseMyBank or iDeal as well as debit cards will the airline kill the earnings from miles on credit cards?  In the short term, the impact might be limited as other retailers don’t surcharge.  But, if you look at the Australian market where surcharging is common (and inter-change is regulated which pays for many programs’ miles) then behaviours start to change.

Getting the balance between payment surcharging and earning income from selling miles on co-brand cards is one of the hot topics that will be discussed at debated (along with fraud, co-brand credit card partnerships and alternative forms of payment) at the Airline and Travel Payment Summit which is taking place in Toronto on 12th/13th of October.  Full agenda and details at this link:  www.AirlineTravelPayments.com  Over 300 industry professionals will be attending and if you want to get the full insights in industry developments you should attend!

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United and Continental FFP merger

Rising to the merger challenge

Merging FFP’s is no easy task.  After all, competitors design their programs based on having a benefit that the opposition doesn’t have.  So how do you square the circle when you merge the two?

United and Continental have been wrestling with that difficult challenge over the last several months and they announced what the new program is going to look like.

Winners and losers

In any merger there are always some winners and some losers.  Baggage benefits for some tiers seem to be the biggest losers in the new merged program.  However, UA/CO seems to have done a great job in balancing the new program.  And don’t just take SeaMountain’s thoughts on this!

Check out what the folk at FlyerTalk – those people who know the programs better than the people who designed them! – are saying.  You can read their comments, as well as the details about the new program here.  On the whole these are all positive.  And these people are a hard crowd to please.

One of the best comments from the site, will please not only those of who advocate that FFP’s be designed to reward behaviour but also CO/UA’s shareholders:  “From a business standpoint, the changes make sense. They reward those who fly or spend more than those who don’t.”  Which is a great summary!

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A fast jet to?

You have to have a more than a degree of sympathy for EasyJet.  First there is a court battle with their founder over ancillary revenue.  Next, board members are up for ejection in a sort of X-factor show down (maybe Sir Stelios could be the new Simon Cowell?)

In between, EasyJet’s business seems to motor ahead, so much so that it is paying a special dividend.  And we are not talking pocket money here.  It is a cool £190 million.  £40 million is a maiden dividend and the rest is a one off.   All of this off the back of an improving operational performance which the management is so proud of that it feels confident to offer holders of its business orientated flexi-ticket a free leisure flight if they are more than 15 minutes late.  If that was on some other airlines that SeaMountain flies with regularly then we’d never have to buy another ticket so it is a confident move.

Part of the founder’s beef with the EasyJet management is about over expansion.  So it does seem a tad odd what the next chapter in this saga appears to be.  Apparently, Sir Stelios is planning to start up a new airline – FastJet (well it would hardly be SlowJet would it?)   The domain is already registered with a home page in blood red colours saying “By Stelios.  Coming Soon.”

Seems like it is “seconds out, round 300″ with the winner being either a knockout or submission from one side or the other!  Maybe the choice of that blood red colour is no accident!

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airBaltic – what next?

airBaltic is a very interesting carrier.  One that has re-invented its business model from a traditional full service carrier to essentially a hybrid LCC.  On top of that it has established BalticMiles as the coalition currency not just for frequent flyers but for numerous business in the Baltic/Scandinavia.

The current uncertainly surrounding their viability can’t be helpful for customers or staff.  According to reports the court has rejected the application for bankruptcy protection/administration although the airline continues to operate as normal.  It appears that the airline took this move as one of its major shareholders (the government of Latvia) is dragging its feet in terms of supporting an increase in capital for the airline.

SeaMountain spoke, earlier this year, at airBaltic’s Riga Hub conference, and was impressed by both the airline and the management team behind it.  Hopefully, the shareholders will be able to agree to the capital increase and allow the further expansion of the airline.

To read the press release from airBaltic click here

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ipads on BA

Not iMpressed

There are times when hype meets reality and the impact is ugly.  As I sit onboard a BA plane bound for San Francisco (except that we are still at the terminal and have moved nowhere for about 90 minutes – they have turned the IFE on so who knows how long we will be here…..) I was reading that BA has issued ipads to its onboard crew.

Apparently the idea is to allow a “truly personalised experience” as the crew will know all about your preferences in advance.  I don’t think it takes an ipad to know that we’d like to leave on time.  This is my second long-haul flight in a row that has been mega delayed on BA (and my 40 minute connecting flight was delayed by 40 minutes) and, one would think, that no amount of technology, however wonderful the ipad may be, seems to make BA concerned about the “basics”.

To be fair to the onboard crew (there isn’t a lot they can do as it is a technical fault which seems to be going on and on…..) they did get the First Officer to come and speak with me (did the ipad tell them that?  Somehow I doubt it!)  But, one suspects that getting the basics right – on-time planes and bags delivered quickly does not need ipads.  Only that, I’d guess isn’t as sexy or as interesting as doing something with an ipad.

Wonder when we’ll all eventually get to SFO……

 

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Are you guilty of legacy thinking?

Google buys Motorola Mobility

Isn’t Google supposed to be an advertising company with a search engine attached?  So what does their acquisition of Motorola Mobility for a cool US$12 billion say about their thinking?  Well, it certainly isn’t legacy thinking!

For many years, “traditional” airlines thought the low cost boys would come to nothing, I often heard at British Airways “you can’t make money on short-haul”.  Very legacy thinking as Ryanair has proved only too well.  They certainly are not guilty of non legacy thinking.  Profitable thinking certainly as their recent results continue to hammer home.

If you’re interested in technology in travel you should sign up for the Tnooz RSS (you can do so here) and one of their best writers (and certainly a non legacy thinker) is the excellent Timothy O’Neil-Dunne.  If you haven’t had the chance of meeting him, he is one of those rare individuals who is at the coal face of our industry, has strong views, but has not lost the strategic overview.  An unusual combination – and did I say he is opinionated?

Travel 3.0

He makes some interesting predictions in his latest piece for Tnooz:  “Ten Reasons why Big Data will change the travel industry”.  You can read the piece by clicking this link here

His two main and very real insights are (a) about legacy thinking – he talks about approaching this as “non legacy thinking” but if you don’t understand all of this you are going to be left behind and (b) the creaking infrastructure in the travel industry might not be able to support all of this.  I wonder which gatekeepers he could be talking about – could the GDS’s and their infrastructure about to be leapfrogged by Google et al with their non legacy thinking.  I think that is what he is hinting at between the lines!

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United FFP changes?

The rumour mill

In keeping with it being silly season for reporters here in the UK I thought I’d make some comment on what the rumour mill is saying about what United might be planning for its Frequent Flyer program.

To be 100% accurate I’m commenting on rumours of rumours (here’s the original source from the View from the Wing Blog so you can check it out direct yourself by clicking here) so that might make it even less accurate!  The comments came to my attention as colleagues, all top tier with UA or CO, started circulating emails about the changes.

What might be happening?

Well, the short of it, looks like UA will be copying what the likes of British Airways has been doing for years.  That is is just not about miles flown, but about the revenue you are bringing.  BA has shifted a bit in this area due to their alliance with BA, but, you still need to have qualifying flights on BA metal to retain status.

What UA are rumoured to be doing is making this explicit by creating revenue targets for elite status.  On top of that there will be changes in benefits like Premium Economy (more likely to be sold on the day as an upgrade or as part of the passes that UA is selling) and instant upgrades.  Which, if true, will be a boon to some frequent, premium paying customers, but not to the mileage runners.

The negative comment seems to be around UA moving away from a concept of loyalty to one based purely on transactions.

So is it true?

Googling around then nothing official pops up.  Other than United saying that MileagePlus will be the name for the combined UA-CO program and that it will still be the “worlds most rewarding loyalty program” (click here for source).  Checking the Twitter sphere pops up nothing either – other than more rumours that UA are behind the leaking themselves!

And nothing in that font of all FFP knowledge, FlyerTalk (unless it is buried somewhere).

So is it a silly season story?  No smoke without fire I think.

 

 

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All change downunder

The sand carriers impact BA and QF

British Airways and Qantas have, for many years, operated a joint business operation on the kangaroo routes.  It has been, in some ways an odd arrangement as, for example, the route via Hong Kong wasn’t part of the deal.  However, QF has just announced (nothing yet on the BA website at the time of writing) major changes to the deal.

BA are coming off the Bangkok to Sydney route and Qantas is stopping Bangkok to London and Hong Kong to London. Is this the impact of all that extra capacity from the sand carriers like Emirates and Etihad into the Australian market?  Perhaps it could be QF is finding the extra capacity of their new (and excellent!) A380′s on the Melbourne/Sydney Singapore London route is enough.  Or is there more to it than that?

What will BA do with the slots?

It appears that the two slots freed up by this will be leased to BA.  Given that slots at LHR are at a premium, this could be the primary reason behind the move.  Willie Walsh  the CEO of IAG (BA’s parent company) was quoted in the UK press at the weekend bemoaning the fact of limited capacity at Heathrow and how few routes the company flew direct to China.  Whilst BA will increase capacity on the route to Hong Kong from 14 to 17 per week that doesn’t account for all the extra slots or for the plane that will be freed up by not flying the BKK SYD rotation.

Is BA set for more direct routes to China with these slots?  Finnair’s result uptick in traffic is widely credited with their new route into China, so, maybe BA is planning some new direct services or increasing service on their existing ones.  Watch this space!

For the full details about the major changes in QF’s strategy the comments of their CEO is on the excellent Just4Airlines.com website at this link:  http://www.just4airlines.com/j4_dox/email/rss.mv?story_id=52699

 

 

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