a few miles more
Pillai explores the lure of frequent flier programmes
to the business traveller
millionaire (noun) - A person who has collected
at least one million miles with a single airline’s frequent
years after American Airlines introduced the worlds
first frequent flier program AAdvantage in 1981, the phrase
mileage millionaire quietly found its way into
print. Nowadays, it is accepted coinage, featuring regularly
in magazines and websites catering to business travelers.
As per one survey, by November 2000, the number of mileage
millionaires in the United States stood at 1,21,000. Moral
of the story: frequent flier programmes have come of age -
at Mach 2 velocity at least.
bewitching is the lure of these points to business travelers
that most schedule their programme with one eye on those flights
which will add to their mileage.
Deep Singhania, Director, Business Development - Middle East
and Far East Asia, Tata Infotech Limited, is a frequent flier
who flies once every month. His travel region extends from
Singapore on the east up to Kuwait on the western side. He
flies with most of the airlines based on their frequency and
the schedule of his meetings. Though this constrains him to
distribute the points over various airlines, when asked whether
frequent flier points come into consideration when he schedules
a trip, Mr Singhanias answer is an unambiguous yes.
It plays a role up to 60 per cent of my decision,
Mr Singhania is not alone. I
M Shaikh, General Manager-Customer Support, MicroWorld Software
Services Pvt Ltd, is somebody who does not fly very frequently
nowadays. But he says, During the peak of my career
I was an avid tracker of my frequent flier points. It used
to very much come into consideration when I had to schedule
for Indage Group Director Mr Vikrant Chougule who says, It
features in my schedule when I fly in the domestic sector.
With the worlds corporate community completely in its
thrall, it was just a matter of time before Frequent Flying
Miles (FFMs) started becoming another form of currency.
Presently, in the west, we have FFMs which are bought, sold,
bartered, shared and even collected for the sake of collection
(like stamps)! At least 100 million people in the world belong
to a frequent flier programme. US Airways has launched a deal
where, for 10 million miles, you can buy a seat on the first
private spacecraft to take passengers into space, scheduled
for 2004. In fact, you dont even have to fly to earn
frequent flier miles.
A report in The Economist, a UK-based magazine, says: Almost
50 percent of miles are earned without even leaving the ground.
The biggest earners are credit-card spending and telephone
calls, but car rental, hotels, share-trading or refinancing
a mortgage all offer extra opportunities to notch up your
miles. In America you can even get miles on your income-tax
payments, if you pay by credit card. The worlds top
frequent flier, reputedly a publishing executive who charges
his firms postage bill to his own credit card, has racked
up 25 million miles-enough to fly London to Sydney return
250 times. Free tickets purchased with frequent-flier miles
account for an average of 8 percent of airlines revenue
big impetus to mileage-gathering has been the Internet. Making
stock trades, filling out surveys or buying products online
is enough to add to your account. Webflyer.com, a site catering
to frequent fliers, estimates that there are more than 15,000
mileage-making opportunities, most of which can be collected
by remaining on firm ground.
What is the secret of such phenomenal growth? Mans fascination
with anything which comes free, says Mr Shaikh of Microworld.
better customer service was never enough. It will not develop
a strong loyalty base in comparison with frequent flier points.
The airline with the maximum freebies will have a strong customer
base. It is like bribing someone with a different name - say
frequent flier points, he says.
Pocketful of miles, nowhere to go
The conclusion to this story should have been that as long
as there is competition, the miles will keep on piling up.
Unfortunately, thats only partly true. A crisis is in
the offing for frequent fliers - all the miles that they accrue
might just go waste.
the past five years, the number of miles awarded by airlines
to its frequent fliers has doubled but miles redeemed have
increased by only one-third. In 2001, only one-fourth of the
miles earned were redeemed. By the end of 2001, the liability
of airlines was almost an astounding 8 trillion miles. At
the current rate of redemption, it will take 23 years to clear
this liability even if no new ones were issued.
Ordinarily this should have been a source of worry to airlines.
But they are not worried since the fine print says that the
membership of the frequent flier programme may be yours but
the airline owns it. Some of them even explicitly state that
the miles and points do not represent the owners property.
Airlines can therefore limit their free seats. But for the
fliers themselves, the number of seats available are being
chased by too many miles. Post-September 11, there was a huge
rise in the number of empty seats making it easy to get a
free flight. But with travel returning to normal, it will
be increasingly difficult to secure free seats or upgrades
on flights using frequent flier miles.
Mr Vikrant Chougule of Indage Group is bang on target when
he says people have logged on so many miles that airlines
cannot have so many seats to encash all of it.
The wise thing to do is to start using the miles you have
guide to frequent flier programmes
A frequent flier programme
is the accrual of mileage points which can then be redeemed
for free tickets. Once members have enrolled in a particular
airlines programme, they tend to select their flights
so that they can travel on carriers that will enable them
to accrue mileage points in the particular programme which
they can redeem for free tickets, even if more direct routings
are available on other carriers.
In addition, most frequent flier programmes also have partnership
alliances with other companies such as car rental firms, hotel
chains, credit card companies, mobile phone companies, etc.
Members not only get special rates and certain value added
benefits by using the services of these companies, but also
earn additional mileage points which they can utilise towards
redemption of tickets.
American Airlines, when they hit on AAdvantage, the worlds
first frequent flying programme, had a very ordinary objective
- reward customers for flying with them and ensure that they
continue to do so in future.
airline used its database to track the miles flown by its
customers and a reward system was set up called a mile
earned for a mile traveled. American then went to include
other services within the ambit of rewards. Hence the inclusion
of Hertz, as providers of rental cars, and Hyatt, as providers
of hotel stays.
AAdvantages astonishing success led to United Airlines
starting Mileage Plus. The features were the same, except
United offered a bonus of 5000 miles just for enrolment. Other
major airlines followed suit.
Later, the hotel industry, who initially came in as partners,
started their frequent stay programs. The first sign that
frequent flier miles (FFMs) had come to stay was when Hertz
withdrew from frequent flier relationships with airlines and
saw a drastic decline in market share. Today, they are partners
in 20 frequent flier programs.
The more the merrier
Ironically, while the whole idea of FFMs was to beat
your competitor, today frequent flier alliances are the norm.
Asked what he would like improved in his frequent flier programme,
the response of Mr Deep Singhania of Tata Infotech, was, If
they can allow barter deal on FF points between
airlines. Like 100 point of 1 airline converted to 60 points
on other airline.
That is already taking place, though not across the spectrum.
France, with its loyalty programme, Frequence Plus, is a classic
example. It is the only European Airline to have a frequent
flier alliance with Flying Returns, which is the loyalty programme
of Air India and Indian Airlines. An Air France client accumulates
miles from the very first point of departure in India (on
the domestic flight) apart from his international flight.
Therefore, both Frequence Plus and Flying Returns members
can redeem the miles on each others flights. Which means
Air France customers can accumulate miles on domestic flights
of Indian Airlines and Air India. They then have the choice
of redeeming them on partner airlines and/or other services
like car rentals, hotels, etc.
Jean-Louis Calmettes, official spokesperson of Air France,
said, The number of airlines we are tied up to is in
double figures. An individual passenger accumulates miles
as he travels on board Air France and our partner airlines.
Likewise, In Air Indias case, the 1,66,641 members of
its Flying Returns programme, can accrue and redeem mileage
points on flights of Air India, Indian Airlines, Alliance
Air and Air France.
They can accrue but not redeem mileage points on code share
flights of Air India and Indian Airlines like Aeroflot, Asiana,
Austrian Airlines, Kuwait Airways, Lufthansa, Malaysian, Silk
Air, Singapore Airlines, Swiss Air Lines, Thai Airways, Virgin
Atlantic, Air Lanka, Air Kazakhastan, Kyrghystan Airlines
and Uzbekistan Airways.
Accounting: Employer v/s Employee?
Question: Since companies pay for the tickets of its
employees, why do they not claim the frequent flier miles?
Answer: They lose far more than they gain.
least three surveys in the US show that the private sector
allows its employees to retain frequent flier miles (FFMs)
received on business travel for personal use. Runzheimer International,
an organisation which keeps track of the travel policies of
corporations, says that it found employers reported savings
from 6 per cent to 10 per cent on air travel if FFMs were
recaptured, yet, as of 2000, only 6 per cent per cent of organisations
thought it to be their property. That is down from 29 per
cent in 1986.
Runzheimer conducted a survey (see box) of 192 companies in
the US representing most industry classifications with travel
expenses that range from $250,000 to more than $30 million.
Respondent organisations had median annual sales of $300,000,000,
also a median 1,500 employees.
Phyllis Schumann, senior editor, corporate travel, Runzheimer
International, said, An organisation deciding to exploit
this opportunity must weigh the costs of the program, such
as losing valuable employees to competition, travelers refusing
to travel on their own time, and various other ways employees
may express their disappointment or dissatisfaction. In our
experience, most successful programs for recapture started
when frequent-flier programs were first introduced or when
the organisation was small.
Schumann adds, The per cent of organisations that considered
frequent-flier bonuses the property of employees was 89 per
cent in the 2000 survey. Those considering frequent-flier
bonuses to be organisation property decreased to a level not
seen for eight years, 6 per cent. Their next survey
comes out later this year.
Organisations Consider Frequent-Flier Bonuses
of Respondents Property of:
= Not Asked]