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Major airlines can't count on customer loyalty

Brand loyalty, once a key factor in all major U.S. airlines’ strategies, has become less of a priority as carriers believe that price is what more and more customers care about.
EARNS DELTA
Brand loyalty has suffered since an industry downturn in 2001 forced major airlines to reduce expenses.Ric Feld / AP file
/ Source: Reuters

Brand loyalty, once a key factor in all major U.S. airlines’ strategies, has become less of a priority as carriers believe that price is what more and more customers care about.

The decline in travelers who stick with a single carrier is a by-product of sweeping industry changes triggered by the weakening of popular frequent flyer programs, the rise of low-cost carriers and the restructuring of major airlines.

“It certainly is damaging to the industry as a whole,” said Stuart Klaskin at KKC Aviation Consulting. “What it means is that there’s this floating customer base. Every airline has to work harder to attract and retain customers.”

The airlines with the most to lose are the so-called legacy carriers, such as AMR Corp.’s American Airlines, UAL Corp’s United Airlines and Continental Airlines, Klaskin said. These are the companies that have worked since the early 1980s to win steady customers through frequent flyer programs.

Airlines have been able to generate hundreds of millions of dollars by selling frequent flyer mileage credits to banks, hotels, car rental services and phone companies.

Victims of their own popularity, frequent flyer miles have become difficult to redeem, simply because so many travelers are trying to do so. It takes an increasing number of miles for a customer to get a free flight or upgrade to better service.

“It’s absolutely harder to find seats that airlines are willing to let go for no incremental revenue,” said airline consultant Robert Mann.

No. 5 U.S. airline Northwest Airlines, however, argued that customer loyalty remains a pillar of its business model and that its frequent flyer program spurs business.

“Northwest remains committed to building customer loyalty through its World Perks frequent flyer program, and it remains a core aspect of our marketing efforts,” Northwest spokesman Kurt Ebenhoch said. “It is the platform we use to recognize and reward our best customers.”

Changing airline identities
Brand loyalty has suffered since an industry downturn in 2001 forced major airlines to reduce expenses. Several embattled carriers adopted lower-cost models like Southwest Airlines Co. and JetBlue Airways Corp., which often sell tickets for less than the majors.

Some carriers have abandoned free in-flight perks in favor of charging customers extra for drinks, meals and entertainment. This shift in strategy has further diluted the value of frequent flyer upgrades.

“The value of a free seat is no longer what it once was,” Mann said.

Bankrupt Northwest, for example, has tested an extra fee for coveted aisle seats. AMR Corp.’s American Airlines no longer offers complimentary pillows. Most major airlines have discontinued free meals on domestic flights.

Meanwhile, some low-fare airlines bolstered in-flight amenities, further blurring the distinction between themselves and the major carriers.

“The common theme here is that as the low-cost segment has moved toward improving their product and offering more amenities, the major carriers as a whole have moved toward reducing these amenities,” said Kevin Mitchell, head of the Business Travel Coalition. “The products look almost the same.”

Experts say travelers are spoiled by cheap flights and that the low-fare revolution has made price the main — and sometimes only — consideration for customers.

“For the first time, this industry is consumer driven,” Mitchell said. “The consumer has said very often and loudly where the price points are.”

Mitchell said United and Continental, the No. 2 and No. 4 U.S. airlines, respectively, are the only majors that still make wholehearted efforts to win repeat customers by nurturing loyalty.

Others focus on almost exclusively on low-fare competition, a move that alienates some long-time customers who might have booked flights without shopping first, said KKC’s Klaskin.

“Price took precedence over loyalty,” he said.