When JetBlue first launched it seemed really reluctant over a loyalty program. They had to have one, but TrueBlue was a half-hearted effort at best. It was a low value revenue-based program with few benefits.
Over the past couple of years they’ve been on a real journey to offer a compelling program for elite benefits. This made a lot of sense in the context of their American Airlines partnership.
- They were getting customers from American, but American’s loyal customers expected similar treatment
- They were increasingly going up against global carriers, expanding transatlantic
- And their customers had the choice to credit to the AAdvantage program. They’d do that if TrueBlue wasn’t compelling on its own.
The American partnership is kaput, but the doubling down on loyalty actually continues. Some of that is seeing through what was in the pipeline, but their CEO explained during the airline’s third quarter earnings call that loyalty programs are profitable, they’re behind in this, and they want to make up the margin gap.
You know, it’s clearly a margin gap for us, right. I mean, I think all these airlines report sort of roughly what their percentage of revenue is and then you know, if you assume that the margin on these programs are high, you know, it’s definitely, it’s definitely single digit, low single digit percentages of difference.
This is why actually, we’ve been so focused on not just building our travel, but our own loyalty program to sort of play catch up, but also craving JetBlue Travel Products. You know, we know that we do not have the same exposure to business travelers as some of these global leisure airlines. And so how do we gain more exposure, more share of wallet for leisure customers as well, and so our goal over time is to get to a point where our JetBlue Travel Products and our loyalty program together can be at a point where they can compete for what I’d call a legacy airline tight margin. So that’s the road we’re on Jamie’s, we’re not there yet, but you know, we’re I think we’re making really good progress
.@baker_never_y: "But do you have an internal estimate as to how many points of margin differential loyalty might currently be driving?"@JetBlue $JBLU CEO: "Hi, Jamie. You know, it's clearly a margin gap for us, right. I mean, I think all these airlines report sort of roughly…
— Ross Feinstein (@RossFeinstein) October 31, 2023
Loyalty programs are high margin, and they’re necessary to attract the customers that they need. Frontier Airlines revamped its loyalty program in 2018. They were first to intertwine theirs meaningfully with their co-brand card. And as the airline struggles they’ve decided to double down on loyalty.
Even Spirit Airlines doubled down on loyalty during the pandemic, mostly copying Frontier. And even Allegiant sees upside for its credit card revenue. Neither fish nor fowl, Southwest Airlines is adding new benefits.
This all contrasts mightily with Delta which is temporarily rolling back its gutting of elite status qualification and club access, saying that they do not have enough premium product to match demand (while using takeaways as a stick to motivate customers to spend more on its cobrand cards).
The ultra low cost carrier and smaller airline segments have been lagging the industry most financially. They’ve discovered that while they once saw loyalty as a cost center to avoid to the extent possible, it’s a profit center for airlines that are actually earning profits. And they’re looking to loyalty to help turn around their fortunes.
After all the programs that have been built by American, Delta, and United have become so valuable that they’re worth as much or more than the airlines themselves, with each able to raise $6.5 to $10 billion apiece during the pandemic backed by future income streams of their programs. Ignoring or downplaying loyalty for years at other airlines seems to have been a mistake.
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November 02, 2023 at 11:04PM
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Loyalty as the New Gold: How Reluctant Airlines, Like JetBlue, Are Changing Their Tune - View from the Wing
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