How to nail loyalty in the age of low-cost carriers

In an age with so many carriers and fare options, travellers have more choice than ever before.

Asia is setting new trends in long-haul and low-cost air travel; low-cost airlines and ultra-low-cost carriers have become not only a fixture of the travel industry but an essential element of contemporary life.

According to the International Civil Aviation Organisation, there are nearly 80 low-cost carriers in Asia Pacific. In response to this trend, legacy airlines are increasingly providing consumers with even more choice in the form of low-cost or basic economy ticket options, stripping back some of the perks of the flight experience, and frequent flyer benefits, to offer a competitive ticket price.

Traditional carriers have also stepped up expansion into the low-cost market with their subsidiaries, for example, Singapore Airlines’ Tigerair and Scoot and Qantas’ Jetstar, with 2018 having seen accelerated rollout of these fare options to many international routes.

With increased competition and choice between airline experiences, what are the implications for loyalty? In an era of dollars spent, not miles flown currency accrual, lower fares will undoubtedly have an impact on flyer loyalty – the question is, how should airlines react?

Understanding who is on-board with low-cost flying

The biggest risk is to assume that those flying on low-cost carriers or choosing basic economy fares will do so every time they fly. It’s a common misconception that these services are primarily used by millennials, low-value customers, or those who will never be swayed by anything other than the price.

The reality is, there’s much more to a customer’s perception of value than price. There are many reasons why someone might fly with a low-cost carrier or choose a basic economy fare.

For example, they might be heading to a short-haul destination, so they feel that they can forego the additional comfort provided by a traditional carrier, or give up some of the usual benefits associated with a regular economy fare given shorter flight times.

To really nail loyalty and build ongoing relationships with their customers, airlines cannot make assumptions that the purpose of every trip is the same.

They need to collect and analyse data on their customers to build a true picture at an individual level, and understand why their customers fly, each time they fly. Unearthing these insights will help airlines to see the bigger picture and understand which customers present the best opportunities to create more valuable ongoing relationships.

A false-economy for corporate travel policies

One of the biggest categories of flyers using basic economy is those travelling on business. This is because many companies have a price cap or even a lowest available fare policy.

However, this approach to business travel is not without its risks; for example, if a meeting overruns and an employee misses their flight, there is rarely an opportunity to switch to an alternative flight with a highly restrictive basic economy fare. Thus costing the company more than expected.

In addition, corporates have to choose between the dilemma of saving the cost versus the comfort of the employee, especially on long haul flights.

Whilst a company may save $100 on a basic economy fare, that saving could be dwarfed by the productivity loss when the employee misses out on key benefits such as priority boarding, advance seat selection and potential complementary upgrades to first class normally associated with their frequent flyer status.

How should airlines adapt their loyalty strategy?

Most airlines offering basic economy options still allow frequent fliers to accrue loyalty points or award miles on these fares – this is an important element of building loyalty in the basic economy age.

However, transparency around the accrual and use of points or loyalty currency is vital. Hiding any restrictions or rules around loyalty points and redemption in the fine print only frustrates members and can have a negative impact on engagement and loyalty.

Allowing basic economy customers to accrue points or miles in a frequent flyer program helps make them feel valued and important. It provides vital data and insights which can be used to create opportunities to increase customer engagement, and over time the amount they spend.

The key is providing highly targeted and personal communications based on logical and attainable upgrades and ancillary opportunities.

Final thoughts

Loyalty is both emotional and transactional and airlines need to be able to deliver personalised relationships. While basic economy is rising in popularity with consumers, airlines need to be careful and take a longer-term view with basic economy fares.

Cutting corners in the short term may end up alienating an existing, loyal customer base and costing an airline more in the long term.

The key is to develop a deep understanding through data analytics of why customers fly, each time they fly and enable them to still feel recognised as an individual through relevant personalised communications and attainable, logical deals, regardless of what ticket they purchase.

Mary English is the executive vice president of Collinson for Asia Pacific.