Without a new approach, airline loyalty programs risk alienating many customers.
Since American Airlines created the industry’s first successful1 customer-loyalty program, in 1981, almost every carrier has followed suit. These programs are hugely important: they encourage customers to fly an airline that otherwise might not be their best choice for a trip. And over time, airlines have learned that frequent-flier miles from such programs are a valuable, aspirational currency they can sell to third parties.
The result has been a boom in the number of miles—which has not, however, been balanced by a similar increase in the number of seats that can be redeemed for them. We estimate that more than 30 trillion frequent-flier miles are currently sitting unspent in accounts. That was enough to let almost every airline passenger in the world redeem miles for a free one-way flight in 2017—if miles could be redeemed for trips without restrictions.
In fact, outstanding balances of miles are becoming much harder to redeem, so programs created to make customers more loyal actually risk alienating them. In this article, we’ll show how airlines have begun to rethink the way they handle redemptions and suggest some ideas on how they could reengage customers by broadening redemptions further.