While US carriers have soared above all comers when it comes to weighing up loyalty programmes, recent years have seen big European airline groups start to catch up.
“We have had growth where we have not had [it] before”, said Rob McDonald, chief commercial officer with IAG Loyalty, discussing how the past three years have been “a watermark” for the business.
McDonald pointed to what he said were “five, six, seven major launches in recent years”, collaborations that include with Sainsbury’s Nectar, Argos and Barclaycard, the latter of which in 2022 partnered with IAG Loyalty to launch a credit card that allows customers to collect Avios points when making purchases.
“We’ve added more Avios collection partners than we’ve ever added before”, McDonald said, speaking ahead of IAG publishing its annual financial results for 2022.
The Group’s “other revenue”, which includes maintenance and Avios, came in at over €1.9bn, around €300 million more than IAG Cargo, the report showed.
More recently, IAG reported adding 1.2 million new loyalty customers during the first quarter of 2023 (Q1 2023), which it said was 50% more than Q1 2019 – additions that contributed to “good cash flow and operating profit during the quarter of €81 million”, according to the Q1 results report.
And the additions have likely taken the estimated value of the programme beyond the estimated $7bn given in the 2023 On Point Loyalty Report, which ranked the world’s top 100 airline points programmes for their economic heft.
The report showed IAG coming in sixth overall, the second-best European or non-US performer after Lufthansa Group’s Miles & More.
The list was topped by the so-called ‘big four’ US carriers – Delta Air Lines, American Airlines, United Airlines and Southwest Airlines – with the first three all having loyalty programmes valued at over $20bn, To compare, the gross domestic products of Papua New Guinea and Cambodia are both around $20bn, with Iceland around $25bn.
But the rest of the top ten were from outside the US, which had only Alaska Airlines and JetBlue in the top 20, once the leasing US carriers were accounted for, with Southwest’s point offering in sight of the biggest European variants.
The Covid pandemic and travel restrictions imposed in turn forced carriers around the world, IAG included, to try use their loyalty programmes to tap into customer spending changes linked to the lockdowns and the effective moratorium on flying.
“We saw loads of customers really expanding where they collect Avios points”, McDonald said of the pandemic period.
The On Point Loyalty 2023 report estimated IAG’s programme to be worth almost $2bn more than in 2020.
In the meantime, “customers began changing their behaviour”, McDonald said, pointing to the expansion of e-commerce purchases and card payments.
In turn, while IAG added partnerships with Sainsbury’s and Barclays, it also “really doubled down on ways to spend Avios”, McDonald explained, adding that the business “listened to customers” when it came to using points to book flights.
Among those rewards-based offerings are a £1 fare, which McDonald said was “hugely popular” with customers and was something that Ryanair and easyJet could not match.
McDonald said the allure of loyalty programmes has widened, compared to seven-to-ten years ago when they were perhaps perceived as something of a business-class traveller preserve.
That broader-church appeal should mean the pandemic-era growth does not prove ephemeral.
“I think it is sustained”, McDonald said.
