Airline Ancillary Revenue and Loyalty Guide for 2013 The best single resource in your quest for revenue success Table of Contents Welcome Aboard An Introduction by Jay Sorensen... 5 Card-Carrying Generosity: American Express, Barclays, Chase, Citibank and Southwest Are Most Rewarding... 7 When banks compete, consumers win... 7 Comparing cards is a complex challenge... 8 Reward value is determined by cardholder behavior... 13 Card competition adds complexity and confusion for consumers... 18 Bank travel reward cards are often a better choice... 20 Premium Class Rewards Provide Best Value for Frequent Flier Members... 22 Airlines have become unwilling gift givers... 22 More reward choices creates better reward value... 23 Mileage value is determined by applying retail prices... 24 Reward value seems related to ease of redemption... 26 United s Explorer credit card strives to maintain a competitive edge... 27 Airlines have an inherent ability to deliver better value... 31 Worldwide Report of Reward Availability for 2013... 33 Introduction to the Report... 33 Carriers Included in the Analysis... 37 Components of the Reward Booking Data... 38 Reward Query Methodology... 39 Airline Data Section Notes... 40 Commentary on Individual Airline Results... 41 Graph: Overall Reward Availability... 43 Graph: Long-Haul Flights Reward Availability... 44 Graph: Flights 251 to 2,500 Miles Reward Availability... 45 Graph: Overall Reward Availability by Month... 46 Air Asia BIG... 47 Air Berlin topbonus... 50 Air China PhoenixMiles... 53 Air Canada - Aeroplan... 56 Air France/KLM Flying Blue... 59 AirTran A+ Rewards... 62 Alaska Airlines Mileage Plan... 65 American - AAdvantage... 68 AviancaTaca - LifeMiles... 71 Airline Ancillary Revenue and Loyalty Guide 2013 IdeaWorksCompany.com LLC Page 1
British Airways Executive Club... 74 Cathay Pacific Asia Miles... 77 Delta - SkyMiles... 80 Emirates - Skywards... 83 GOL - Smiles... 86 JetBlue True Blue... 89 LAN Airlines - LanPass... 92 Lufthansa/SWISS/Austrian Miles & More... 95 Qantas Frequent Flyer... 98 SAS Scandinavian - EuroBonus... 101 Singapore - KrisFlyer... 104 Southwest Rapid Rewards... 107 Turkish Miles&Smiles... 110 United Airlines - MileagePlus... 113 US Airways Dividend Miles... 116 Virgin Australia Velocity Rewards... 119 Appendix Table of Query Dates Used in This Report... 122 Worldwide Report of Ancillary Revenue for 2013... 124 Summary of the Results... 124 Ancillary Revenue Defined... 130 About Individual Airline Listings... 131 Europe and Russia... 136 The Americas... 157 Asia and the South Pacific... 181 Middle East and Africa... 194 Currency Exchange Rates Used for the Worldwide Statistics... 198 Bag Fees Sprout this Spring in Asia, Europe, and America... 199 Unbundling has the potential to make basic fares more affordable... 199 Alaska Airlines is the gold standard for fee-based bag service... 201 Air France and KLM jump on the bag fee carousel... 203 British Airways counters with carry-on only fares at Gatwick... 206 Frontier Airlines CEO defends $100 carry-on fee... 207 Clear and concise introductions help prevent consumer confusion... 209 Choice and Creativity: Carriers Build Ancillary Revenue by Empowering a Consumer s Right to Choose... 211 The focus is changing from products to consumers and methods... 211 Online stumbles became lessons for learning... 212 Fare families, branded fares and a la carte methods offer solutions... 213 The revolution began with a la carte... 214 Airline Ancillary Revenue and Loyalty Guide 2013 IdeaWorksCompany.com LLC Page 2
Fare families associate perks with pricing... 217 Branded fares brings retailing simplicity to consumers... 220 When properly merchandised, airline travel can fetch a premium... 224 Economy Class Meals Get an a la Carte Upgrade... 225 Buy on board appears, disappears, and returns... 225 Cruise lines embraced specialty dining a decade ago... 226 Enjoy the following global selection of upgraded meals... 227 KLM adds Choice and Control with a la carte meals... 229 This is more complicated than delivering a pizza... 231 Austrian tried full frills and now relies on a la carte... 232 How to add sizzle to your product and beef up the bottom line... 233 Disclosure to Readers of this Report: IdeaWorksCompany.com LLC makes every effort to ensure the quality of the information in this report. Before relying on the information, you should obtain any appropriate professional advice relevant to your particular circumstances. IdeaWorksCompany cannot guarantee, and assumes no legal liability or responsibility for, the accuracy, currency or completeness of the information. Terms of Use for this Report: You may not disseminate any portion of the Report through electronic means, including mail lists or electronic bulletin boards, without the prior consent of IdeaWorksCompany. You may make one hard copy by downloading and printing it. You may store the document as a file on your computer. Please contact IdeaWorksCompany if you require multiple downloads for use within your company, and for all other uses. Except as expressly permitted in this Terms of Use, the Report may not be reproduced, transmitted, or distributed without permission. You may not commingle any portion of the Report with any other information and shall not edit, modify, or alter any portion. IdeaWorksCompany provides the Report and services as is and without any warranty, or condition, express, implied or statutory. IdeaWorksCompany specifically disclaims any implied warranty of title, merchantability, fitness for a particular purpose, and non-infringement. In no event shall IdeaWorksCompany be liable for lost profits or any special, incidental, or consequential damages arising out of or in connection with the Report (however arising, including negligence). Distribution of this Report is protected by the Economic Espionage Act of 1996 of the United States and the data protection laws of Europe. Issued April 2014 by IdeaWorksCompany.com LLC Shorewood, Wisconsin, USA IdeaWorksCompany.com Airline Ancillary Revenue and Loyalty Guide 2013 IdeaWorksCompany.com LLC Page 3
About Jay Sorensen, Writer of the Report Jay, with sons Anton and Aleksei, on the North Fork Trail in North Cascades National Park in Washington. Jay Sorensen s research and reports have made him a leading authority on frequent flier programs and the ancillary revenue movement. For 2013 he was a speaker at the FFP Spring Event at the Freddie Awards in Washington DC and the MEGA Event in Vancouver; he spoke at the 2012 IATA Passenger Services Symposium in the Middle East. His published works are relied upon by airline executives throughout the world and include first-ever guides on the topics of ancillary revenue and loyalty marketing. He was acknowledged by his peers when he received the Airline Industry Achievement Award at the MEGA Event in 2011. Mr. Sorensen is a veteran management professional with 30 years experience in product, partnership, and marketing development. As president of the IdeaWorksCompany consulting firm, he has enhanced the generation of airline revenue, started loyalty programs and co-branded credit cards, developed products in the service sector, and helped start airlines and other travel companies. His career includes 13 years at Midwest Airlines where he was responsible for marketing, sales, customer service, product development, operations, planning, financial analysis and budgeting. His favorite activities are hiking, exploring and camping in US national parks with his family. About Eric Lucas, Editor of the Report Eric Lucas is an international travel, natural history and business writer and editor whose work appears in Michelin travel guides, Delta Sky Magazine, Alaska Airlines Magazine, Westways Magazine and numerous other publications. Founding editor of Midwest Airlines Magazine, he is the author of eight books, including the 2013 Michelin Alaska Guide. Eric has followed and written about the travel industry for more than 20 years. He lives in Seattle, Washington, where he grows and sells organic garlic; visit him online at www.trailnot4sissies.com. Eric, at his favorite summer retreat, Steens Mountain, Oregon. Airline Ancillary Revenue and Loyalty Guide 2013 IdeaWorksCompany.com LLC Page 4
Welcome Aboard An Introduction by Jay Sorensen Henry Selfridge, the Wisconsin-born founder of Selfridges & Co. department store of London, offered this advice to those in business: Entertainment, customer service and value for money: The first will get them in, while the second and third will keep them there. Consumers may debate whether frequent flier programs and a la carte features provide good customer service or value for money. Some may argue their favorite loyalty program delivers on every expectation. Many more would likely complain that frequent flier programs are lacking in both categories. But very few would eagerly step forward to proclaim their program is entertaining and satisfies a sense of wanderlust. The early consumer response to ancillary revenue initiatives was resoundingly negative, and only recently have signs of acceptance appeared. Airlines struggle with the tasks of managing reward travel and charging fees. But why can t the loyalty marketing and ancillary revenue initiatives reach for the higher standards of the retail world? We are, after all, privileged to be working in the most exciting industry in the world the business of travel, seeing the world, and seeking new experiences. Retailers utilize attention-getting devices such as astounding and colorful displays of merchandise, personal welcomes and invitations, and conspicuous promotions. In many ways, Richard Branson of the Virgin Group is a living and breathing example of these methods for the travel industry. Mr. Branson has made a lifetime of creating new products. His style provides an illustration the airline industry would be wise to follow... especially before announcing a new fee that merely replaces a formerly-free service. Even Ryanair finally felt chastened by relentless criticism for its desire to shake down consumers for every penny, pound and peso. During 2013 its CEO publicly admitted it must improve its scandalous reputation for customer service. All over the globe, more emphasis is being placed on how to better sell air travel and airlines are experimenting with different methods such as fare families and branded fares. Carriers such as Air New Zealand, Air Canada, and Frontier are proving that when properly merchandised airline travel can fetch a premium. I hope you enjoy reading this copy of the Airline Ancillary Revenue and Loyalty Guide. With nearly 240 pages, it is our largest publication to date and remains the only single resource dedicated to the topics of ancillary revenue and loyalty marketing. I believe Henry Selfridge would concur with the credos of consumer transparency and retail innovation that infuse this guide. After all, if we can t promise consumers entertainment, customer service and value for money, they will never walk down the jet way and through the airplane door. President IdeaWorksCompany.com LLC Airline Ancillary Revenue and Loyalty Guide 2013 IdeaWorksCompany.com LLC Page 5