Synthesis Topics

US airport loyalty programs overview

The purpose of this project is to provide a systematic and comprehensive overview of the current status of adopting passenger loyalty programs by the primary hub airports of the National Plan of Integrated Airport Systems (NPIAS).

Background (Describe the current situation or problem in the industry, and how your idea would address it.)

Loyalty programs, originally introduced to the airline industry in the early 1980s, have now become an essential component of the business ecosystem for airlines. Airline loyalty program produces profit margin by issuing and recycling miles at different rates, provides positive working capital through delayed redemption, and enhances passenger loyalty towards the airline brand. The market appreciates these tangible benefits, and values the financial diversity and sustainability made possible by loyalty programs for airlines. Therefore, popular loyalty programs such as American Airlines' AAdvantage are appraised by investors to worth tens of billions of dollars (Forbes, 2020). This provides airlines with incredible support to fight the unprecedented challenge caused by the COVID-19 global pandemic.

Compared with the airline industry, airports are late adopters of loyalty program. It is only within the last decade that some airports started to realize the value and decided to create the airport version of loyalty programs. This trend mostly originated from Europe, where airports such as London Heathrow, Paris Charles de Gaulle or Milan Malpensa are now collaborating with airport restaurants, duty free shops and parking facilities to provide this value-add service (Lissa Poirot, 2019) to passengers. In the U.S, some airports have braced this trend but choose to collaborate with third-party loyalty programs. For instance, a loyalty program called Thanks Again (2020) enables customers who pre-register their credit cards to earn rewards when shopping at a number of airports including Atlanta Hartsfield-Jackson, Miami International and San Antonio International Airport.

Objective (What is the desired product or result that will help the airport industry?)

This study aims to achieve the following objectives:

1. A comprehensive overview of the current status of US primary hub airports in adopting passenger loyalty programs;

2. A report of different approaches of adopting loyalty programs for airports and major loyalty service providers in the market.

3. A description of the essential framework of airport loyalty program.

4. A case study for a selected airport to detail the anticipated short-term and long-term benefits of operating an airport loyalty program.

Approach (Describe in general terms the steps you think are needed to achieve the objective.)

It is anticipated that the following steps will be taken to achieve the objectives listed above:

1. Survey all primary hub airports for their current status of adopting airport loyalty program;

2. Synthesize information collected from the airport survey and loyalty program solution providers;

3. Relate current airport loyalty programs to frequent flyer programs of airlines and rewards programs of retailers to extract key components that should be adopted by airport loyalty programs; and

4. Select an airport to conduct a case study of how loyalty program could benefit the airport financially by working with the airport authority/operator, retailers, and passengers.

Related Research - List related ACRP and other industry research; describe gaps (see link to Research Roadmaps above), and describe how your idea would address these gaps. This is a critical element of a synthesis topic submission.

To the best of our knowledge, there is no prior study within ACRP that addresses airport loyalty programs. The closest ones that can be related to this topic would be ACRP 01-26 (Improving the airport customer experience) and ACRP 01-40 (Evaluating the Traveler's Perspective to Improve the Airport Customer Experience). Airport loyalty programs are considered as a business approach to enhance the utility and satisfactory of customers when they need to do transactions with airports or vendors residing in commercial airports (Wu & Tsui, 2020).

There is limited number of studies on airport loyalty programs. Maurer and Wittmer (2015) compare customer loyalty programs offered by European airports and provide a ranking of service attributes through surveying airport passengers. Han, Yu, and Kim (2018) address the value of airport shopping in enhancing travelers' satisfaction. Loyalty programs built on retail shopping will further strengthen the bond between travelers and airports. The benefits of loyalty programs could be more significant for airports located in multiple-airport regions where travelers have abundant choices to select the origin of air travel. Loyalty programs then become an essential and effective factor in helping airports retain comparative advantages when facing the competition of other nearby airports (Nesset & Helgesen, 2014; Paliska, Drobne, Borruso, Gardina, & Fabjan, 2016).

Through the review of existing studies, it is obvious that research on airport loyalty programs is scares, compared with studies on airline frequent flyer programs or hotel frequent guest programs. The majority of these studies are about European airports. Airports of the U.S. clearly lag behind their European counterparts in adopting loyalty programs.

 

References

Forbes. (2020). How airlines make billions from monetizing frequent flyer programs. Retrieved from https://www.forbes.com/sites/advisor/2020/07/15/how-airlines-make-billions-from-monetizing-frequent-flyer-programs/#2ec745fc14e9

Han, H., Yu, J., & Kim, W. (2018). Airport shopping–an emerging non-aviation business: triggers of traveler loyalty. Journal of Travel and Tourism Marketing, 35(7), 835–845. https://doi.org/10.1080/10548408.2017.1422454

Lissa Poirot. (2019). Airports have rewards programs, too. Retrieved from Nerdwallet.com website: https://www.nerdwallet.com/article/travel/airports-have-rewards-programs-too

Maurer, T., & Wittmer, A. (2015). Airport Loyalty Programs. In 19Th Annual World Conference Air Transport Research Society (Atrs) (p. 11). Retrieved from https://www.alexandria.unisg.ch/publications/243852

Nesset, E., & Helgesen, Ø. (2014). Effects of switching costs on customer attitude loyalty to an airport in a multi-airport region. Transportation Research Part A: Policy and Practice, 67, 240–253. https://doi.org/10.1016/j.tra.2014.07.003

Paliska, D., Drobne, S., Borruso, G., Gardina, M., & Fabjan, D. (2016). Passengers' airport choice and airports' catchment area analysis in cross-border Upper Adriatic multi-airport region. Journal of Air Transport Management, 57, 143–154. https://doi.org/10.1016/j.jairtraman.2016.07.011

Thanksagain.com. (2020). Get rewarded for every transaction! Retrieved from https://www.thanksagain.com/

Wu, H., & Tsui, K. W. H. (2020). Does a reward program affect customers' behavioural intention of visiting the airport? A case study of Singapore Changi Airport. Journal of Air Transport Management, 82. https://doi.org/10.1016/j.jairtraman.2019.101742

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Idea No. 550