Date

12-2-2024

Document Type

Thesis

Abstract

Frequent flyer programs (FFPs) started in the 1950s as rudimentary punchcard programs tracking limited customer information. However, at present, they are some of the most dynamic and complex loyalty programs in the world: maintaining external partnerships that have diversified industry economics with billions in annual co-branded revenue; agglomerating big data to create detailed customer profiles, determining their willingness to pay, and dynamically set pricing thereafter; and generating commercial value often exceeding the market capitalizations of their respective carriers. This paper leverages extensive secondary sources to portray the evolution of FFPs and their impact on the larger industry through every major iteration—from pre- and post-co-branded credit cards to the COVID-19 pandemic and the contemporary environment. With every iteration came a greater, more complicated integration of FFPs with revenue management as airlines increasingly leverage[d] and manipulate[d] customer loyalty for financial returns. This integration was/is only accelerated by big data and artificial intelligence which have evolved the commercial airline industry from being oriented on mass markets to a segment or customer of one. Nevertheless, growing external partnerships also fuel this change as FFPs and their operating economics evolve from isolated, standalone programs to globally interconnected ones bridging airlines, alliances, and continents. While the future potential of FFPs largely depends on their ability to continue isolating a market of one, proposed governmental action threatens to implicate existing structures and the larger industry as FFPs assume increasing relevance in everyday customer spending.

Department

Aviation Science

Thesis Committee

Prof. Michael Welch, Thesis Advisor
Prof. Michael Farley, Committee Member
Prof. Veronica T. Cote, Committee Member

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