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Full-service airlines go full tilt at loyalty programmes

With the entry of a new challenger in the premium services space, Vistara, a key differentiator between its offerings...

Mumbai | March 7, 2015 1:06:18 pm

With the entry of a new challenger in the premium services space, Vistara, a key differentiator between its offerings and those of incumbents like Jet Airways and Air India will be the loyalty rewards programmes.

Even as no-frill carriers compete largely on costs, the war between Indian full-service airlines may well play out through their loyalty programmes. The first signs of competition in this space are already visible: Jet Airways, which is looking to protect its base, tweaked its frequent flyer programme last month, soon after Vistara, a JV between Tata Sons and Singapore Airlines, commenced operations in January.

Under the new scheme, customers are allowed collect points and upgrade to a higher tier of the loyalty programme based on the value of the ticket they buy as well as the distance and frequency of travel. Earlier, accumulation of points was only linked to the miles travelled, irrespective of ticket price.

“The new tier point structure allows members to earn more tier points per flight, thus accelerating the time taken to upgrade to the higher tier,” Jet Airways said in response to an email sent by FE.


Jet Airways’ privilege programme has five tiers which entitles members to enjoy benefits like access to exclusive lounges, higher baggage allowance, priority check-in and waiver of certain fees. “Faster upgrades or easier retention of existing tier, along with the enhancements and benefits are all aimed to ensure deeper guest engagement with and loyalty towards Jet Airways,” the Naresh Goyal-led carrier’s statement said.

Since Vistara’s launch, Jet has doubled and tripled the number of miles its business and economy class passengers earn on routes on which Vistara operates. Vistara added another route to its network, Delhi-Goa, on February 23. In 2014, Jet Airways transferred its frequent flyer programme undertaking to its subsidiary Jet Privilege, in which it has sold a 50.1% stake to Abu Dhabi-based Etihad Airways.

An analyst with a brokerage believes these attempts are aimed at protecting the base of passengers, especially corporate travellers, from switching to airlines like Vistara and even no-frill carriers like IndiGo, which often offer more attractive fares than Jet Airways.

He declined to be identified. No-frills carrier IndiGo doesn’t have a frequent flyer programme, but offers some special schemes for corporate flyers.

“In the full-service airlines segment, there isn’t much space to bring in vast changes apart from differentiating on in-flight services, as most airlines want to keep their costs low,” the analyst said. “Jet Airways has a massive advantage over Vistara as far as its frequent flyer programme is concerned, since its network is much bigger than that of the latter. However, if Vistara can gradually tweak its Club Vistara programme by allowing attractive upgrades as it expands its routes, it can pose an attractive alternative for Jet Airways’ loyal customers.”

Meanwhile, Vistara will look to strengthen its own loyalty rewards programme in consonance with the growth in its network. It has already changed the rules of the game as far as the structure of rewards programmes is concerned by being the first to introduce accumulation of points on the basis of ticket prices. Club Vistara operates on a system where the passenger is rewarded with upgrades and other benefits based on the amount of money they spend flying with the airline. The carrier has also done away with the concept of a physical loyalty card and introduced an online account, which will help it in marginally reduce costs.

The problem with having a loyalty programme based on miles travelled by a passenger is best exemplified by Air India’s frequent flyer programme Flying Returns. Flying Returns members who fly internationally end up earning more points compared with their domestic counterparts purely on the basis of greater number of miles travelled. This is despite the fact that in some cases the cost of a return ticket on a domestic route may be higher than that on some short-haul international sectors.

Although Vistara’s frequent flyer programme is in place, the airline is yet to come up with a redemption system that will allow passengers to redeem the points they have earned to obtain benefits offered by the programme.

A spokesperson for Vistara told FE that the airline is currently working on its redemption system for its frequent flyer programme. “We should have it up and rolling in the next 10 days or so,” the spokesperson said on February 24.

With the initial reaction to Vistara’s in-flight services being encouraging, an attractive redemption mechanism for loyal flyers may help the airline attract more such passengers, especially from other airlines.

By Rhik Kundu

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