United Airlines: Frequent Flyer Program
(6 pages of text)
Case (Pub Mat)
From 1980 to 2010, frequent flyer programs (FFPs) had evolved from simple customer reward programs to independent profit-generation business models. The airline industry had seen enormous success with FFPs, which had become businesses of their own. In June 2014, however, United Airlines announced that as of March 1, 2015, it would move from awarding miles based on distance flown to awarding miles for dollars spent per ticket, following in the footsteps of Delta Air Lines. According to the new mileage accrual plan, most United Airlines passengers would earn fewer reward miles. Many customers saw this change as a significant devaluation of award miles and complained about United Airlines’ new policy. Who benefited from the revenue-based FFPs and how would the new program affect the behaviour of United Airlines’ customers? Should American Airlines also adopt the revenue-based FFP?
The case strives to promote an understanding of the following:
- The structure and dynamics of the airline industry.
- The evolution of a business model — specifically, the transition of FFPs from customer reward programs to profit-generating business models.
- Strategic decision-making based on game-theory thinking.
- The pros and cons of revenue-based FFPs.
- Managing customer relationships.
Transportation and Warehousing
United States, Large, 2015
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