How Frequent Flier Programs Influence Air Fare Choices
The potential rewards of membership in a Frequent Flyer Program (FFP) can actually cost more in terms of airfare than non-membership. However, the widespread success of FFPs as marketing toosl for airlines worldwide attests to the popularity of the notion that flying more often on more expensive tickets is economical, because it leads to rewards such as free flights, merchandise and services.
According to Frequent Flyer Services, the first frequent flyer program was established thirty years ago by American Airlines. Introduced in 1981, their AAdvantage FFP caught on quickly, with TWA and United Airlines establishing similar programs later that same year. During the 1990s, the booming economy engendered a rapid replication of FFPs throughout the international airline industry, with the first international collective alliance of airlines and FFPs formed in 1997, giving global travelers benefits leverage.
Throughout the three decades in which FFPs have been available, program basics have changed very little. Members collect points or miles according to a pre-determined schedule each time they pay for and take a flight. When they reach a plan’s specified threshold of points or miles, they are eligible to trade them in for travel discounts, free flights, or other goods or services.
Members can earn status points through a combination of flight points and air fare dollars paid. Status points count towards reaching a higher level of FFP membership. For example, an FFP may offer Bronze, Silver, or Gold categories. Members can progress to a higher category through the collection of status points. While upgrading to a higher status does not earn flights or discounts, it does provide perks, such as sky lounge admission, that are unavailable to members in the lower FFP echelons.
The Influence Factor
Research by McCaughey and Behrens into the relationship between FFPs and airline ticket sales confirms that FFP members will pay more for airfare in the knowledge that their flight is contributing to their program points/miles. Some specific findings regarding the influence of FFP membership on air fare choices include:
- Gold members tend to select the most expensive fares
- If tier members are close to an upgrade threshold, they will likely select a higher fare
- FFP members who are close to earning a reward are especially anxious to earn additional points
- Consumers with membership in more than one FFP typically select more expensive fares
The above is primarily true of members on domestic flights, since for international travels, consumers are typically more concerned with scheduling and price (McCaughey and Behrens, pp. 15, 21) . This has been confirmed through recent analysis (Petrovic, 2011)  of search volumes for phrases such as “cheap flights”.
McCaughey and Behrens conclude from their findings that the mere existence of an FFP generates additional revenue for airline companies from members willing to pay more for flights in order to earn membership benefits.
A Florida International University study conducted by Burgos et. al.  explores the effectiveness of FFPs in attracting and retaining customers. Their findings confirm that FFPs, a form of loyalty marketing, are key factors for success in the service industry. The anticipation of awards and upgrades impels members to go to additional expense, plus guarantees membership customer retention.
 25 Milestones in 25 Years of Frequent Flyer Programs. (2006). Retrieved April 21, 2011, from http://www.frequentflyerservices.com/press_room/facts_and_stats/25_milestones.php
 McCaughey, N. C., & Behrens, C. (2011, April). Paying for Status? The effect of frequent flier program member status on air fare choice. (Page 2). Retrieved April 21, 2011, from http://www.buseco.monash.edu.au/eco/research/papers/2011/0411payingmccaugheybehrens.pdf
 Petrovic, D. (2011, April). Cheap Flights: Keyword Targeting Challenges. Retrieved April 23, 2011, from http://dejanseo.com.au/keyword-targeting-in-the-cheap-flights-segment/
 Burgos, A., et. al. Perceived Value: How changes to frequent flyer rules and benefits can influence customer preferences. (Page 21). Retrieved April 21, 2011, from http://scholarworks.umass.edu/cgi/viewcontent.cgi?article=1316&context=gradconf_hospitality