I Think Alaska Just Did What American Airlines Should Have Done Last Year

Alaska Airlines has always intrigued me.  I’ve flown them a handful of times and always had a good experience.  They have friendly staff, clean planes and a solid operation.

Alaska made something of a big splash this year when they agreed to a merger/acquisition with Virgin America.  Alaska Airlines is in charge and the Virgin brand is likely to go away at some point.

A few months ago, I discussed the business points of the deal and I also covered what it meant for travelers.  Now that the merger is completed, Alaska Airlines is moving on to a new set of goals.

We learned earlier this week that Delta and Alaska were severing their partnership.  This wasn’t a big surprise given how much their friendship devolved.  That’ll happen when someone sets up shop in your backyard selling the same product to your customers.

Alaska’s chosen path forward after the merger with Virgin American and mutually agreed-upon divorce from Delta?  They made their program better.  As Lucky from One Mile at a Time reported earlier this week, Alaska is making a number of changes that will benefit travelers:

• Short distance awards start at 5,000 miles one-way, down from 7,500.
• Award flights are eligible for complimentary upgrades.
• Partner earnings have been amplified in a serious way.

By increasing the earning rates on some premium fares with international partners, Alaska is rewarding customers who spend more.  But, they’re doing it in a way that also continues to reward regular frequent travelers.  Cheaper short mileage awards and upgrades on award redemptions are a nice “thank you” to all their customers.

Why American Airlines Should Have Considered This Strategy

American Airlines was the last of the Big 3 to go through bankruptcy and ultimately reorganize.  That resulted in a merger with US Airways.  With US Airways’ management in charge of the combined airline, we all expected that painful cuts were coming to the loyalty program.  But, it didn’t have to be that way.

American Airlines had done a great job of attracting large corporate clients and high-dollar customers over the years.  They had better catering than their competition and performed well at ways to make those customers feel special.  Conversely, US Airways never was able to attract that sort of customer in large quantities.

Their loyalty program was also more rewarding.  By choosing to replicate (almost exactly) what United and Delta had done, they ceded the ability to say they were better in this area.  Even if the economics of the old program didn’t “work”, it could have been tweaked in some ways.  They could have left some meaningful pieces in place to reward high-value customers.

Instead, they gutted large parts of the program.  Where Alaska Airlines makes partner earning more rewarding, American Airlines significantly reduces theirs in a number of areas.

I’m not sure if Alaska’s changes will lead to growth in their elite ranks.  I don’t know if they’ll lead to increased profitability.  But, I applaud them for trying something different.  So far, they don’t appear scared to twist some dials and see how that impacts their ability to attract new customers.

The Final Two Pennies

Loyalty really does matter.  I’ve been an Executive Platinum member for the last decade or so with American Airlines.  I’m openly contemplating switching to United next year (and I need your help making that decision).  That won’t be because United’s program is better.  It’s because there’s no difference in the loyalty programs.  When you remove that variable, flight schedules become a much more prominent factor in my decision-making.  You could argue that’s the way it should have been for years.  American Airlines likely had me acting irrationally at times to buy their product.

Loyalty might not matter as much today when planes are full.  But, the airlines are making a big bet that they can make loyalty important again when planes aren’t quite as full.  When they need to, will they be able to recapture the magic and influence customers to make irrational decisions?

The post I Think Alaska Just Did What American Airlines Should Have Done Last Year was published first on Pizza in Motion