Airline Mergers and Frequent Fliers

I’m often asked what I think of airline mergers, especially in terms of how having fewer airlines relates to frequent-flier programs. In the past, we all assumed that the “Big Six” would stand forever, but after the spate of recent mergers and rumors of more to come, the idea of the Big Six has died.

How will having fewer carriers affect the frequent-flier programs of the few mega-airlines left standing? The answer may surprise you. It’s generally assumed that less competition is bad news for consumers, but frequent-flier programs aren’t Ma Bell. The growth of two key areas of loyalty programs, consumer partners and international travel, doesn’t have a negative effect on these programs and may actually impact them positively.

For example, because having fewer programs results in correspondingly larger membership bases, partners such as credit cards can offer greater incentives to that extensive audience. You might not see Frontier Airlines offering 100,000 bonus miles to acquire its credit card, as a couple of the larger frequent-flier programs have done, because Frontier’s membership base and global reach simply aren’t deep enough to demand that kind of investment from a credit card company.

The combined Continental-United frequent-flier program, however, has an estimated 91 million members—and nearly two million of them are elite members, with mileage accounts that are sometimes matched by healthy bank accounts. How could any company looking to make a profit not love to market to that group?

And when it comes to the nature of the shifts under way, keep in mind that mergers actually make it much harder for airlines to introduce negative changes. How is that possible? Well, some may argue that frequent fliers don’t have an option to turn away from a diminished program because of less competition, but I disagree. Thanks to the powerful voice of today’s social media, any airline that makes an unusual and negative change to its program risks a very public battering of its brand and its financial status when millions of members take to Twitter and Facebook to let everyone know about their displeasure. Power to the masses, I say—as a result of airline industry consolidation, they’ve grown far too large to be overlooked.