In past years, airlines’ biggest concern was how to control skyrocketing fuel prices. Today, carriers worldwide are making dramatic business model changes to survive not only fuel costs but a myriad of challenges. This perfect storm of challenges colliding simultaneously could result in changes that bring about the ultimate travel experience for consumers.

A survey conducted by Sabre Airline Solutions of 90 airlines across the globe reveals that while fuel cost instability and revenue management are among the top challenges for carriers over the next 18 months, it is customer loyalty and retention efforts that are viewed by an overwhelming majority of survey respondents (86 percent) as having the most positive impact on their business.

Customer experience was ranked by nearly 50 percent of those surveyed as the primary issue related to customer loyalty and retention.

The importance of developing customer loyalty is part of the unwieldy crisis airlines face today as charging additional fees is viewed by them as one of the top tactics to increase revenues.

Overall customer satisfaction with airlines was down this year, in part because of costs and fees, according to a study released in June by J.D. Power and Associates.

"The importance of customer loyalty and retention was distinctly higher in this year's survey as compared to a similar study we did two years ago," said Gordon Locke, vice president of airline marketing for Sabre. "That's not surprising as airlines grapple with the challenge of introducing additional fees to generate much-needed new revenue, in a way that doesn't erode an airline's brand or negatively impact customer loyalty. The airline that finds that magic balance will become a model for the rest of the industry.

"We've seen some winners and losers in this area, particularly as customers are less loyal to brands and more apt to switching preferences now than ever before. In the next year or two, we'll see more experimentation and a greater focus on the customer as airlines sharpen their ability to service customer needs using new technologies available to them."
According to 58 percent of those surveyed, merchandising and ancillary revenue will help airlines’ bottom line results. Baggage fees, travel insurance, and vacation packaging were rated among the highest in the survey to generate revenue.

Other key Sabre survey findings:

The firm commissioned the Sabre Airline Industry Trends Survey to increase the firm’s understanding of the specific issues and challenges the airline industry is currently facing.

The online survey was conducted in August-September 2009 and involved nearly 200 air carrier employee respondents, including analysts, managers, and vice presidents representing 90 airlines around the world.

Air carriers have reason to fret over customer loyalty and retention since a Colloquy research firm survey of U.S. consumers found that frequent travelers are becoming less loyal to a variety of travel loyalty programs, with a 31 percent decline in active participation in frequent flier, hotel and other travel rewards programs as the economy has worsened over the last two years.

On average, the survey finds, travelers actively participate in 1.5 programs now compared with 2.2 in 2007. The reasons?. Road warriors have been grounded. Corporations have negotiated contracts with preferred airlines and hotels and fault employees who go outside them. And many travelers are simply tired of juggling frequent flyer programs.

The Sabre-conducted survey reaffirms an earlier marketing report that showed that airline loyalty efforts are still worth pushing as cash-strapped customers take stay-at-home vacations and companies cut back on business travel.

The market research report entitled Building Stronger Relationships with Frequent Flyers: The Secret to Loyalty Program Success from Carlson Marketing & Peppers & Rogers Group says with more than 70 frequent flyer programs worldwide, travelers have no lack of opportunity to be rewarded for their patronage. In the U.S. alone there are 235 million members in the top six programs and over 10 million awards are issued per year.

“Enrollments and redemption, however, are not the measure of success for a frequent flyer program — it is the building of profitable, long-term customer relationships. Unfortunately, while this goal is judged as being very important by 85 percent of airlines around the globe, only 15 percent agree that it has been fully achieved,” the research revealed.

The research showed that a strong customer relationship with an airline improves repeat business and a frequent flyer program can directly influence the decision to purchase a ticket from one airline versus another.

“Airline frequent flyer programs have been in existence for over a quarter of a century,” the study noted, concluding, “Now is the time to consider how these programs may be transitioned to a new level of effectiveness. Now is the time to understand and to act upon the strength of the relationships among members in these programs.”

Of the firm’s various assets, none is more important than its present relationships, because the strength of relationships with customers as well as other stakeholders is a fundamental indicator of the business’s future success. Relationships are predictive. All else is history.”


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