Larger airlines around the world have frequent flyer program each with its unique name, policies and restrictions regarding joining, accumulating, and redeeming points. The primary method of obtaining points in a frequent-flyer program until recent years was to fly with the associated airline. Most systems reward travelers with a specific number of points based on the distance traveled (such as 1 point per mile flown), although systems vary.

How to improve Airline customers’ loyalty programs?

Customer retention has grown in importance as most firms have acknowledged that customer retention has a bearing on profitability over the long term. Most of the airliners offer loyalty programs to their customers to reward customers for their support and encourage continuous future support from such customers.

These programs are hugely important: they encourage customers to fly an airline that otherwise might not be their best choice for a trip. And over time, airlines have learned that frequent-flier miles from such programs are a valuable, aspirational currency they can sell to third parties.

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Successful Airline loyalty programs generate lots of Miles:

Saving the miles for is the reason many customers enroll in customer loyalty programs. Airlines realize that selling miles can not only make their passengers more loyal but also generate lucrative income streams in its own right.

Redemptions are good value for airlines if no paying customer is available for a seat that would otherwise fly empty. To use industry lingo, carriers try to avoid “displacement.” This approach worked well when redemptions were relatively simple to manage: passengers got seats that would otherwise probably have remained empty—as many did during and just after the financial crisis, when the level of business travel plunged.

Customers are seeking newer options to redeem their points/miles which makes them more satisfied and engaged with the airline for long duration.

Few Ideas to consider to ensure that their loyalty programs regain the customers’ affections.

Hotels or Hotel intermediaries: Airlines should work with hotels or hotel intermediaries to give passengers access to great rates by focusing on distressed inventory. Some airlines already have relationships to redeem miles for hotel rooms, but the number of miles needed is high, since the airline typically pays something close to a standard rate.

Luxury-goods firms: especially newer ones looking to enter the market, can be appropriate partners, since they have very high margins and want to maintain price integrity.

Concert tickets and restaurants are excellent choices: Airlines should build partnerships that give them access to these distressed opportunities like, when the tickets are undersold for an event and during off-peak times, restaurant owners will accept promotional bookings.

Digital innovations make real-time promotions a possibility: Fulfillment would take place through a quick scan of a code on the airline’s mobile app. Even if the airline gave the coffee shop only $1 for the coffee itself, the shop would be pleased to get an additional customer and an opportunity for cross-selling.

Internal Redemption Options: Airlines have many opportunities to provide redemption at a low (or even no) cost across the business—and to please customers to boot.
Few Examples may be:
Onboard, airlines can offer a menu of redemption choices
At the airport, airlines can offer instant redemption
Last-minute upgrades through miles are a true win–win

Encourage late-booking redemptions:
In the last week before departure, the airline has a much better idea which flights won’t be full. Such close-in bookings represent a great opportunity to offer redemptions.

Rethink how to price and manage redemption seats internally:
A better way to allocate redemption seats would be to open the full inventory to the rewards program, but at variable pricing. By allowing the rewards program to “buy” seats internally at the bid price, a rewards program pushes customers toward less full flights. The rewards managers can decide whether the circumstances warrant taking a loss on a seat by allowing it to be redeemed if the miles are worth less than the bid price.

Take a more customer-value view of redemptions:
Innovative programs are starting to offer more valuable customers higher levels of available redemptions. Airlines can also offer some redemptions at a loss to promote their loyalty programs. One carrier ran “redemption special” flights: all seats to a holiday destination were slated for passengers redeeming miles.

Become more relaxed about redemptions on partner airlines:
Airlines pay each other real money for redemptions. Many therefore restrict them on partner airlines and encourage them on their own flights.

Shift the mind-set from ‘breakage is good’ to ‘breakage is bad’ :
Expired miles represent a lost opportunity to engage customers. Carriers should start lengthen their expiration policies, to remove expiration totally for higher-value customers, and to introduce micro-redemption ranges to encourage more frequent activity.

Finally, if miles-based rewards programs irritate customers, airlines should rethink the whole issue of miles. Airline loyalty programs kludge two different things: miles that passengers can redeem for flights, on the one hand, and status levels that confer benefits during flights, on the other.