Ponder over a business concept so ingenious that every competitor in your field decides to replicate it.
One of the greatest joys in traveling lies in embarking on an incredible journey that seems almost cost-free because you've covered the expenses using rewards points, perhaps accumulated from less glamorous business trips. However, do you realize that there is a particular individual from history whose concept made this possible?
That was the late Thomas Plaskett, who served at American Airlines during the 1980s and is recognized as the inaugural airline executive responsible for initiating the AAdvantage frequent flyer program.
As Plaskett stated way back in 1982, the main purpose of implementing a loyalty program was to “ efforts to create brand loyalty within a commodity market .”
The circumstances were distinct in those days.
Now, I might have some minor disagreements with the concept of Plaksett conjuring this idea from scratch, considering our exploration into how Southwest Airlines previously handled situations like these. so absurdly sexist you have to laugh; now has a rewards program from the 1970s .
This was known as the "Southwest Sweethearts Club," where female secretaries were awarded prizes for arranging travel for their male bosses through Southwest Airlines.
Although Southwest currently appears to be rushing headlong into eliminating all aspects that may have set it apart from being just another commodity airline, there was once a time when it possessed flair — even if somewhat outdated.
However, it was Plaskett who truly ran with the concept.
It's fascinating to examine who American Airlines has appointed to oversee the AAdvantage program now and to consider how these programs and others like them have changed over time.
Dual utility?
This month, American Airlines handed over the reins of the AAdvantage program to an executive called Scott Long, who was previously responsible for investor relations.
It's often claimed that having the right people is more crucial than having the right policies, and thus Gary Leff opined over on View From the Wing The fact that Long is taking charge indicates something about America's objectives for the program.
Briefly put, contemporary airline loyalty programs serve a two-fold purpose:
- Here's what Plaskett suggested: the notion that passengers would likely remain loyal if they could earn rewards for their frequent travel, such as complimentary flights, upgrades on board, or various incentives.
- Moreover, we see the transformation of loyalty points into nearly their own separate currency, traded between airlines and credit card firms. These points rely not on backing from the U.S. government but rather on the guarantee of corporations specialized in hurtling pressurized metal tubes through the sky at several hundred miles per hour.
When questioned about the significance of these programs for their operations, airline companies hesitated initially. However, during the pandemic, American Airlines embarked on raising $10 billion through bonds and leveraged loans, which were supported by its loyalty program.
That was quite solid proof.
Finding a balance
As Leff highlights, the choice of Long—once more, stemming from his work in investor relations—indicates that American’s current objective may be to maximize revenue through its collaboration with Citibank. This financial institution holds exclusivity for issuing American Airlines AAdvantage credit cards.
The difficulty lies in achieving a equilibrium, as with numerous aspects of business.
To maintain the value of their miles for travelers, American Airlines needs to ensure that customers will want to apply for, carry, and utilize Citibank credit cards to more swiftly accrue these rewards.
When I reached out to American Airlines for their input, they took a somewhat more refined stance:
During his initial seven years at American, Scott was associated with the Commercial division, where he spent a portion of his tenure developing strategies for AAdvantage. Even when he moved to the Finance department, he maintained close ties with the Commercial team.
As the recently appointed VP of Investor Relations and Corporate Development, he frequently updated investors and various stakeholders regarding American’s efforts to enhance the AAdvantage program for its members. This included details about the refreshed collaboration with Citi, anticipated to greatly expand both loyalty programs and reward opportunities for AAdvantage members and holders of Citi-branded cards.
The memo issued by our vice chairman and chief strategy officer, Steve Johnson, regarding Scott's promotion stated: "Scott is ideally suited to spearhead the ongoing advancement of the globe's premier travel rewards platform and guarantee the smooth rollout of our groundbreaking credit card collaboration with Citi."
Build a legacy
It's been 43 years since Plaskett’s invention, and nearly every airline globally has replicated AAdvantage. That’s quite an enduring legacy, and it deserves recognition.
Create something that brings joy to customers and enhances your company's profitability.
Moreover, create something so intelligent that it becomes emulated by every competitor in your field. The possibilities of its evolution are endless—and countless individuals may eventually feel grateful enough to acknowledge your influence.
This posting initially appeared at Pawonation.comcom .
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