Recently I mentioned IBS winning Sri Lankan and BMI as customers for their iFly loyalty system, so I’ve decided to have a quick look at this area as there seems to be a lot of interest from various IT companies. I tend to go easy on hyping my employer’s own solutions on this blog, so I’ve spent more time today looking at other IT companies and also what some airlines are doing. 

You’ve got the interesting sitation at Aeroplan where they are now selling more points to more retailers, 80% of their rewards are used to redeem air travel, the main airline partner Air Canada is cutting capacity, and then “Aeroplan owes C$1.16-billion to its member in the form of rewards that it doesn’t currently have the cash to support.”  This recent quote from Toronto’s Globe & Mail doesn’t really inspire confidence either:

Meanwhile, Air Canada’s emergence from bankruptcy protection in 2006 was similarly depressing: Despite an upbeat prognosis from some analysts, the shares have withered to 80 cents from $21. Another trip to bankruptcy court seems likely.

But the problems with Air Canada and it’s separately listed loyalty program haven’t stopped others going down a similar path. There was the announcement in April about a rebranded outfit now known as The Mileage Company that is running Airmiles and the British Airways frequent flier program and is also now looking to pick up management of loyalty programs for more airlines. Sounds like a similar pitch to Carlson who work closely with Hitit and run the call cente and all the back end loyalty proceses for airlines like SATA, V Australia and a number of Middle Eastern carriers. Carlson also appear to have a successful loyalty program consulting business, picking up work with SAS and China Southern. Oliver Wyman have also been busy in the consulting space, especially around providing advice to airlines wanting to spin off their frequent flyer programs using a similar model to Air Canada. Qantas is one such airline that spun off the loyalty program into a searate entity, but the markets have cruelled any plans for an IPO and it is still 100% Qantas owned. They have tried to get more power back into the program and away from the partner card companies by cutting off the ability for credit card loyalty programs to redeem flights – the goal apparently being to push customers to use the airline’s own more profitable co-branded credit card to obtain points.

The more one digs into these loyalty programs the more you realize just how many players there are. Hawaiian Airlines has a multiyear partner­ship with Vesdia who are responsible for the management and growth of the loyalty program, but I’m not sure how much technology is related to this deal or whether it is more marketing focussed. Polish IT company Comarch launched their new loyalty system with Russian Carrier S7 in December last year, and I’ll actually be bumping into a few of their people later this week. I haven’t even touched on the big database companies like Oracle/Siebel who I know have some good airline loyalty contracts in place. From what people tell me of the legacy systems many frequent flier departments are still using, it would appear there is still a lot of potential for migrating these customers to more modern systems.