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What are reward points costing your business?



For many years traditional flag carrying airlines have attracted regular business passengers through offering loyalty reward schemes.

Air Miles was created in 1986 by British Caledonian and its advertising company. It was quickly snapped up by British Airways when it absorbed British Caledonian. Today the scheme is known as Avios and like all reward programs it plays a role in marketing the airline.
 
The airline industry has changed since the 1980’s and so has the pressure on businesses to save money. We’ve all become a bit savvier and consumers now realise that there is no such thing as a free lunch. You only need to look at what is happening in the supermarket sector. The traditional big retailers with their Club Card and Nectar schemes are suffering from the march of the discount brands including ALDI and LIDL. These low cost retailers are doing just what the first low cost airlines did in the 1990's. They’re stripping the cost out of their businesses to offer everyday low prices. When easyJet started in 1995, loyalty points were not included along with inflight meals that no one wanted and boiled sweets. This enabled the airline to offer consistently low fares and a product that appealed to the masses.
 
easyJet has grown to become one of the largest airlines in Europe taking on the traditional carriers such as BA and Air France. To fight back, these legacy carriers have slashed fares and tried to copy the business model of the low cost airlines. The problem is that they still have costs in their business that mean they need to sell at a higher price. One of these costs is the expensive and ever increasingly out of date loyalty point programs.

British Airways has just recently made some drastic changes to its loyalty program which includes reducing the value earned on European economy flights to only 25% of what they used to be. This makes the scheme even more unattractive to frequent business travellers, who would need to fly four times as much just to get the same amount of points. And as the flights on traditional airlines are usually higher than low cost carriers your business would need to be paying a lot more than if you switched to easyJet.

Many businesses like to give their travellers some flexibility when choosing airlines to fly with. But what cost is this having on your corporate travel budgets? With the changes now made to Avios points, the argument to use traditional airlines on European routes is diminishing. Including and mandating easyJet into your policy can save you considerable amounts without compromising on service which doesn’t vary much on a two hour flight anyway. With flights on more of the top 100 European business routes than any other carrier, great on-time performance and a flexible product the case for change is not hard to make.

Supermarket retailing and the European airline industry are both going through very similar situations. Consumers are voting with their feet and savings are to be made for all. It will be interesting to see how both groups of consumers respond to the opportunity to change and save.




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