28 June 2017 843 words, 4 min. read Latest update : 27 October 2023

Airlines loyalty programs : different countries, different benefits

By Pierre-Nicolas Schwab PhD in marketing, director of IntoTheMinds
Loyalty cards have been an important innovation when it comes to increase customer loyalty. It ll started with American Airlines and the least we can say is that the airline industry is the one which has probably pushed the concept […]

Loyalty cards have been an important innovation when it comes to increase customer loyalty. It ll started with American Airlines and the least we can say is that the airline industry is the one which has probably pushed the concept the farest. The concept of “miles” has become synonym of loyalty. Collecting miles was once limited to airlines tickets but has in the meantime extended to other purchases too. For instance, airlines members of Star Alliance (Miles and More loyalty scheme) are teaming up with banks in their respective country to propose “Miles and More” credits cards that allow you to collect “miles” with all your other purchases. This seems also a good way to leverage customer loyalty for both the airline and the bank. Yet, when looking at this loyalty program carefully, we noticed two problems :

  1. the advantages vary from one country to the other
  2. when you do the math you quickly find out it’s not as interesting as you may think (actually the likelihood is low that you’ll really benefit from a “mile and more” credit card).

Loyalty programs hacking : how to make your miles account grow

Let us first tell you this article is not about techniques to “hack” loyalty programs and to collect huge amounts of miles. We discusses the case of one particular customer who accumulated 40 millions miles (it remains an exception) but there are numerous bloggers and vloggers out there who have specialized in airlines loyalty schemes and have explained how to perform some sort of “growth hacking”.
The aim of today’s article is rather to point to some inequalities in terms of rewards between countries, and to eventually show that owning a Miles-and-More credit card is likely to cost you rather than profiting you.

Miles-and-More credit cards : large differences in benefits from one country to the other

Miles-and-More credits cards are proposed in many countries but not all. If you live in France for instance there is no local bank offering one. Other countries have several offers available. In Belgium for instance you can either chose a Mastercard or an American Express. In yet other countries, you have the choice between different Miles-and-More mastercard from different banks. As you can see, not all EU citizens are equal when it comes to subscribing to a Miles-and-More credit card. Yet, nothing prevents you from asking a credit card in a different country which leads us to our next insight.

The second interesting insight is that benefits vary largely (by a factor 10) from on country to the other. Most countries offer a “1 mile for 2 Euros spent” loyalty scheme while other are more generous with 1 mile for 1€ spent, and others even give you 1.5 miles for each euro spent. We crunched the numbers for you and you can find a comparison of all benefits in the table below.

 

HOW MANY MILES WILL YOU GET WHEN YOU SPEND 1€ ?

Mastercard Business Mastercard private Visa Diners American Express
Austria 1 1
Belgium 0,5 1,5
Bosnia 0,65
Croatia 0,53 1,49
China 0,56
Cyprus 1 1
Czech Republic 1,32
Germany 0,5 0,5
Greece 1 1
Hungary 1,03 1,03
India 2,17
Israel 0,23
Italy 0,5
Japan 1,25
Luxembourg 1,5 1,5
Poland 0,71 0,85
Portugal 1 1
Romania 0,93
UK 1,5 1,5 0,66 1,33

The conclusion is pretty simple. If you are a European citizen, it’s far more interesting to have a Luxair Miles-and-More Mastercard or a Brussels Airlines American Express. Let’s now make some hypotheses and see whether it’s really interesting to have one of those credit cards.

Is it really interesting to own a Miles-and-More credit card ?

In most cases a Miles-and-More credit card will cost you more than it will bring you.
The promise of those cards is simple. Whenever you spend money you’ll accumulate “miles” that you can redeem for free flights. The rates are known. A round-trip within Europe will cost you between 17500 miles (if you book online well in advance) and 30000 miles. Taxes and surcharges will have to be paid in cash; the miles cover only the airline fare.
So what is 1 mile worth ? Although this might seem a difficult question to answer it’s actually pretty easy; it’s around 300 miles for 1 Euro worth of service of merchandise (the conversion rate can be easily calculated from the Miles and More shop). The miles-and-more credit card yearly fee (amounting to 90€) for instance an be paid with miles if you have enough of them : 33000 miles exactly. And in fact you can indeed fly pretty easily for 30000 miles (or 85€) to most destinations in Europe (excluding airport taxes and surcharges).

Let’s jump to the conclusion. Gathering 30000 miles will require with most Miles-and-More credit cards that you spend 60000€. You’ll have to pay 90€ yearly fee to own this credit card, which offsets immediately the price of the first free ticket. It follows that a Miles-and-More credit card will cost you money rather than bring you benefits, unless you spend at least 120000€ per year (10000€ per month !) with it.

Conclusion

The Miles-and-More credit cards give you the impression that your loyalty will be rewarded. Yet, doing the math shows that it’s very unlikely to really benefit from this loyalty scheme as the amounts to spend to get free airline tickets are just terribly high.



Posted in Marketing, Research.

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