Carriers Moving Frequency Mileage Into Cyberspace

<B>Carriers Moving Frequency Mileage Into Cyberspace</B>

By David Jonas

The Internet and travel loyalty programs increasingly are becoming intertwined as airlines recognize the convenience in empowering frequent flyers at their Web sites and online merchandisers discover the purchasing power of the generally tech-savvy segment of travelers.

"There's tons happening. Most of the big guys will have reward redemption online in the next 30 to 60 days," said Randy Petersen, frequent flyer guru and editor of Inside Flyer. "The interesting thing is the mindset. If travelers do it themselves, they are satisfied with the seats they can or cannot get. They prefer not to call an agent, even though they're looking at the same res system."

American Airlines, which is expected to launch online reward redemption through aa.com in the coming weeks, this month launched a new co-branded frequency program with America Online, creating a behemoth Internet-based loyalty program. Dubbed AOL AAdvantage, the program enables members to earn and redeem mileage. Mileage accrual will include flights on AA, shopping with numerous merchandisers and participation in opinion surveys. Members also will have access to exclusive AOL promotions. Mileage redemption, which is unlimited--meaning miles can be applied to cover total costs--includes reward travel on AA, as well as a list of 30 merchandisers expected to grow to 200 by 2003.

"This legitimately is the biggest announcement over the past several years in terms of where these programs are going," Petersen said, noting that American has 100 people working on the program and that the two entities combined will spend more than $600 million over the next three years. "The power of these two brands will bring about change. There are even rumors out there that the other majors will band together to launch some sort of frequent flyer portal." Visitors to the Web site, aolaadvantage.com, can view redemption options both by category or mileage level.

Northwest, which was the first to offer online redemption, upgrade requests and real-time balance tracking, is going beyond traditional Internet functionality: It now is leading the charge toward wireless connectivity. The carrier in July announced accessibility to WorldPerks mileage accounts and program information via Web-enabled SprintPCS phones. Northwest this summer also forged a partnership with Internet brokerage E-Trade.

United Airlines has been offering online reward redemption for domestic flights since May 1999. International flights soon will be added. Online upgrade requests have been available for nearly two years, while a recent enhancement--account summary information accessible through WAP-enabled phones--was implemented this summer. The site also provides real-time account balances and reward seat availability. Moving forward, United will look for partnership opportunities for its loyalty program facilitated through its separate e-commerce company (BTN, Jan. 24).

Air Canada this summer reorganized its Aeroplan frequent flyer program as a new division to "further improve the quality of the program's customer service levels and incentives and to increase and further leverage our commercial partnerships." That includes expansion of e-commerce, including a more comprehensive virtual shopping center where members can earn miles by purchasing goods and services. Aeroplan members, accounting for half of all traffic, generate 60 percent of the carrier's passenger revenues. Canadian Airlines' mileage program, Canadian Plus, will be folded into the larger unit in January.

Air Canada is mulling a further spin-off by creating a separate identity for the Aeroplan unit and a possible initial public offering. In that scenario, the carrier said it would maintain majority ownership and control.

At Delta, online reward redemption and upgrading are expected by year-end. E-statements and enhanced customization of the SkyMiles program will follow. Currently, members can request reward tickets and upgrades through the site and view their current account balances. America West just last week enabled frequent flyers to check their account balances online.

Other enhancements in the works at a few carriers include account statements and bonus offerings delivered via e-mail and separate areas on airline Web sites dedicated to elite-level frequent flyers.

Meanwhile, frequent flyers soon will have an innovative way to turn their reward mileage into currency thanks to Minneapolis-based MilePoint, a new Internet-based company. The program, already backed by America West, Continental, Delta, Northwest, TWA and US Airways, as well as Hilton Hotels, is slated to launch this month. It will allow frequent flyers to apply mileage to purchases from more than 100 retailers, including Amazon.com and all SkyMall participants. The exchange rate into MileMoney will be 2 cents per mile. MilePoint estimated that mileage conversion on average will account for 10 percent to 25 percent of the purchase price for available merchandise.

MilePoint has enlisted the advice and expertise of many well-known industry figures, including former AA chief Bob Crandall, its chairman of the board. "By turning miles and points into online money, we will literally release billions of dollars of purchasing power into the online marketplace," he said. "This is the natural and logical evolution of the current frequent flyer programs."

Mark Lacek, the company's CEO who created Northwest's loyalty program, said, "Based on average frequent flyers' accumulated miles, many members will have hundreds of dollars just waiting to be spent online."

In the mileage management area, San Francisco-based Netcentives recently forged an agreement with Milesandpoints.com of Walnut Creek, Calif., a portal designed to organize a traveler's loyalty program accounts. Under the agreement, Netcentives will provide its online aggregation technology to Milesandpoints. In return, Milesandpoints.com will provide content and promotional information to Netcentives.

As a free service for registered users, milesandpoints.com tracks account balances from airline, car rental, hotel, credit card and phone company programs. It also alerts users when miles are set to expire and when travel suppliers offer special mileage-based promotions. Milesandpoints.com users also can access exclusive travel promotions.

The company is planning future enhancements, including a mileage redemption versus cash comparison for purchases and mileage-based auctions.

Netcentives is a provider of customer relationship management for loyalty programs of various companies, including several airlines. In fact, TWA this summer selected Netcentives to provide a mileage-for-purchase program for the carrier's frequent flyers. Netcentives currently has a network of more than 20 merchants participating.

The company also backs ClickRewards, an Internet-based system that converts loyalty program mileage into ClickPoints. ClickPoints now can be redeemed for goods and services from 60 online merchants. Nine major airlines, along with Marriott, National Car Rental and a few other merchandisers that grant mileage for purchases, now participate in the program. Netcentives also furnishes reward account aggregation for American Express, Excite, Microsoft Expedia, OAG, Sabre and America Online.

"There probably will be other partnerships. The future of all this online development is pretty unique," Petersen said. "But I don't think these merchandise sites will substitute my desire to cash in points with my airline so I can go to Hawaii.