Air France-KLM to revamp frequent-flyer scheme

PARIS (Reuters) – Air France-KLM said it is overhauling its Flying Blue frequent-flyer program, hoping to increase its contribution to sales.

The Franco-Dutch airline group said it had spent two years and 15 million euros ($17 million) on IT to overhaul Flying Blue, the joint loyalty program of Air France and KLM with 15 million active members.

From next April, members will earn miles based on the amount they spend on their ticket rather than the distance flown, with status members receiving more miles per euro spent.

Status levels will also no longer be earned by racking up a specific number of flights. Members will instead collect more points for longer flights and for those in premium cabins.

The two airlines earn nearly 55 percent of their revenue from loyalty schemes including corporate contracts with companies and the Flying Blue program. Air France-KLM CEO JeanMarc Janaillac said the group wanted to increase by 10 to 15 percent the proportion of sales that Flying Blue contributes to turnover at the airlines.

"It is a profit center," Frederic Kahane, head of loyalty at Air France-KLM said.

Airlines tend not to give details of the profits they make from their loyalty schemes, but several have tried various strategies to release cash from them.

Air Berlin, which ended operations last month, sold a 70 percent stake in its loyalty program to major shareholder Etihad in 2012 for more than the market value of the German company as a whole at the time. In 2013, an IPO of Smiles helped Brazil's Gol bring down its net debt.

Air Canada separated its frequent flyer program Aeroplan in 2002 but said in May it wanted to launch its own loyalty program, hitting shares of Aeroplan's operator Aimia.

Air Canada said bringing the program back in-house could be worth $2 billion-$2.5 billion on a pre-tax basis over 15 years.

More recently, airlines such as British Airways and Delta have tweaked schemes to mean the amount of miles earned is based on ticket prices, such that premium cabin flyers earn more miles for the same journey than those in economy.