TheBrief FREQUENT-FLYER PROGRAMMES INCREASE BUSINESS TRAVEL COSTS, STUDY REVEALS

AIRLINE frequent-flyer programmes are a staple for air travel, particularly among frequent business travellers, but they also add to the cost of business travel for employers, the findings of a new study suggest. According to the study, frequentflyer programmes are a win-win-lose when it comes to air travel. The airline wins because the programmes generate loyalty and repeat customers. The pointsprogramme member wins because of incentives to receive flight upgrades and free plane tickets. But in cases where the employer is shouldering the cost, they lose because they could be paying more for the travel than they need to. The study, Reaching for Gold: Frequent-Flyer Status Incentives and Moral Hazard, published in the current issue of the INFORMS journal Marketing Science, is authored by Yesim Orhun and Andreas Hagemann, both of the University of Michigan, and Tong Guo of Duke University. The researchers analysed the transactional database of a leading US-based airline's frequent-flyer programme. This included the histories and point accumulations of 3.5 million frequent-flyer programme members during the 2010 and 2011 point-earning cycles. “We found that the closer frequent-flyer programme members get to ‘elite status’, the more likely they are to choose an airline even when it may be more expensive than a competitor’s flight,” said Yesim Orhun. | ANI