Evaluating frequent flyer programs from the air passengers' perspective

Frequent flyer programs are used as a common strategy in the airline industry. They can be defined as a service quality attribute that consists of some redemption of free flight miles and can determines the selection of airlines. It has been argued that they can act as an entry barrier, but limited attention has been paid to assessing the impact of this strategy on passengers’ perceptions of service. They are generally part of broad airline service quality parameters and thus can creates dilemmas for airline managers, passengers and regulators regarding their added value, costs and competitive effects on industrial organization.

► Frequent flyer programs creates dilemmas for airline managers, passengers and regulators regarding their added value, costs and competitive effects on industrial organization. ► It is difficult to evaluate the impact of frequent flier programs in isolation to who actually pays for the ticket because of principal-agent issues. ► An empirical analysis of the Gran Canaria/Madrid route finds the willingness to pay for various airline services is different depending on whether passengers are members of a Frequent flyer program and whether they pay their own tickets or not.