The question is not whether FF
programs are profitable, they definitely are. The question is: do they build brand loyalty among the flying public?
All the majors offer more or less the same FF
program, you can get anywhere through their alliances. No FF
program offers anything special.
KEY: if airline FF
programs built loyalty, the legacies would be able to charge a premium based on the popularity and loyalty to their FF
program. This doesn't happen. At all. WN
determines pricing in all markets it serves, the rest just follow along. Where there is only legacy competition on a route, both legacies just charge exactly the same price. FF
builds no loyalty on an overall basis, people choose first because of schedule and price, they then may stay loyal for a while to who first offered them the best schedule or price, if they live in other than the 23 top markets contolled as hubs.
If I fly 3 times 300 times a year, I'm going to try to stick to the same airline, even if they sometimes aren't the cheapest or best scheduled. But I'm going to start with the airline that gives me the schedule/price I want and then build loyalty from there. All legacies are going to more or less even out on this.
A real value of FF
programs besides the income they earn from selling miles to 3rd parties (credit cards, mortgage brokers, hotels, etc...) is the information gathered about customers and their habits.
This is more valuable than the 'loyalty' earned by offering rewards that are no different than the rewards offered at the competition. Because of AAdvantage, AA
is able to keep track of 60 million plus individual customer habits and tailor their pricing and schedule (the only real things that matter to most fliers today) accordingly.