Can Credit Cards Dominate Airline Elite Status?


Over the past few years the dominant means to earn points in airline loyalty programs has shifted dramatically in favor of co-brand credit card use. That has mostly focused on award mile earning but smaller forays into status earning have come up from time to time. In the US market Delta Air Lines is currently the most aggressive in pushing status earning via it co-brand credit card partnerships. In Europe the Air Berlin TopBonus program is pursuing a similar strategy. And Anton Lill, Managing Director for TopBonus, recently spoke to that program at the Loyalty 2015 Conference.

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Lill is tremendously optimistic about the offering. He sees it as a win for everyone involved: Consumers, the credit card company and the carrier:

We started an experiment early last year and it has been proven extremely successful: When you spend with your card you not get reward miles but you can also earn status miles. [A big debate if that’s what the airline wants] We’ve cut an exclusive deal; we’ve seen huge growth over he past year and it still continues to grow. Is there abuse? Yes. Is huge abuse? No. But what it does is helps loyal Air Berlin flyers get faster into Silver, to get faster into Gold. And, more importantly, to keep their Gold and Silver status. So, if you’re lacking one or two segments to become Silver and you use your card you become a Silver and you feel great because you get all the status benefits. So far it has worked tremendously. We make even more money from our co-brand as a company and our customers love it. Abuse is very, very minimal.

The biggest challenge with this approach is a dilution of benefits. Historically the status value proposition was reserved only for those who actually flew with the carrier. The European market is “far more recognition-driven market;[customers] they want the service,” according to Stuart Evans, ICLP’s Director of Global Loyalty Practice, so it should not be too surprising that offering an easier way to achieve that tier is appealing. And Lill acknowledges that with the credit card-based earning many less frequent customers are earning more points and status than in the past. He sees that very much as a win for the program:

My classic level CC members spend more on Air Berlin tickets with their classic card than they earn miles on Air Berlin. … It works for both parties. The bank partners see significant improvements in spend on credit cards even above and beyond what they have seen before. The airline sees more loyal status members. The members fight for it. And the abuses are very minimal.

Delta and Air Berlin are just two examples in the vast world of airline loyalty programs. And, while these two are pushing strongly towards CC-based status earning other carriers are pulling back on that front. United Airlines used to offer a couple different programs where customers could earn status via such spending; they are gone now. Similarly, one of Lill’s largest competitors looking for ways to not give out more status. Lufthansa is tightening down on corporate contract-based status granting; the company sees a clear separation necessary between those who are actually flying frequently and those who are not. Perhaps Lufthansa can afford to be more selective for being much larger? But that justification does not apply when comparing United and Delta.

Read More: Lufthansa and Altea Corporate Recognition: A bespoke approach to business and loyalty

And, while the revenue from this sort of arrangement no doubt contributes to the loyalty program bottom line that is not enough, at least for Air Berlin. During the discussion Lill noted that the TopBonus program is responsible not only for generating profits within its own silo, but also for contributing to the operating revenue of the airline, too:

I, as the loyalty company of Air Berlin, have to measurably contribute to the airline revenue. All the campaigns I’m running, I have to demonstrate what they generate in airline revenue, not so much waht they generate in points earned, but in airline revenue.

And, at least for now, the ability to earn status via credit card spend seems to be working on that front.

It seems clear that the industry is not fully convinced one way or the other on this front. But there are a couple programs pushing the envelope in this area and, based on the changes seen in other aspects of program earning rules, I would not be surprised to see more choose to pursue such a path.

See more stories from the Loyalty 2015 conference here.

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Seth Miller

I'm Seth, also known as the Wandering Aramean. I was bit by the travel bug 30 years ago and there's no sign of a cure. I fly ~200,000 miles annually; these are my stories. You can connect with me on Twitter, Facebook, and LinkedIn.

3 Comments

  1. I think it has the potential to be a huge value proposition for the airlines. I’m in a former Delta hub (CVG) and fly roughly 25k miles a year on paid tickets and about another 50k on award tickets. However, I’m Platinum with Delta because I put $120k a year on my co-brand cards. Skymiles are useless for anything aspirational, but while the CVG Delta schedule keeps my award ticket reservations I’m regularly paying a bit more on the revenue tickets to fly Delta to enjoy my perks (the lessening of which is another discussion).

    The point is that hardcore CC spenders that don’t fly a lot don’t cost the airline a tremendous amount to offer the benefits to because they aren’t flying often. The only people against the scheme are the butt-in-seat flyers that think they are the only valuable revenue stream to an airline. Frankly, I would contend that the $120k/year I put on my co-brand Amex cards makes me more valuable than someone buying $30k in tickets. Let’s say Delta is getting 1% off my spend so I’m worth $1200 a year to them. Let’s go on to assume a 4% operating margin at the airline which I would contend may be too high given how tight those margins are, so that guy is worth $1200 a year too. Here’s why CC is more valuable though… they don’t have to do anything but put their name on the card to make $1200 off of the CC guy.

    Frankly, I’m surprised Delta doesn’t provide a path to Diamond status if you put enough on the card.

  2. I think the issue is it dilutes benefits for everyone and those who actually fly a lot might look elsewhere. Is spending $120K on your credit card really as valuable as spending $30k on the airline, I doubt it. But I get that selling miles is a bit like printing money and difficult for the airlines to say no to. CC spend is pretty easy to game though, I say as I’m on my way to Target. It’s all a merry go round and you just have to play the game to the point it makes sense to you.

  3. Was there elaboration on what they think of as “abuse”? Do they mean “people who put lots of spending but do minimal flying”? I’ve never understood why anyone involved would mind that! Just struggling to see what abuse constitutes in this context.

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