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Business Standard

Tapping the frequent flyers: How Jet Airways set the standard in 1994

With Indians constantly on the move, hotel chains are deploying a common strategy: tap into the growing number of frequent air travellers,' said a story in this newspaper (Business Standard, July 28, 2025). The concept of frequent-flyer programme (FFP) was pioneered by American Airlines with its AAdvantage Frequent Flyer programme, launched in May 1981. In India, we had Air India jumping on the bandwagon in 1994. As far as I am concerned, it was Jet Airways that set the standard. While most FFPs focused on providing free miles to be redeemed for future travel, Jet Airways did a lot more. It offered, in addition to mileage points, generous upgrade vouchers to its FFP programme members (Platinum tier); the airline also allowed flight changes without any extra fees — a feature I think about whenever I am made to pay an extra ₹1,700 to get on to an Indigo flight that departs 90 minutes earlier. My first exposure to the linkage between air travel and hotel bookings was around the year 1998. I was flying from Mumbai to Kochi and as soon as my flight landed, I got an SMS alert on my mobile phone about a special offer from a Kochi hotel (this was before mobile internet became a part of our common currency). I was piqued and later found that BPL Mobile was partnering with hotels in various cities to alert them about potential customers. All brands want to get a larger share of your wallet. Be it an airline or a hotel, or even a candy company. Recently in California, I discovered that the brand See's Candies ran a very interesting loyalty programme. Often loyalty programmes give you a straight 2 per cent or 3 per cent discount in the form of points. See's Candies offered a lot more. But the brand wanted you to work hard for it. The programme was administered through a loyalty card. The card had seven months indicated (May to November). When you bought candies worth $40 or more, you got a gold sticker on your card. If you bought $40 worth or more for three months, you got a $20 reward; if you did this for seven months, you got a $50 reward (a whopping 18 per cent reward). Interestingly, the programme takes a break during the peak candy-buying season of December/January. See's Candies is one of the gems that Warren Buffett spotted and invested in in 1972. Warren Buffett's investment in See's Candies has delivered great returns: since acquiring the company for about $25 million, See's Candies has generated over $2 billion in pre-tax earnings for Berkshire Hathaway. Outperforming the broader indices. I suppose the company is so successful because it is constantly trying to widen and deepen its customer base. Airlines have been at the forefront of tapping the frequent flyers potential. But they also come under scrutiny for exploiting customers in uniquely different ways. I was given a window to this in an article that I read recently (Economist, July 26, 2025). The article says that some American airlines charge customers differential prices depending on the number of tickets they buy. Analysing 19,000 prices across 3,200 routes (in the US), it was found that the price you are offered may not be the same if you booked one or two tickets. A single traveller paid anything in the range of 5 per cent to 19 per cent more (depending on the sector). While Delta did not practise the variable pricing strategy, the article says that American Airlines and United were seen to charge more. However, this practice was abandoned after travel writers got wind of this. The worst thing happened. All airlines just hiked their two-ticket charges. Hotels and airlines are perfectly positioned to work on each other's frequent-user lists. Travellers will be nudged by airlines to book at a hotel where the airline has a tie-up. In a reciprocal way, hotels will push airlines that are with them. In that sense, Air India and Taj Hotels could enjoy a vibrant partnership. But just pushing FFPs and offering discounts may not get you more profits (check out my article 'What is the price of loyalty', published in Business Standard on October 25, 2018). It is important to tailor your FFP and hotel loyalty programmes to ensure greater stickiness and interest in using additional value-added services. This way the customer will get something extra, and the travel sector, hotels and airlines (may be taxi companies, tour guides, etc.) will benefit more by reducing their cost of customer acquisition. Win Win Win.