Brian Sumers, in his excellent paid Substack, wrote about his conversation with Emirates Senior Vice President of Loyalty Nejib Ben-Khedher. It was clear that Emirates has a unique view of loyalty programs which is that they should not earn a profit, but serve the airline, and I wanted to flesh out this thinking a little bit.

Elite airline flyers often feel that something has been ‘sullied’ by frequent flyer programs selling miles, and members earning status from credit cards! But that’s not exactly the view here. There seemed to be (3) strands of thought:

1. Emirates views its frequent flyer program as a tool to drive business to the airline, rather than as a profit center on its own. They make better targeted offers to elite members (for instance limited-time promotions where cash and points redemptions might value points up to 2 cents, instead of their baseline $0.007 each).

   “We’re different from the North American carriers,” he said. “Kudos to them. They have built something that is as valuable as, and sometimes more valuable than, the airline themselves. We are part of the commercial organization at Emirates, and we support the commercial organization. …. Truly, it is loyalty to Emirates that we are trying to drive, first and foremost.”

2. The Dubai-based carrier partners with U.S. bank transfer partners not for the revenue from those banks, but to introduce the Emirates brand to more Americans, hoping that they’ll try Emirates and fly them again.

3. They believe that they haven’t devalued Skywards enough, because even as they increase the price of awards dramatically people are redeeming more awards.

   Ben-Khedher said, people are paying the increased prices, suggesting that maybe awards had been underpriced. The number of classic reward redemptions is 60 percent higher than before Covid and 10 percent higher than last year, which Ben-Khedher noted was after the airline’s price “adjustment” and probably “speaks to inelastic demand for our superior product.”

I was struck by Ben-Khedher parroting something that Delta says, that their focus is the airline product and not the value of miles and that this drives customers to choose them. In other words, that they can get away with being less generous (Emirates views loyalty ‘more holistically’).

However Delta attracts customers, puts them in seats, and then sells them credit cards. Emirates seems almost indifferent to the revenue-maximizing potential.

And the value of the Skywards program does matter to Emirates customers.

• About the only area of real value in the Emirates program is upgrades for paid tickets.

• Ben-Khedher told Sumers that people redeem more miles for upgrades than for free tickets (“More miles are burned each year on upgrades than anything else, he said, including redemptions”). He’s recently also provided data suggesting that this is not true, but even there the percentage of miles redeemed for award travel was shockingly low.

• So customers are gravitating to where they can find value in the program.

Mostly though I was struck by the notion that loyalty isn’t something that’s worth trying to earn a return from, and that it’s not a key part of stickiness with customers.

• Why wouldn’t you try to make money on your frequent flyer program?
  
• And if you’re trying to offer a program that keeps your best customers loyal, why would a low value program be the right answer?

What’s going on here actually makes quite a bit of sense. Emirates as a company hasn’t prioritized loyalty and so the head of loyalty optimizes within that framework. Revenue management won’t release award inventory to the program to any meaningful degree, so Skywards is stuck promoting using their miles as cash towards flights on the airline and cannot buy excess inventory to sell at a profitable discount through the frequency program.

It’s not ‘the Skywards program doesn’t value its members’ its ‘Emirates doesn’t connect the dots in loyalty’ beyond airline customer recognition and so Ben-Khedher must solve for the equilibrium. With plenty of outstanding miles and limited seats, prices must rise and profits are left on the table.

To a certain degree this is even logical, if you understand what Emirates is trying to maximize. If you’re an Al Maktoum, your focus is on Dubai as a world financial and attraction center. You’re not maximizing profit for the Emirates Group, you’re focused on the airline as a tool for bringing people to and through Dubai and for imprinting an impression of Dubai on the world. You want to fill planes, and a loyalty program can help you do that. Still, your primary marketing program can help to fill planes and for Emirates this is a lost opportunity.