Last week I covered an interview with Air France KLM Flying Blue’s Senior Vice President Ben Lipsey. He’s a frequent flyer nerd, who started out on FlyerTalk and connected with Air Canada’s Ben Smith for an internship. He eventually got a job there, and in 2018 went with Smith over to Air France KLM as the CEO’s Chief of Staff before heading up loyalty.

Lipsey shared that the program’s goal is to offer attractive reward pricing to attract U.S. members who transfer bank points. Interchange is capped in Europe, so this is a way to get a small slice of rewards card revenue. He expects that by mid-year a majority of Flying Blue awards will be issued in the U.S. Amazing. (By the way, this is a simple illustration of the difference in rewards programs under interchange limits versus without.)

The inimitable Brian Sumers interviewed Lipsey for his outstanding Substack (paywall, I subscribe and it’s well worth it). There were several fascinating points:

• Air France KLM’s Flying Blue shared in the cost of the January 1 Bilt transfer bonus, which was 75% – 150% depending on Bilt Rewards status level (I transferred 120,000 Bilt points to 300,000 Flying Blue points.)

• The offer was a big hit, “customers transferred hundreds of millions of points from Bilt to Flying Blue. In addition he said, thousands of customers signed up for a loyalty account.”

• Working closely with Bilt is attractive because they have affluent young renters in big cities, where Air France KLM flies. The mileage sales themselves are profitable, but it also makes the airline top of mind, and 20% of those who transfer points become revenue customers later too.

• Flying Blue lowered its award prices to encourage more Americans to transfer points. When customers compare redemption options, by being the best option they get more points transfers – and that makes money. Business class between the U.S. and Europe now starts at 50,000 points each way.

• In the future they expect small price changes of a revenue ticket to make smaller differences in the cost of an award instead of pushing redemption prices into a higher pricing ‘band’.

• Search tools like point.me help the airline to highlight the value they offer. U.S. customers might not think of Flying Blue as a transfer partner until point.me shows them how it stacks up against competitors.

• When business class mistake fares from 1,500 to 13,500 points one way were recently offered, Flying Blue considered honoring the deal – it wouldn’t have cost that much – but they were afraid of the precedent.

  Flying Blue received about 2,500 bookings — so few that it considered honoring the fares. “We debated internally whether it was worth taking the hit because the liability is not huge,” he said. “But the thinking was, we wanted to set the precedent that a mistake fare was a mistake fare.”

  It cancelled most of the tickets, but not all. In a post on Flyertalk, Lipsey said Flying Blue would honor tickets for 13,500 miles booked by elite frequent flyers. The thinking: while it was a huge discount, it was at least a somewhat plausible price, and Lipsey said it made sense to absorb the error for the program’s best customers.

  I would have loved the flip side here, to see the marketing around “you never know what kind of amazing deal you’ll find with Flying Blue!”

• Customers who didn’t have the deal honored were allowed to transfer points back into bank programs, because Flying Blue wants people to have confidence when transferring points. That’s actually a cumbersome process, which is why it’s rare.

  Each customer has a Membership Rewards number, he said, in addition to their credit card number. First, the customer needs to learn that number — which Lipsey said might take a couple of calls — and share it with Flying Blue.

  “Then you have to tell us, and we have to go via our partnership manager, which is one person who manages the Amex contract in this case, to specifically request the credit,” Lipsey said. “Then our finance team has to basically erase the miles and not bill Amex, which is a very manual process, which we are willing to do on a request-by-request basis because of what happened.”

Incidentally, the early FlyerTalk-to-loyalty and airline product is strong (via now-Air France KLM CEO Ben Smith). In addition to Lipsey, Vice President of Inflight and Air Canada Rouge Andrew Yiu began on FlyerTalk (he was “Empress” until switching to his real name as a username when he got on with Air Canada in 2005). And Air Canada’s Vice President of Loyalty Scott O’Leary was the Continental Airlines representative (“CO Insider”) on FlyerTalk.