Air France KLM’s Genius Play: Drastically Cutting Business Class Reward Costs to Boost Profits

Air France KLM’s Flying Blue was already the best loyalty program in SkyTeam (although some partisans might argue for Korean Air Skypass) and has made several improvements over the past couple of years – better expiration rules, the addition of free stopovers, lower redemption prices. They seem to be one of the few rewards programs to have re-discovered that better programs are more profitable programs.

  • In the fall they reduced business class awards between the U.S. and Europe to 50,000 points. (Their re-introduced award chart still says 55,000.)
  • And they run frequent transfer bonuses with their partners. On the first I transferred 120,000 Bilt points into 300,000 Flying Blue points using a 150% transfer bonus.

Ben Lipsey, who runs the program, explains the why in a recent interview. He’s offered before, counterintuitively, that it’s actually the U.S. market that is driving program improvements. I think they already have a better program than key European rivals. It’s not competition from rivals like British Airways or Lufthansa that’s driving improvements. Instead, they’re chasing revenue growth from Americans.

  • Credit card revenue drives U.S. frequent flyer program profitability. The same isn’t true in Europe. That’s because card interchange (swipe fees) are limited in Europe. (It doesn’t make sense for banks to spend a lot to incentivize transactions where those transactions aren’t as profitable.)

  • Air France KLM partners with all of the big transfer currencies in the U.S., and that gives them a piece of U.S. card revenue.

  • They want to be an attractive points transfer partner to secure more of that revenue.

Lipsey explains that, in essence, it’s that drove them to lower redemption rates. When customers compare award options at he wants Flying Blue to offer the best deal, so that they get the points transfer.

So of course, Amex rewards is the biggest but there’s also Chase, there’s Citi, you know, Capital One. We, of course, have a partnership with Bilt. So the logic is roughly the same. You can transfer it to Flying Blue and then you can redeem. And, you know, a lot of the challenge that national to the US and international program has is we’re not always top of mind. So we also look at some of our partners. Like, for example, which acts as a kind of Google Flights or an OTA for redemption. That allows us to very easily compare the availability and pricing of reward tickets. And then it tells them kind of where to transfer my points to and how do I book.

And for us, you know, when we can, they’ll remain profitable and offer attractive reward inventory and options to our customers. In the US in particular, for us it’s a really, you know, good source of value that I think that we offer and one which will actually lead us to, you know, having over 50 percent of our award tickets being issued point of sale US. As of about mid next year, which is a really interesting statistic, I think, for a foreign, foreign loyalty program.

By mid-2024 over half of Flying Blue award tickets will be issued in the U.S.. Wow.

In some sense, Air France KLM is turning conventional wisdom on its head. We usually assume that credit cards are generating more points, there are a fixed number of seats, and that increased demand drives up redemption prices. And that may even be true for U.S. frequent flyer programs. But the option to spend those points on foreign programs drives those programs to become more attractive for U.S. consumers.

And the democratization of information, making more consumers aware of these better options, is key for this to happen. Blogs and tools like that educate consumers break up the mindshare monopoly that U.S. airlines have over points transfers.

But previously, I mean, you had to kind of be quite you know, well versed in kind of the loyalty, you know, sphere to kind of understand that, okay, I can transfer my, you know, US based credit card points to a, you know, Colombian based frequent flyer program to redeem on a German airline between, you know, like you’d have to kind of understand these things to know that this was a, this was an attractive way to redeem your points, but people, it’s not always top of mind.

You know, if you look at to name any names, but to say, okay, if Delta, for example, being the biggest partner of Amex in the US and of course, it’s a partner. It stands to reason that, you know, I would think a large majority of people transfer their Amex MR points to Delta. Well, what, you know, I’d like them to also to know is that we also offer a good value.

And that, you know, Flying Blue is an attractive, what transfer as well. And that’s where tools like come in because it democratizes this and it allows them, to allows customers to kind of see firsthand. Hey, you know, there’s other options for me to to redeem my points. You know, going via another airline, another carrier that I might not have thought of at first.

Air Canada has done a really good job. It’s my former employer, but I’m also, you know, very happy to see a lot of what they’ve done. I think the team there is fantastic. And I think they, you know, you’ve seen, they’ve added a lot of airline partners. That’s a strategy and you know, one where we’re also looking to grow as well. But when you do that, it means that, okay, so we’re Air France, KLM, them Air Canada. If I’m sitting in, you know. somewhere in the US or the UK or Australia. And I have dozens of partners that I can transfer my points to.

Delta gets the lion’s share of Amex transfers. United gets the lion’s share of Chase transfers. No other program is even close. But clearly Air France KLM is getting a material amount of transfers as a partner of American Express, Chase, Citibank, Capital One and Bilt. Bilt, by the way, Lipsey says “my favorite loyalty program at the moment is Bilt.” And he calls out the outsized role that Air Canada Aeroplan plays in the U.S. because of the quality of its program.

At investor day the group’s CEO said they “are just now starting to dial up our Flying Blue,” and that it is “the key unique tool that we have that the others do not have.” Lipsey offers several initiatives in the pipeline:

  • Reciprocal elite benefits with Etihad
  • Subscription product for purchase of miles and benefits
  • Sustainability redemption options
  • More benefits for Platinum and Ultimate elite members

What Lipsey understands and articulates in this interview, and that many other loyalty programs seem to have forgotten in their drive to offering more seats at average low value, is that aspirational rewards are what drive irrational loyalty on the part of consumers. He gives the example of redeeming miles for business class to Japan. It’s chasing the possibility of outsized value in travel that a consumer couldn’t otherwise access that keeps them loyal, keeps them spending, and choosing a brand even on a given trip where it may not be the best value.

Still, what’s most striking to me is that while many loyalty programs don’t like their redemption options compared with others, Flying Blue sees this as an advantage – and similar services empower consumers and let them compare, so the program with the best availability at the best price wins their business and this is a great advantage for a brand that isn’t already top of mind for consumers. And this is driving down prices, rather than credit card rewards ubiquity increasing prices. Great stuff.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. I do like Air France business, but store my points with Delta because last time I checked, they had a short shelf life with Flying Blue and that could only be extended with an actual flight (not through a credit card or something similar).. If that has changed, I may reconsider but I notice that the French hotel chain (Accor) has the same policy (and moreover there is no way there to store the points with someone else)

  2. Good for him – cut from the Mark Nasr / Scott O’Leary cloth.

    Explains why they were so willing to reverse bank mileage transfers for the ‘mistake’ Canada->Europe awards last month.

  3. Am I the only one who thinks that Aeroplan is overrated by bloggers? Redemptions on AC metal are mostly dynamic and basically on par with dynamic awards offered by AA and UA on their own metal. Long haul J redemptions to Asia are now mostly a mirage for Aeroplan, since most availability has been blocked for months to combat brokers.

  4. The pricing might be lower, but they’ll have to reduce availability of those low-priced seats, because while more redemptions might drive revenue at Flying Blue, selling too many seats at low saver award redemptions reduces the revenue from actually selling seats for cash, and selling long-haul J seats for cash is where the majority of the profits come from for long-haul, full-service airlines. Also, if they can sell redemptions on partners at lower award prices, that’s great for FB as well since that doesn’t eat into the profits that the actual AF-KLM airlines can earn, but from what I’ve seen at least the Skyteam partner redemptions aren’t as cheap as the AF-KLM ones.

  5. Increasingly I see Flying blue awards as the top choice on I just wish there were F awards even if it were at a higher price. Give the customers a choice!

  6. I prefer Air France to any other airline in Europe (except perhaps Swiss), but I have never redeemed an award on them because – in my experience – the redemptions are almost always very high, and often absurd. Maybe this is a function of the fact that I am almost always flying from the Americas to points beyond Europe, but rarely to Europe, but that’s been my fairly consistent experience. If I could find decently priced redemptions, I would be an enthusiastic redeemer of AF awards.

  7. Thanks for the update. Very informative. Yesterday I booked JRO > JFK for next mid December in business on Air France for 104500×2. I also used Air France last summer for JFK to ATH and IST to JFK. If I remember they were 50000×2 each way. Their online web site usually works well and though I did have to call to get a day stopover in AMS it was handled quickly and professionally. For the record I used aeroplan last month to book JFK to GEV non stop next summer on Swiss Air for 70,000×2. These systems along with Qatar (Avois) and Iberia put the US systems to shame.

  8. I like AF/KLM generally for redemptions. However, if there is a definitive answer on what prevents FB points from expiring that would be great. FB itself is not clear at all and does not, for example, state that any XP earned on any partner will extend expiration.

  9. AF/KLM/FB is also quite smart to charge a moderate amount of fees. Not too many to prevent people from redemption (like British Airways), but not too little to not make extra money (from business perspective). Well played.

  10. I have taken advantage of the lower award prices and the stop over benefit twice since they were introduced. I gave flexibility to plan travel around lower priced awards. Air France is my new favorite these days.

  11. Yeah, Air Canada, they added so many airline partners….
    yeah they sure did buddy – and then blocked them all after running multiple sales on buying points

  12. Linn, I know for certain you can extend the flying blue miles expiration time by getting their MasterCard or transferring American Express points. The past two Septembers, when there was a points transfer bonus from Amex, I transferred and my expiration date extended by two years.

  13. Delta will just keep raising the rates. UA and AA also do that. Makes no sense, especially on AA. I can fly JAL J class ORD-HND for 60k AA miles…fly AA metal have to connect somewhere and it’s a minimum of 180k miles. Anyone that would choose AA J over JAL J needs to see a shrink

  14. @ Gary — 50% of the redemptions coming from the US market is no surprise. After all, that’s where most of the credit card miles are being generated.

  15. Linn, I know for a fact that you can keep the points renewing by transferring from American Express. I did it the last two Septembers and each time I get another two year extension.

  16. Um I’m searching on

    SFO-CDG round trip with departure dates in April or May, I don’t see anything under 330k miles.

    Per flight so double for round trip.

    For JFK-cDG it’s 131k each way.

    Where are these 50-55k each way to Europe in business awards?

  17. Thanks to several of you who say the draconian expiration policy has changed. Will check it out but no way as good as my forever miles with United (keeping my AA miles by using an AA credit card)

  18. I flew SFO-CDG last month for 50k each way. That rate only applies to a few seats on each flight (I don’t know the number). I think it is called the Saver tier. After those are gone the rate goes up.

  19. The 50k seems to be a marketing ploy to me. While they may have a few seats at that price, most are pricing out way above that, some over 300k. They can claim the lowest price, but in reality it’s rarely there.
    This seems to be happening across the big programs. United and American flights are also pricing out in the hundreds of thousands of miles.

  20. Business Class travel to Europe or Asia is what airline miles are for! On those long and/or overnight flights, you want to have as much comfort as you can afford.

    Domestic 1st class is a joke, except LAX – JFK on AA which departs around 7 am. Not getting up at 4 am, thank you very much! And who needs a full recline during the day?What I’d like is a full recline and a pod on an evening West-to-East transcon flight, but domestic airlines don’t offer them. Maybe they think a 6-hour flight with a 3-hour time zone adjustment doesn’t warrant any pampering, while a 6-hour flight to Europe includes a 6-hour time zone adjustment and so you need a bed.

    Typically a R/T Business Class ticket to Europe costs 160k miles, while a one-way Business Class ticket to Europe originating in the US costs 120k miles. Which makes no sense.

    A R/T Coach ticket on Air France recently cost 120k miles, for direct flights. The morning of our return flight, we got an offer to upgrade to Business Class for $281 per seat. Unfortunately the seating chart had no two seats together, there were no pods, and plus, it was a daytime westbound flight so we saved the $560 and stayed in Coach. The meal was delicious.

    Star Alliance has SO many partners and it seems easier to rack up those miles (3x miles in several spending categories with Chase) as well as reaching Silver, Gold, etc. for complimentary upgrades. Word to the wise : flights booked on the Chase travel portal cost 30% more in miles than the same flight on the United site. So transfer your miles over and book there.

    The United app also has a fabulous portal for booking hotels, with all the photos and reviews you might want.
    The Delta app is rudimentary at best for booking hotels, sad to say, because you earn MQDs (points toward Medallion Status) very quickly when you book travel through Delta.

    I will say this : Delta has a really nice Business-ish Class to Europe called Preferred Select. You don’t get a pod or a flat recline but it’s just the two of you in large comfy seats and all the other 1st Class amenities. A direct one-way flight BOS-FCO was around 80k miles. Totally worth it and made me keep racking up my AmEx miles.

    Here’s a niggle : most sites won’t let you put a miles-based trip in your cart unless you have enough miles sitting in your account. How do they know you don’t have a stash somewhere else to transfer over when you’re ready to purchase?

    I had a stash of Bank of America points but I could only use them through their dedicated travel portal. Chase gives you the option of transferring the points out to Star Alliance partners where, once again, your miles go further.

  21. Great interview. To make AF work you have to book far out and be very flexible with dates. But if you can it’s the best option out there. And who doesn’t want to have Paris as a stopover?

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