Innovation Needed: Gen Z & Millennials Show Less Interest in Traditional Airline Loyalty Programs

A recent report by OAG highlights a significant shift in how younger travelers view airline loyalty programs. Gen Z (61%) and Millennial (49%) travelers often cite inconsistent travel with a single carrier as a primary reason for not joining loyalty programs, followed by lengthy reward redemption times, noted by 14% and 19% respectively. Additionally, 8% of Gen Z travelers prefer rewards tailored to their travel preferences and booking patterns.

Adapting Loyalty Programs for Younger Travelers

To address brand loyalty issues, airlines are increasingly moving away from solely rewarding customers based on frequent flying. One popular strategy is the introduction of co-branded credit cards that generate miles regardless of the airline flown. This flexibility caters to the younger generation's travel habits, allowing them to earn miles even if they fly with different carriers. For example, a traveler can earn miles on their Delta SkyMiles account even when flying with Southwest Airlines.

Embracing Digital Native Travel Habits

Digital natives, particularly Gen Z and Millennials, often seek the most cost-effective accommodation options rather than sticking with traditional hotel chains. Airlines can capitalize on this trend by offering loyalty points for bookings made through third-party websites. For instance, Air France’s Flying Blue program offers two miles for every euro spent on Booking.com, providing a direct incentive for travelers to book through their platform.

To benefit from these rewards, travelers must book through the dedicated portal for Flying Blue members and enter their membership number during the final booking stage. Miles are automatically credited after the stay is completed, ensuring a seamless experience for the user.

Transparent Data Communication

Transparency in data collection and usage is critical for earning the trust of Gen Z and Millennials. These generations, particularly Gen Z, are highly conscious of online privacy. Airlines must clearly communicate how customer data is used and why certain information is necessary for safety and regulatory compliance.

For example, airlines can reference how the United States Department of Transportation (DOT) is reviewing the safety of passenger data collected by major airlines, as announced by Secretary of Transportation Pete Buttigieg. This review aims to ensure that airlines handle passenger data responsibly and transparently, addressing privacy concerns and building trust.

In the European Union, airlines are already required to explain their data processing practices under the General Data Protection Regulation (GDPR), setting a standard for transparency and data protection.

Looking Ahead

The OAG report underscores the declining appeal of traditional loyalty programs among younger travelers, who prioritize flexibility and tailored rewards. In response, airlines are innovating by offering co-branded cards, partnering with third-party platforms, and enhancing transparency in data usage. These strategies are essential for adapting to the preferences of Gen Z and Millennials and maintaining their loyalty.