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Miles or more?

Airlines are increasingly producing loyalty packages to encourage long-term relationships. However, not every forwarder wants travel miles, and the offers can be costly for carriers, writes Ian Putzger

In a market characterised by volatility, anecdotes abound about forwarders who have abandoned contracts with airlines to take unfettered advantage of the spot rate du jour. LAN Cargo, Latin America’s largest cargo carrier, is one of those seeking to strengthen bonds with its regular customers. In July, it unveiled a loyalty programme that rewards its most frequent fliers with credits for travel.


The scheme covers shipments booked on any carrier within the LATAM Airlines group – LAN Cargo, TAM Cargo, LAN Cargo Colombia or Mas Air. Each shipment accrues cargo credits which can subsequently be exchanged for flight tickets.


“With this new programme, we want to reward all those customers who choose our company, throughout our entire network. With many of them, we’ve developed long-term relationships and we’ve grown together throughout the years,” declared Álvaro Carril, LAN Cargo’s senior vice president sales and marketing, at the launch of the scheme. “This programme will allow us to reward our customers and provide them with both a great service and an incentive to keep working together.”


To qualify, customers have to ship a minimum of 500 tonnes in a year on any of the carriers in the LATAM group. The minimum tonnage translates into sufficient mileage to acquire a ticket in economy class on even the most expensive route in the group network, says Cristina Oñate, the carrier’s marketing, planning and product development director.


“This is our first corporate rewards programme,” she says. It is still early days, but customer response has been very positive. “For the past couple of years we have been wanting to develop more initiatives to get closer to our clients and create value for them,” she notes, adding that the programme marks the first phase of a broader undertaking. “We are looking to do more things with clients and maybe launch more initiatives in this direction.”


Rich Zablocki, vice president global product development North America at CEVA Logistics, observes that the concept is not novel. The idea harks back to IATA travel vouchers that were based on the volume of a forwarder’s activities. These could be used for discount travel on participating airlines. That regime petered out over the years as airline participation waned, with some launching their own incentive programmes instead, he notes.


Now interest seems to be perking up. Air France-KLM Cargo is currently running some trials on a local basis with incentives that seek to foster closer ties with forwarders, notably small and mid-sized firms that focus on particular segments.


“We are trying to put an incentive programme in place that rewards them for cargo that they put on our flights,” says marketing and communication manager Laurent Petitmangin. “We will evaluate this at the end of the year. If it works, we will roll it out worldwide.” He estimates that the roll-out will likely commence around April 2016.


Unlike LAN Cargo’s programme, the emerging incentive scheme at AF-KLM extends to benefits besides travel points. “Loyalty can have different aspects. We may be able to send them information when they need it or provide them with tools that help them with their work. There are also some initiatives that save them time. These customers expect services,” Petitmangin says.


Another avenue that AF-KLM is exploring revolves around inviting clients to special events, such as a forum on a specific issue or an aspect of the business. “When we invite them to an event, it’s got to be really focused,” Petitmangin notes.


Rüdiger Helm, head of key accounts at Lufthansa Cargo, also sees promising scope in this area. He reports that customers are showing growing interest in such meetings, especially on the carrier’s home turf. “Clients look to the home carrier to assume a leading role in tackling some industry issues,” he remarks, adding that all levels of LH Cargo management are usually present at such events, which gives customers the chance to seek out executives for a dialogue.


For the most part, travel benefits are at the core of airlines’ loyalty programmes. “Travel is what most companies use it for,” says Joe Reedy, vice president of cargo sales at American Airlines, regarding the cargo division’s incentive package.


Etihad Cargo has had a cargo loyalty programme in place since 2013. Called CargoConnect, freight forwarders can earn miles each time they book cargo with the airline. Built on a similar platform to the carrier’s passenger frequent flyer scheme, it is targeted at small and medium-sized forwarders.


CargoConnect members earn miles for net revenue paid to Etihad Cargo. They can redeem miles, upgrades or choose items from the gift shop. For every $2 spent on general cargo, members can redeem one mile, or four miles if the money is spent on premium cargo. Members do not have to have existing agreements with Etihad.


American has opted for some flexibility in the mileage calculation. The US carrier has a travel incentive scheme in place that can work with tonnage or revenues, says Reedy. In the main, customers earn 2,000 points for every $40,000 spent. Moreover, there are additional incentives for booking a premium service. An ExpediteFS shipment, AA Cargo’s express offering, rakes in 20 bonus points.


LAN’s approach is to make a straightforward translation of tonnage into miles, using the parent airline’s rewards scheme for travel. “We have been able to build on a platform that they already have,” remarks Oñate.


In LAN’s scheme, a tonne of cargo is a tonne of cargo, regardless of the commodity involved. Management prefers to keep this distinction for pricing decisions. At this point the carrier is looking at refining the offering, bringing in elements like access to VIP lounges or special services. “We thought about complimentary services, but we wanted to launch this first,” Oñate says.


Users of American’s ‘Business Extra’ scheme can use their points for upgrades or lounge access. As in LAN Cargo’s case, the programme has been adopted from the passenger side, which has saved the cargo division considerable time, effort and money. “These programmes are costly to put in place. You need to build another unit,” one airline executive says privately.


There is also the question of the cost allocation for the tickets. In the past, cargo departments often had ready access to tickets to dispense as they saw fit, but these days the purse strings are a lot tighter. “The cargo department has to pay for it. It is a cost for them,” remarks Zablocki.


For Lufthansa Cargo there is the additional matter of being a separate company from the passenger airline. “We are a combination carrier, but we are a separate legal entity,” says Helm.


At LH Cargo, fringe benefits like tickets play only a marginal role. “Clients’ interest in tickets has diminished. There is no exorbitant demand for this,” comments Helm. “Central for the customer is the product, the network and reasonable service on the ground.”  >>

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