The British Airways Kerfuffle

This Loyalty Newscast is brought to you by Nayax Coinbridge, turning loyalty into currency instantly spendable at any shop worldwide.

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Happy New Year. I am Katy Topping and on behalf of us all at Loyalty Wired, I’d like to wish all of you a healthy and prosperous 2025. As for us, we’re getting right back into it with our first action packed Loyalty Newscast of the new year. We’ll begin with a look at the controversial recent changes to British Airways Loyalty Programme. Then we’ll continue our series on the evolution of coalition loyalty with a look at the partner’s point of view. And finally, we’ll take a look at the struggle that luxury brands have building loyalty with Gen Z consumers. We’ll delve a little deeper into the war between Amazon and Walmart in the data, and we’ve another edition of Sponsor Love. But first, welcome back our host with the most and the man with the plan, Rick Ferguson.

Thank you, Katy. As you so ably teed up for us, the big story this new year is of course the British Airways announcement of their program relaunch into a revenue based loyalty model. We have indeed donned our reporter’s hats to get to the bottom of these changes and their potential impact. More on that story in our first segment.

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As for the rest of the world, it’s a typically slow news week after the holidays, one of the stories we’ll be following this year is the continued investigation of so-called deceptive practices in the airline industry by the US government. Whatever your feelings about the incoming Trump administration, word around the campfire is that the Republican controlled Congress will allow these bills and investigations to wither on the vine. Will the airlines and their credit card partners escape the wrath of the US Department of Transportation? Will Senator Dick Durbin lay down his arms and quietly kill his interchange bill? We’ll be on the case and will bring you the latest developments in the airline loyalty industry.

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In happier airline news, United Airlines announced that it will begin testing SpaceX’s Starlink satellite internet access for Mileage Plus members on select flights this year, marking another salvo in the war to improve the airline customer experience. Moving to the broader travel sector, a new report from Morning Consult found that travel loyalty program usage has stagnated in recent years with the share of US adults who actively participate in such programs showing flat or no growth between 2021 and 2024.

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The good news is that Gen Z is beginning to flex their loyalty muscles. Morning Consult reports that 58% of Gen Z travelers surveyed use loyalty programs when booking travel compared to just 49.9% of travelers overall. And in a New Year’s Eve surprise, trading app Robinhood distributed $2.5 million worth of Bitcoin and Dogecoin in a move aimed to reward existing users for their loyalty. The giveaway attracted over 450,000 participants each receiving $5.98 cents worth of Dogecoin.

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These real loyalty headlines for this week. If you need me, I’ll be cashing in my Dogecoin windfall for a grande mocha at Starbucks. See you next time, everybody.

Somewhere in between the roast turkey and the sprouts, British frequent flyers received a bit of coal in their Christmas stockings. UK carrier British Airways is rebranding their venerable executive club program and shifting to a revenue based loyalty model. At the announcement of this controversial news, Rick Ferguson and Iain Pringle leapt into action with this report on the BA changes and their impact on frequent flyer loyalty. As Rick says, we’ve seen this story before.

If you’re in the loyalty game here’s a story you’ve heard many times before. A major airline makes draconian changes to its loyalty program by moving to a revenue based model or by devaluing an existing program. Almost immediately the worldwide interwebs explode outrage in indignation. The flyer blogs gleefully dissect the changes and the press tears the airline apart like a pack of rabid weasels.

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This week, it’s British Airways that have ignited the firestorm by rebranding its loyalty program as the British Airways Club and moving to a revenue based model. Starting April 1st, members will earn one tier point for every pound spent on eligible purchases. This change means, of course, that BA Flyers used to earning elite status on short-haul flights will be left struggling to maintain that status while big spenders will take their place in business class and in the premium lounges. As for the press reaction to this announcement, we might best sum it up with this quote from Sunday Times editor Andrew Neil, who wrote on X, “The changes to the BA loyalty program have the makings of a self-inflicted disaster. Maybe one of the biggest corporate cock-ups of modern times.”

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Those are strong words from Mr. Neil. The question is why is British Airways transition to revenue based model such a cock-up? BA is just the latest entrant in a long line of carriers that have transitioned to a revenue based program in which members are rewarded based on dollars spent rather than miles flown. The big three US carriers switched to revenue based models nearly a decade ago. In Europe, Air France-KLM and Lufthansa have made the switch, so have Air India and Virgin Australia.

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On paper, the move makes sound business sense. Long gone are the days when mileage junkies could earn status by racking up cheap short-haul flights. Revenue based programs reward the loyalty of those flyers who contribute the most to the airline’s bottom line, and in the US, the most valuable members are those who spend the most on the airline’s co-branded credit cards. But in the UK and Europe, the math is a little more complicated. While the BA American Express card is lucrative to the airline, it’s far less lucrative than the US airline cards, which pull in roughly $25 billion in ancillary revenue annually.

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So, does the switch make sense for British Airways? To answer this question, we dispatched Loyalty Wired’s Iain Pringle. We should note here that we did ask British Airways for comment on this story, but we didn’t receive a response. Iain’s first stop was Phil Gunter, loyalty expert and pioneer of spend based airline programs. As Phil tells it, part of the problem with the change is that the move seems to most benefit the BA customers least susceptible to switching. Here’s Phil.

I can understand why they’ve done it. What they’re trying to do is slim down their tiers and focus on the customers they perceive to make the most money. So on the top level it makes sense. The challenge is that it’s excluding an awful lot of customers that have a lot of more choice. So the customers they’re excluding is premium leisure, small businesses, and even the customers within the UK, but in the regions where BA isn’t the only choice. So a lot of these, it’s much easier for these guys to switch and they’re actively being driven out of the program with these changes.

Because as far as I understand, it’s people that are organized are going to be penalized. It’s the people that are unorganized that want these flexible tickets are the ones that are going to benefit most?

Well, the way I look at it, the ones that will be benefiting most are the ones on corporate deals and they’re locked to the airline anyway. It’s the people outside corporate deals which can choose to fly someone else that are going to be pushed out.

Next, Iain spoke with Rob Burgess, editor of Head for Points. Rob agrees that the change seems oddly designed to most reward those flyers already locked into flying with British Airways. Here’s Rob.

It’s a strange move by the airline in my view. It’s basically putting leisure travelers and self-funded travelers, self-funded small business people, actually like you me, in a position where there’s no real path, there’s no obvious path to earning status with British Airways any longer and you just have to accept that it’s not going to happen. The only people who are, I mean realistically, just get 20,000 pounds of net spend for British Airways Gold Card, which gives top tier lounges and the like, that’s going to require about 40,000 pounds of economy flight spend or about 25, 30,000 pounds of business class flight spend, where the taxes and charges are a low percentage.

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No one is spending that sort of money with BA except corporate travelers, effectively, who are forced to fly British Airways by their employer under the terms of a corporate contract. And of course people who are… If the only people who can afford to get your status are people who are already flying in business class, they may not need the status. Unlike United States Airlines, business class tickets even domestically in the UK come with lounge access, come with all the perks status. So all you’re doing is offering status to people who are going to be doing it anyway because they’re already flying in the cabins required to earn the status.

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It’s very odd. It will probably cut the number of status holders at BA by 80 to 90%, which is just bizarre because Whilst the lounges might be slightly crowded, they’re not 10 times crowded. There’ll be more mice than people in the BA lounges come April 2026 on the current standards.

And you would’ve thought a lot of these that are benefiting from it would also be on deals with BA I imagine as well if it’s the big corporates.

Indeed. So that’s the other, it’s not just the fact that my 10,000 pounds is more of a kick in the teeth to me than say Goldman Sachs spends 10,000 pounds. So if Goldman Sachs spends 10,000 pounds a ticket, they’ll get two to three 4,000 pounds of that back at the end of the year as a rebate from the airlines as long as they hit certain spend targets. So the self-funded flyers are actually having to pay out more money than corporate travelers who are getting a big fat end the year rebate.

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[inaudible 00:10:35] about rebate, of course, won’t be factored into the amount of money they’ve paid for a ticket in the first place. It’s a very odd system. Fundamentally, your rewarding the loyalty of people who have no loyalty to you but are forced to fly you under the terms of their employer’s deal and may hate the ground you walk on. And those of us who can choose the airline we fly with are effectively being pushed out of the program.

Most of the flyer blog ire has been directed not at the move to a revenue based model, which frankly everyone expected, but by the steep hill that non-contractually obligated flyers must now climb to attain even silver status in the new program. Angry Flyers represent opportunity for BA’s competitors and Phil Gunter expects those competitors to respond.

So how can other airlines respond to these changes on the 1st of April?

Oh, the obvious thing is to basically status match. Offer the people, make an offer to people that have been either disenfranchised by British Airways or when they come up for renewal they look at their ability to retain it next year, they’re going to be open to offers. And there’s an awful lot of them. The offering BA has is very strong if you live in the west of London, but if you live somewhere else, it’s just not as good.

So can you see this being a signal for a status war in Europe or even wider that on Oneworld Alliance?

I think it’s already started. The movement, the change of SAS from Star to Sky Team started an awful lot of activity already in Europe. In the UK you might not have felt it as much because you’re a little bit outside, but this is just going to be the next rung of that. There is awful lot of activity last time. I think this is going to just be that on steroids.

So British Airways may well expect a round of status matching from the likes of Virgin Atlantic or Air France-KLM. Whether or not BA has caused a self-inflicted wound remains to be seen. After all, there is precedence for an airline to backtrack on program changes. But if the wound is self-inflicted, Rob Burgess chalks it up to good old fashioned hubris.

I think there’s a view in the airline that British Airways is the greatest carrier on the planet and people will flock to them whatever happens. My experience, if you read the comments of our readers in our forum and the comments to our articles and our main article on this is now over 3000 comments long, is that people in reality fly British Airways because they want to earn status benefits for future flights. They don’t fly British Airways because they necessarily think it’s fantastic, but they just, there’s a view taken that okay, BA is not the greatest to fly economy or premium economy or business, but if I can get lounge access and fast track security, priority boarding thrown in because I do 8, 9, 10 flights a year and I get states from that, then I’ll put up with what is not the greatest onboard experience of the industry.

(13:39)
The problem now is that when those people forcibly have the lounge access, priority boarding, priority security, et cetera, taken away from them, are they still going to choose British Airways when they’re free to choose whichever carrier best suits their needs for a particular trip? And realistically, not in all cases, but in many cases people will now look at this and think, no, why should I?

Wrapping up our series on coalition loyalty, Iain Pringle sits down with Pavel Los, former global head of loyalty for Shell, to highlight one of the main reasons coalition loyalty programmes fail, a disconnect between the needs of the coalition operators and the brands that join the scheme.

So, hi Pavel.

Hi, Iain. Great to be here.

Nice to have you along. We’ve seen coalition loyalty programs. You’ve been involved, when you were at Shell, you’ve been involved in many, many coalition programs around the world, some of the biggest coalition programs, where you’re either a partner or even a part owner in these coalitions. So now we’ve seen the coalition model around the world struggling with the closure of Flybuys in New Zealand and the purchaser from Air Miles in Canada. Let’s just talk about coalitions from a partner perspective. Why do brands like Shell join coalitions in the first place? Why was it attractive?

I need to state, not talking on behalf of Shell, I’m not working there anymore. My subjective views, brands join coalition loyalty because they want access to a broader customer base. They want to partner with somebody in a non-competing business to get a bigger reach. That used to be ultimately the reason why brands entered coalition schemes. Because you could be talking then shared operational costs, arguably data sharing and insights, that’s where I think most of the coalition schemes actually got this wrong, and then creating a joint or enhanced customer value. In my view, it’s been always mostly about creating a bigger.

So if that was why you joined, then what’s gone wrong and are they still relevant? They’re the two big questions. Yeah?

Where the coalition operators got this wrong in my view, is that they set up their internal KPIs that are very different to the success of the brands in the coalition. So their KPIs were to create as much money as they can from fees, partner getting a share of a… I’ve even seen share of a transactional cost, instead of KPIs on how do I bring the brands that are joining the coalition, how do I help them to grow? And that’s where coalition got this wrong. That’s where many of the coalition models actually got this wrong.

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Brands typically would join for customer reach and join for data sharing. And honestly, I’ve never seen a coalition operator willingly sharing data. It’s been always for a cost, always for a fee. Very difficult to get access even to data about a brand customer.

Yeah, I have some experience too. And so what do you think a new coalition model could look like? Because I think everyone’s saying that the coalition model makes sense on paper, but what does a new coalition model look like?

Could we write the thesis on this. I think we see evolving customer expectation, base of acceleration of digital transformation is huge. Competition is massive and brands have a challenge on how both brands and the coalition advocates, let’s call them that way, they’ve got a challenge how do we make all of this relevant to the final customer, right? So I think there is a future, the future sits in a technology-driven platforms, who actually can bring these brands together and create something that I call a loose coalition of brands. Where these brands are connected through this technology platform, they can manage how they behave, what are maybe if they exchange points, what’s the points exchange? And it’s very flexible and they can then bring customers and bring the benefits of the broader customer base, but at a much lower and much more flexible and agile technological setup.

Well, thank you for that. Really appreciate your views and it’s great to have an internal view on this, Pavel, so thank you.

Now it’s time for Sponsor Love, our chance to sit down with the companies and loyalty experts who make this podcast possible.

So today’s Sponsor Love is brought to you by Coinbridge by Nayax. So I’m delighted to be joined today by CEO and finder Guy Rosenhoiz. Hi, Guy.

Hi, Iain.

Nice. Thank you for joining us. Guy, before we get started, I just wanted to reflect on how people redeem points for payment today across the UK. So Virgin Red, famously, they allow miles to be redeemed for sausage rolls at Greggs. The process works, but it’s effectively a redemption for a gift card that can be scanned at the point of sale. Or at Tesco you can redeem Tesco Club Card points at PizzaExpress by ordering a voucher online, taking a code on your mobile phone to the restaurant or taking an email along with a second confirmation email with a code to the restaurant to get your money off your meal. Or at Quidco, and like many other programs, customers have a choice of cashback or a gift card, which gives slightly better value than the cashback equivalent.

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Guy, with these array of processes can you tell me how Coinbridge Redemption works?

Well, Coinbridge does it a bit different. You just need to open the brand app, click pay with points, tap your phone on the reader and done. You’re paid.

Any point of sale?

Any point of sale, completely agnostic.

And how does that happen? How does that work? How come you can do this and others can’t?

Well, with Coinbridge, the brand app incorporates RSDK, which is basically an e-wallet. We inject prepaid card token into that e-wallet, and when the user taps the brand app, we actually as an issuer, we receive a transaction request for whatever they want to purchase. Now, just before we approve it or decline it, we reach out to the loyalty platform. We understand the balance that the user has and any other policies or usage rules that they have, like they can spend it here, can’t spend it there, and so on and so forth. We get those rules, we take the balance, we compare them to the transaction request, and if it fits, we approve the transaction and the user feels that he actually paid with his points value.

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That’s how it goes. Later on, we settle on the funds that we approved with the brand and that’s completely separate process. But from a user perspective, straightforward.

So from a user’s perspective, it’s just open the app, click pay with points, tap, done. No codes, no paper, no vouchers.

Nothing. And the most important thing from a user experience is that it’s consistent across the board. So wherever you’ll go and wherever you’re allowed to redeem your points or redeem your loyalty assets, you’ll have the same experience. You don’t need to read a code here, to scan a barcode there or to ask a cashier what to do. In fact, the cashier doesn’t even know that you paid with points. If you tell them that, they’ll be surprised because they see a credit card transaction.

So basically the credit card terminal says, can you pay 100 pounds? You then tap your card. The person behind the counter needs no training, no-

Nothing. That’s also a very important point. That’s a big, big, big barrier, because sometimes the person behind the field doesn’t know what to click on and how to allow you to redeem certain points or whatever. In our case, they don’t need to be involved.

And how can a brand choose where to redeem? Because if you’re a program like, I don’t know, Nectar or American Airlines, they will want to choose who you redeem for and how much the price of the redemption is. How do they do that?

Well, all they need to do is to set the policies, either on a group level or on a club level or on a user level, of what that user can do and that’s it. They can decide that he can’t pay here or can only pay there or whatever, or only through the coalition. They can even decide that no transactions on Tuesday or whatever, we’ll fulfill that. All they need to do is to have that information on their system. So at the transaction event, we’ll query that. The same as we ask for balance, we’ll ask for the rules and we’ll comply with the rules and just see that everything is being done.

If you comply with the rules, you can also change it by tier or by personal, but by person to person as well.

Completely. Complete freedom, complete flexibility, and basically to be honest, full control of the brand on the spending policies.

Well, thank you very much for that Guy. I appreciate being on and thank you for being a sponsor of the newscast.

Thank you very much. Very happy.

When it comes to US retail, the rich keep getting richer. Research firm, Stratably’s Mass Index, which measures retail sales across Amazon, Target, and Walmart, continues to outperform the broader US retail market at a pace of two to one. And while Target lagged last year, the big three US retailers remain locked in fierce competition. Not just for your dollars but also for your loyalty. Let’s break it down by the data.

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We’ll start with consumer spending. By the end of 2023, Amazon had captured a whopping 10% of US retail sales, 4.4% of all consumer spending. Walmart, not far behind at 7.3%. Fast forward to mid 2024 and Amazon maintained its edge pulling in 3.5% of consumer spending in the second quarter compared to Walmart’s 2.9%.

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Now, let’s talk memberships. Amazon Prime dominates with a 67% penetration rate amongst US consumers, that’s 180 million members nationwide. Walmart+, while smaller has been growing, reaching 31.8 million members or 30% of US households. And Target Circle, over 100 million strong with its premium version Target Circle 360 debuting last year. There is overlap though, lots of it. 86% of Target Circle members also belong to Amazon Prime and 83% of Walmart+ members do too. In fact, nearly a third of Target’s members subscribe to all three programs.

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When it comes to spending habits, memberships make a difference. Walmart+ members spend 76% more than the average Walmart shopper and Target Circle members nearly triple their spending at Target, but Amazon still leads in sheer volume, raking in over $14 billion during Prime Day 2024. That’s an 11% jump from last year.

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And the battle extends to delivery perks. 81% of Walmart+ members used grocery delivery last year, that’s four times the average Walmart shopper. Target Circle members, eight times more likely to use delivery services. So while Amazon may still lead, Walmart and Target are closing the gap, one benefit and dollar at a time.

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That’s our look at the data for this week. We’ll see you here next time.

Luxury fashion and retail goods have long served as an aspirational beacon for successive generations of shoppers, but these brands face a crisis in Gen Z, a cohort that appears to be turning away from these storied brands. What factors are behind this looming crisis and how can these brands attract and retain skeptical young consumers? Loyalty Wired retail correspondent Edilsa Bueno is on the case.

Hi Edilsa, welcome back to the Loyalty Newscast. It’s always a pleasure to have you aboard.

Thank you so much, Rick.

We’re here to talk about the luxury goods industry. The industry seems to be in a bit of a crisis, particularly when it comes to attracting and retaining Gen Z shoppers. We’ve seen a flatter declining sale, shrinking customer basis. Give us the highlights about what’s going on in the luxury goods industry right now.

What a great recap, but I don’t think the luxury market is just in a bit of a crisis. It’s actually, I think in a real inflection point. One we haven’t seen since the great Recession and just to paint the picture, over the last two years, we’ve seen about 50 million customers walk away from the category.

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So while you’ll see global luxury spending hit over 1 trillion in 2024, the personal goods market, it’s expected to shrink, and that’s about 2%, which is huge. Only about a third of luxury brands are expected to grow this year. Gen Z is the luxury’s biggest opportunity, and yet it’s also its biggest challenge. Their priorities are changing, they’re shifting their focus from traditional luxury items, so think handbags, shoes, to experiences, travel, wellness, entertainment. And rising costs and economic uncertainty that isn’t helping either.

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This is the exact thing that’s important though, is that Gen Z isn’t walking away completely. That’s something I didn’t hear in a lot of research that I looked at last year. They accounted for 63% of luxury fashion purchase. They’re important and they’re a lot of potential if brands can connect them in ways that feel authentic and relevant. And so whether the industry can meet that challenge remains to be seen, but the stakes, they couldn’t be any higher.

It’s interesting that you mentioned Gen Z because a lot of these luxury good brands, they’ve been around for a long time and they have achieved that staying power by always building up that next generation of consumers that enter the economic point in their lives where they’re able to start to afford some of these luxury purchases. But Gen Z so far, to your point, while they’re still responsible for a lot of purchases, they are just disengaging from some of these brands. So what are some of the key initiatives that luxury brands should be focusing on for 2025?

One of the things that’s part of the issue is that it’s chasing Gen Z. It’s costing brands their core customers. And we need to find something that maybe spans generation. Everyone is focusing on that cohort, but there’s another group we can’t overlook and that’s the customer over 50. They’re growing as a proportion of the population and actually increasing their fashion spend.

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When I think about an initiative that can connect across generation, the word that comes to mind is authenticity. And that isn’t just a buzzword, it should be a business strategy. That means purpose driven branding that aligns with their values. For older customers, it’s about long-term value, honoring that brand heritage. So a great example of that is Hermes. They’ve stayed really true to their craftsmanship while evolving to Gen Z’s behaviors. To attract Gen Z you also need to attract that customer over 50. And it’s about what you say, it’s about what you stand for, and it’s about proving it in ways your customers can see and trust.

That’s really interesting that there’s a bit of a bifurcation going on and we are a Loyalty Newscast, so we want to dive into how loyalty strategies can make an impact. So as luxury brands think about the most effective way to recapture Gen Z attention and then also retain the over fifties that you mentioned, we’ve seen some luxury brands dabble in loyalty plays, who in your opinion is doing it well and who’s providing a good example for other retailers to follow?

It seems to be all about emotional connections now. Loyalty is really evolving. It’s no longer about just points and rewards. It’s about creating that deeper emotional connection and meaningful. And Gen Z wants brands that meet them where they are, especially online. And the how is through digital and AI.

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If you’re not investing in AI, you are already behind. I’ve seen so many clients that aren’t talking about it. And an example of who’s doing it really well is Louis Vuitton. They’re using AI to provide personalized concierge services that guide the entire customer journey. So it’s not about just tailored recommendation, it’s about exclusive experiences. By 2027, nearly 30% of luxury sales will be online. So we’re seeing here that it isn’t just the future of luxury, it’s the present.

(31:26)
One in five luxury retailers are actually investing in tech, so things like AI, data, my personal favorite CRM systems, and that’s to deliver seamless personalized experiences. So brands that lean into how to deliver seamless and where that meets loyalty are the ones that will lead in the future.

And there’s also that whole Gen Z, whether you call it a cliche or not, in terms of their values, they value transparency, they value immediacy, they want alignment with their social values. Given your contention that it’s not about just having a points program or a bespoke loyalty program, what are some of the best practices for leveraging a loyalty strategy to build relationships with this cohort?

It seems like a little bit of wahoo when you say the values part of Gen Z. and I talked about authenticity earlier. The way to deliver that is through acknowledging their values. And I think where brands go wrong is that sustainability isn’t a differentiator anymore. It’s actual table stakes. So when you talk about Gen Z, it’s values, they care about sustainability, transparency, “purpose.” they expect brands to support and reflect those priorities as they go.

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The problem is, there’s a major disconnect between them and the brand. Only 18% of fashion executives consider sustainability a major growth driver. And I feel like you feel that in the way they deliver sustainability. It looks a little bit more like greenwashing and greenwashing will lose you more customer than it gains. A great example of somebody who’s doing it well I believe is Prada.

(33:08)
They have their Re-Nylon initiative and in that they offer loyalty rewards when customers choose sustainable options. So here you are with rewards reflecting their values. That’s ultimately what it’s all about. Luxury brands need to move beyond their product. A purpose without proof is just marketing fluff. So it’s about being transparent, whether that’s in how materials are sourced, your sustainability efforts or your broader social responsibilities, consistently showing that and your values both online and in store. And again, it just comes back to authenticity. When brands align with what they care about and show up authentically, loyalty becomes a natural outcome.

And that’s it for this New Year’s edition of the Loyalty Newscast. Thank you for listening. Visit Loyaltywire.com and join our email list. And do reach out to us on social media. I’m Katy Topping. Till next time.