Vistara exploring moving away from Award Charts to Dynamic Award Pricing

Vistara, as per various news reports, is considering another complete revamp of their frequent flyer programme, after having just made the last one a few years ago. As per the report,

Vistara is increasing the number of partner companies across different segments and moving to a dynamic award-pricing system.

Frequent flyer programmes around the world become alternate currencies and dominant form of rewards when the airline itself is a strong one, and is able to then spread its brand via other partnerships who are able to shine under the master brand. Usually, these frequent flyer programmes are run as profit centres, with the programme itself responsible for a P&L target by selling miles to partners, and then ensuring there are enough seats on the aircraft to ensure everyone is not going empty handed when they want to redeem their miles. Jet Airways JetPrivilege was this school of thought. The programme itself is around for about 25 years, and was a household name. No wonder, they have teams of sales people who are responsible to go out and recruit partners willing to use their currency as their rewards currency. Most big airlines have gone this way, such as Delta, American Airlines, British Airways, Cathay Pacific and so on. I call it the mileage factory model.

Another school of thought of about frequent flyer programmes being used to inculcate loyalty. There is no excessive selling miles and the airline focuses on surprising and delighting their customers to keep them coming back to them. In this club, the customers of the airline’s loyalty programme feel special, because no one wriggled their way into the next seat by buying miles or something. It is all earned by those who continue to give their business to the airline and its partners. Vistara was in this club, apart from Air India.

But this might be changing soon. Last month, while in Singapore, I had a question to ask the CEO, Leslie Thng, about exploring taking over JetPrivilege given its already engaged user base, to which his response was that Vistara was focussed on adding organic users to the Club Vistara programme, while adding more lifestyle brands to the programme, and hence, they would get there slowly but steadily on their own.

Vistara currently has a fixed award chart, which means a few number of seats are released across the open schedule which can be redeemed or used for upgrades at a fixed number of points. They already have it very aspirational on the higher end. For instance, their business class redemptions on international flights are bad value for your points and you are better off buying in cash.

Airlines across the world are now ditching award charts, such as Delta which already moved in this direction, and United, which is planning to move in this direction from November 2019 onwards. In such a case, the airline decides on the spot the number of miles required for a seat, depending on how well the flight is filling up. This is a similar approach to how the new JetPrivilege programme works, where the number of miles is dependent on the realtime fare of the flight.

Now, Vistara is working on two more interventions for Club Vistara. Firstly, they are planning to add a lot more partners in the coming days. I’ll wait to see more on that. The second and more important part… Vistara is now having a relook at the way they shell out award tickets. There are two new options on the table:

  • Vistara wants to do away with award charts and make a dynamic redemption possible. So, the same award seat could be 10,000 points or 5,000 points depending on the travel period and the demand on the flight (loads)
  • Vistara is also looking to move into cash and points redemptions.

What the article does not talk about, but exist are many more systems that lie in between.

  • A Peak/off-peak system where during peak dates the airline gets to deduce more miles for the same ticket. British Airways has this working successfully for them. For instance, if you wanted to buy a ticket to go to Delhi during Diwali by redeeming your miles, you pay 1.5x number of miles of what would be available on a usual period.
  • A system where a certain number of seats would be made available as on a fixed chart, usually called saver inventory abroad, and then linking the price of the rest of the seats on the plane to the going price of the tickets. This way, loyal members also get a fixed redemption which really rewards them for their loyalty. And if someone is in a rush but still wants to use miles, they get to book an anytime redemption by paying a higher number of miles for their tickets. Etihad Guest has this working for them amongst others.
  • A third system, not very popular yet, but catching pace, is where miles can be used to redeem for fixed value. For instance, 100 Vistara miles get you a 500 INR voucher to be redeemed against your next ticket. JetPrivilege was tip-toeing into this, by issuing Jet Airways vouchers.

Ultimately a loyalty programme is a cost centre or a profit centre depending on the airline’s wishes. Vistara is getting good traction from the current programme from what I hear from members, and I wouldn’t want them to fully move away from a fixed value chart, which would be sort of a reset for members, who might want to reconsider their loyalty, given they are sitting already disengaged with JetPrivilege at the moment.

I would really really hope that Vistara steers clear of this dynamic pricing for now. There is a lot more they can do at the moment but dynamic pricing won’t be one of those things recommended for the moment, at least until they get to be a bigger force in Indian aviation.

What are your thoughts on Vistara’s thought process about dynamic pricing?

Comments

  1. I hope they inform members well in advance, like Citi usually does with its changes, and not drop a sudden bomb messing people’s plans.

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