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Frequent-flier programs: the Australian experience.

When Tom Plaskett pioneered American Airlines' AAdvantage frequent-flier program in May 1981, he patterned it after the time-honored Green Stamps concept, but with an important difference: "...replace toasters with the most sought after reward today - travel."(1) It turned out to be the biggest and most successful innovative marketing program in the history of the airline industry. Thus in a television commercial aired some time ago, when asked, "What's in it for you?" the tired business traveler, shown dragging his luggage down the corridor, shot back, "the points!"(2)

Points are earned by members of frequent-flier programs when they fly on the sponsoring airline and its affiliates, when they rent cars from or stay at hotels owned by its designated partners, or when they use airline affiliated credit cards or other services. Members can then cash in their earned points for upgrades, free tickets, or sometimes even merchandise. The main reasons why airlines operate these bonus programs are to cultivate brand loyalty and repeat business, to deter new smaller airlines from entering established markets, and to allow the sponsoring airlines to compile the demographic profiles and travel characteristics of their members through sign-up procedures and computerized flight log-ins.

Two of the earliest articles on the subject have been published in this journal describing the passenger characteristics and corporate responses to frequent-flier programs in the United States: 1) Frederick J. Stephenson and Richard J. Fox, "Corporate Attitudes Towards Frequent-Flier Programs," Transportation Journal, Vol. 27, No. 1, Fall 1987, and 2) Rex S. Toh and Michael Y. Hu, "Frequent-Flier Programs: Passenger Attributes and Attitudes," Transportation Journal Vol. 28, No. 2, Winter 1988. This article traces the recent extension of the frequent-flier concept to Australia, describes the lessons learned from the American experience, and examines both the passenger characteristics and the corporate responses to the travel bonus program in Australia.

AIRLINE DEREGULATION IN AUSTRALIA

Australia is a very large country with a small population of 18 million people located mainly in concentrated coastal pockets around the fringes of the continent. This makes air travel an essential means of transportation, with 35 percent of all trips over 1,000 kilometers being made by air.(3) It is also a concentrated market where 80 percent of the airline passengers fly on the top twenty routes.(4)

Australian aviation has until recently been governed by the Two Airline Policy, which essentially nurtured and regulated two main domestic airlines (the government-owned Australian Airlines and the privately-owned Ansett Australia) first to prevent monopoly and second to pursue the infant industry argument. Together, Australian and Ansett had about 84 percent of the domestic market, with the rest going to regional and commuter airlines which fed into the trunk networks.(5) The government-owned Qantas operated only on international routes.

The fully regulated Two Airline Policy, which had been in existence for more than thirty years, was increasingly criticized for fostering inefficiency, with costs bloated by as much as one-third,(6) and for high fares.(7) With the widely perceived successes of airline deregulation since 1978 in the United States and since 1987 in Canada, the Australian airline industry was deregulated in October 1990. This led to free entry and exit of airlines with no capacity restrictions and the freedom to set rates according to market conditions, all in the interest of increasing efficiency and overall consumer welfare.

The major effect of deregulation in Australia that concerns us is the entry in December 1990 of Compass Airlines into the established domestic market. Compass had a substantial cost advantage over Australian and Ansett, where total cost per available seat kilometer for the new entrant was estimated to be about eight cents, compared to about fourteen cents for the two incumbents.(8) This allowed Compass to offer economy fares 20 percent below the unrestricted fares of Australian and Ansett, so that by September 1991, Compass had cornered over 20 percent of the share of the markets in which it operated.(9)

In the absence of U.S. style hub-and-spoke systems and natural monopolies through coordinated route structures, the incumbents struck back in the same manner in which the major airlines in the United States have tried to keep out the new low-cost, no-frills smaller airlines from entering into established markets - launch frequent-flier programs to retain customer loyalty.(10)

AUSTRALIAN FREQUENT-FLIER PROGRAMS

Given the impetus of Compass' successful inroads into their densest and most lucrative markets and anticipating each other's move, Australian and Ansett both launched their own frequent-flier programs in late 1991.(11) Qantas, now allowed to operate domestic services, merged with Australian in September 1992, and now operates the joint Qantas/Australian frequent-flier program. The original Compass went bankrupt in December 1991, was resuscitated in August 1992, launched its limited bonus program soon after, but went bankrupt again. Air New Zealand, which after November 1993 could operate domestic flights in Australia under the terms of the Closer Economic Relationship (CER) Agreement creating a Single Aviation Market, also has its own frequent-flier program.

Qantas/Australian, with 44 percent of the domestic business market,(12) has the largest indigenous frequent-flier program, with 320,000 members,(13) and is growing rapidly with 14,000 new members a month. A Qantas spokesman was quoted as saying, "The program is growing like wildfire....not only do you have to manage the program, but you have to manage the growth of the program itself."(14) Qantas charges a $30 fee to join. Each member earns 1.5 points for each kilometer flown in first class, 1.25 points in business, 1.0 points in economy, and 0.7 points for discounted tickets. Note that points are valid for only two years, after which they expire unless redeemed. Domestic redemptions for air travel staff at a meager 9,000 points, while international redemptions start at 30,000 points. Gold card holders (250,000 points a year on international or 62,500 points a year on domestic) have access to Flight Deck lounges on domestic flights and Qantas Captain's Club privileges on international flights. The Qantas/Australian program is closely affiliated with British Airways (which owns 25 percent of its stock), Australian Asia Airlines, and Qantas regional subsidiaries, with American Express as its charge partner, and Hertz as its car rental affiliate. Qantas/Australian also has fifteen hotel affiliates.

Ansett, with about 36 percent of the domestic business market,(15) has a frequent-flier program that is smaller, with 198,000 members,(16) and growing at only half the pace of Qantas/Australian.(17) Ansett also charges A$30 for joining its frequent-flier program. Ansett's policies on points earned and redemptions are essentially similar to Qantas/Australian, but because it does not fly international routes except initially to New Zealand as part of the CER Agreement, it has affiliated itself with international partners - United Airlines, Singapore Airlines, Cathay Pacific, Malaysian Airlines, All Nippon Airlines, Swiss Air, and Austrian Airlines - to compete with Australian, which after its merger with Qantas has international appeal. Ansett also has its own regional subsidiaries. Its charge card partner is Diner's Club, with Avis as its car rental tie-in, and it has thirteen hotel affiliates.

Air New Zealand has about 80,000 members in its frequent-flier program and charges NZ$50 to join. Set points are earned based on origin and destination, and points for domestic travel within New Zealand are earned only when tickets are part of a continuous international flight, but points have indefinite shelf life provided members travel on the airline or its affiliates at least once every eighteen months. Its partners include Virgin Atlantic, American Express, Hertz, and several hotel chains.

The effectiveness of frequent-flier programs as a marketing tool in the Australian aviation industry is underscored by the fact that after merging the Qantas and Australian bonus programs, business travelers preferred Australian over Ansett by 46 percent to 38 percent, reversing the previous preference pattern.(18) Like their American counterparts, corporations are not allowed to join the programs that are targeted strictly towards the traveling public, who generally make the airline choice. But frequent-flier programs in Australia are distinctive in four major ways, some of them the result of learning from the American experience, where mistakes led to many problems.

First, the airlines in Australia have almost solely targeted frequent business travelers (who account for over 64 percent of all domestic travel(19)) by charging an initial membership fee instead of following the lead of airlines in America, which enticed new members with bonus points just for enrolling, and by restricting the shelf life of the mileage points. The latter leads to "breakage," an airline term referring to unclaimed points, and avoids the massive contingent liability problems that have plagued American airlines operating successful frequent-flier programs.(20)

Second, Australian frequent-flier programs are more restrictive. Note that unlike in the United States, in Australia one earns only 70 percent of the points on discounted fares. Then, not only must points be redeemed within two years, the awards are good for only a year. Furthermore, members can nominate only five others in a preassigned redemption group, so travel awards have limited transferability and certainly cannot be sold to coupon brokers, a practice that was rampant in the United States. Also on Qantas, one cannot upgrade unless one has at least attained Silver Card status (70,000 points a year on international flights or 17,500 points a year on domestic flights), and upgrades are not available on domestic flights or across the Tasman Sea to New Zealand. On the other hand, Ansett allows upgrades only on domestic flights and Air New Zealand confirms upgrades only on flight check-in or just prior to departure. The restrictions on upgrades are to minimize the number of premium fare passengers being locked out of a "full" flight, as has happened in the United States. In the case of free flights, both Qantas/Australian and Ansett do not allow redemptions during peak hour travel to avoid displacing full fare passengers. However, there are no black-out dates.

To top it all, Ansett does not allow points to be earned on trans-Pacific flights on its international affiliates unless one has flown on Ansett within the last thirty days. Indeed, the rules for earning points and redeeming them are so restrictive in Australia that the rejuvenated Compass II, a low-cost carrier, once ran an advertisement that promised, "We won't make you travel halfway round the world for a toaster."(21), Third, Australian frequent-flier programs have more bands or redemption zones specifying the number of points needed for free travel. For instance, on the domestic routes where 60 percent of the redemptions occur, Qantas/Australian has ten bands while Ansett has four, whereas in the contiguous United States, there is only one. The main purpose of multiple bands for domestic travel is to reward repeat frequent fliers on popular short hauls such as Melbourne-Sydney, where one needs only 17,000 points to redeem for a free return flight.

Fourth, in Australia, unlike in the United States, frequent-flier benefits are taxable. Under Tax Ruling TR93/02 effective from July 1, 1992, if the A$30 membership fee is paid by the employer, the employer must pay fringe benefits tax.(22) When an employee through company-sponsored travel accumulates points that are eventually redeemed for private trips, the employee is subject to personal income tax based on a fair market value of the free ticket or upgrade purchased "at arm's length." If the awards are earned from a combination of business and private travel, then the amount of taxes owed must be apportioned accordingly. But if the travel awards are earned through privately funded trips, then the awards are not taxable, unless they were transferred to others in the family. Thus Australian frequent-flier programs have developed ingenious nontransferable benefit schemes under which members sign a document agreeing that points will be redeemed only for their exclusive use. Thus frequent-flier programs in Australia have two elective components: the Personal Flight Rewards Division and the Family Flight Rewards Division.

RESEARCH OBJECTIVES AND SURVEY DESIGN

The rest of this study focuses on two other aspects of frequent-flier programs in Australia: (1) passenger attributes and attitudes and (2) corporate policies and attitudes. Specifically, it constructs a demographic, behavioral, and attitudinal profile of frequent-flier program members, and examines corporate policies and attitudes towards these programs.

There were two separate surveys. A survey of airline passengers was conducted at Sydney Airport in November 1993 over a period of seven consecutive days, covering each day of the week at different time periods to neutralize daily variations in passenger profiles. On the recommendation of the airport duty manager, our field workers spent equal amounts of time at the Ansett, Qantas/Australian, and International terminals to reflect the manager's best estimate of the traffic breakdown. Our interviewers were instructed to approach airline passengers at least thirty minutes before their scheduled departures to fill in a two-page form consisting of twenty-four questions. The response rate was excellent in that only about 15 percent of those approached declined to participate, resulting in a total of 377 completed questionnaires filled by Australian residents.

Then, obtaining the names and phone numbers of companies in Sydney from Australia's Top 500 Companies, 1993-94, resulting in a sampling frame of 235 large corporations, all of them were contacted by phone in December 1993 asking them to answer nine questions. Most answered immediately, while others faxed back their responses, resulting in a total of 124 completed corporate questionnaires, representing an overall 53 percent response rate.

The results of the airline passenger survey and corporate survey were coded and stored using SAS. Numerous frequency distributions, cross-tabulations, parametric and nonparametric tests of hypotheses, contingency tables, and regressions were run. Only the most significant and interesting results are reported.

FREQUENT-FLIER PROGRAM MEMBERSHIP PROFILE

It has been noted that the frequent-flier programs that have recently emerged among airlines in Australia were almost exclusively targeted towards frequent business travelers who are relatively fare-insensitive, usually traveling at full or premium fares all year round. Our analysis of the passenger survey results reveals that 25 percent of the respondents identified themselves as members of frequent-flier programs, representing 3.65 million out of the 14.6 million air travelers in Australia.(23) Among the frequent fliers, 75 percent considered themselves primarily business travelers, whereas only 25 percent flew primarily for pleasure. (This comports with the observation that among the program participants, 68 percent flew at company or government expense and 32 percent paid for their own trips.) As 48 percent of all travelers considered themselves primarily business travelers, this means that among them, 39 percent were members of frequent-flier programs.(24) Conversely, as 52 percent of all air travelers flew primarily for pleasure, this means that among them, only 12 percent were members of frequent-flier programs.(25) Note that the proportion of frequent fliers is more than three times higher among business travelers than pleasure travelers. Clearly, the airlines in Australia have been successful in targeting their frequent-flier programs towards business travelers.

DIFFERENTIAL PROFILE OF FREQUENT FLIERS

Having estimated the approximate magnitude and composition of frequent-flier members, we now differentiate them from nonmembers. The results of independent sample t-tests on separate groups of members and nonmembers are shown in Table 1.

Examining Table 1, compared to nonmembers, members of frequent-flier programs tend to travel twice as often, and are less concerned with overall service by flight attendants or the quality of the meals. This is not surprising since most members are business travelers flying on corporate accounts so they can eat well at the airport or at their hotels. Moreover, many Australian frequent fliers belong to Qantas/Australian's Flight Deck and Ansett's Golden Wing, paying up to A$200 a year for [TABULAR DATA FOR TABLE 1 OMITTED] what has been described as two of the best lounge clubs in the world.

Members naturally place more importance on frequent-flier programs and less importance on low or discount fares, since most are traveling on company expense. Furthermore, being seasoned travelers, members rely less on travel agents. They also have higher annual incomes and tend to be older than nonmembers.

A comparison of the frequency distributions for members and nonmembers shows that whereas 70 percent of the members traveled alone, the corresponding figure for nonmembers was 60 percent. This again reflects the fact that frequent fliers are usually business travelers on work-related business, a notion supported by the previous observation that 68 percent of the members were traveling on tickets paid for by corporations or the government, versus only 42 percent for nonmembers. Similarly, whereas 17 percent of the members were traveling in first or business class, only 5 percent of the nonmembers were flying on premium fares. Also, 19 percent of members make 16 or more trips a year, compared to only 3 percent of the nonmembers.

Demographic differences between members and nonmembers were significant. In total, 74 percent of all members of frequent-flier programs were men, whereas only 26 percent were women. Furthermore, the male/female ratio is 2.85 for members and 1.35 for nonmembers. The survey results imply that men are vastly over-represented among frequent fliers. This may partly account for the fact that 47 percent of the members earn more than A$60,000 annually, compared to only 17 percent for the nonmembers. The observation that a larger proportion of frequent-flier program members are wealthy can in turn be partly explained by the fact that, whereas 74 percent of the members are above 30 years of age, only 59 percent of the nonmembers belong to this mature group.
Table 2. Multiple Memberships in Frequent-Flier Programs


Number of programs Frequency Percent Cumulative percent


1 73 76 76
2 18 19 95
3 5 5 100
4 or more 0 0 100


 96 100


FREQUENT-FLIER BEHAVIORAL ATTRIBUTES

We now examine the behavioral attributes of frequent-flier program members. An analysis of the sample frequency distributions pertaining to members reveals surprising but interesting results. While 11 percent of the members indicated that they were using bonus coupons on the flight they were about to take, on average they cashed in their credits for 1.61 free flights and 0.42 upgrades a year. Note the interesting fact that in Australia, free flights are approximately four times more popular than upgrades, whereas in the United States, upgrades are twice as popular as free flights.(26)

[TABULAR DATA FOR TABLE 3 OMITTED]

The multiple membership profile of frequent-flier program members is shown in Table 2. Note that most frequent fliers are enrolled in several programs to facilitate convenience of schedules. On average, members are enrolled in 1.28 programs, while 53 percent are enrolled in tie-in programs, with credit cards, hotels, and car rentals as the most popular in ranked order.

ATTITUDES OF FREQUENT FLIERS

Having outlined the demographic characteristics and behavioral attributes of frequent fliers, we now analyze their attitudes. Members of frequent-flier programs were asked to rate their agreement with five statements concerning bonus programs, with the results appearing in Table 3 in descending order of agreement. [TABULAR DATA FOR TABLE 4 OMITTED] The last column indicates the average rating pertaining to their degree of agreement.

The survey results reported in Table 3 indicate that frequent fliers agree that program membership influences their choice of an airline. Also, to maximize their prizes, many choose to concentrate on one program to ensure that they receive the awards, since points are only "alive" for two years. On average, frequent fliers are somewhat neutral to the idea that multiple program membership enhances flight flexibility, so only 26 percent agreed with that strategy and only 24 percent belonged to more than one program. There is some concern that frequent-flier benefits might be taxed, which is what happened in Australia. Finally, only 17 percent of the members were concerned with losing their benefits due to program termination or airline bankruptcy, primarily because the two major domestic airlines in Australia are very strong, a de facto continuation of the Two Airline Policy, although Compass went bankrupt again.

Frequent-flier program members also were asked to rate eight factors for their importance in deciding which airline to use. Results are shown in Table 4 in descending order of importance with the last column indicating the average rating.

An analysis of Table 4 indicates that on-time performance and convenience of schedules were the most important determinants of airline choice. This is not surprising since our results show that 75 percent of all members of frequent-flier programs are business travelers who are willing to pay premium fares to meet fight business schedules, confirming a finding that a business traveler's choice of an airline is not based mainly on brand loyalty, but is instead determined primarily by on-time performance and schedule convenience.(27) Overall cabin service, low or discount fares, frequent-flier programs, and the quality of the meals were considered important to somewhat important, reflecting the influence of pleasure travelers who are more price-sensitive. Apparently, frequent-flier programs, previously considered a factor in choosing an airline, are not regarded as important as on-time performance and schedule convenience, cabin service, or low fares. Some members try to reconcile their primary desire for schedule flexibility and convenience with their secondary interest in frequent-flier benefits by enrolling in multiple programs.

Finally, members considered the recommendations of their travel agents and corporate travel planner as the least important in choosing an airline. Probably frequent fliers are so familiar with airline schedules that they often make their own travel arrangements. Our survey results show that 69 percent of the members selected their own flights or had their secretaries do it for them.

The survey results also show that the importance placed on frequent-flier programs on the choice of an airline is positively but insignificantly correlated with enrollment in multiple programs (r = 0.07, p = 0.27) but is positively and significantly correlated with concentration on one bonus program (r = 0.17, p = 0.06). Thus there is some evidence that those who play the frequent-flier game may or may not play many games, but they do tend to concentrate on one to maximize the prizes. The correlations also seem to suggest that those who consider the bonus programs as important are not particularly worried that their points will evaporate with program termination or airline bankruptcy (r = 0.05, p = 0.32). There is also insignificant correlation (r = 0.08, p = 0.25) between the ratings members place on the importance of frequent-flier programs and the taxation of benefits, and 75 percent of the members indicated that they would report their frequent-flier benefits for tax purposes.

Frequent-flier members also were asked, "If frequent-flier bonus tickets were considered free employee benefits, how important to you would a program be when choosing an airline?" Altogether, 70 percent said that it would be very important or important. However, when asked, "If frequent-flier bonus tickets were considered company property, how important to you would a program be when choosing an airline?" the figure fell dramatically to 23 percent. Obviously, business travelers are more inclined to play the frequent-flier game for themselves than for their companies. For both questions, members were asked to rate the importance of frequent-flier programs on a scale of 1 (very important) to 5 (not at all important). Of those that responded to both questions, a match paired t-test indicated a very significant difference (p = 0.0001) in attitudes towards frequent-flier programs under the two separate ownership scenarios.

The differences in the ratings given by each respondent to the importance of frequent-flier programs under the two ownership scenarios were then treated as a dependent variable in a multiple regression model. Treating the two membership categories as an independent dummy variable, it appears that the difference in ratings was significantly larger (p = 0.07) for members than for nonmembers, indicating that members consider the ownership of bonuses as very important. When the importance of frequent-flier benefits owned by a corporation was treated as a dependent variable in a multiple regression framework, the partial regression coefficients for taxes, convenience of schedules, and the quality of meals were all negative (p = 0.10, p = 0.07, p = 0.24, respectively). This implies that those who worry most about taxes, convenience of schedules, and the quality of meals are the very ones who are least interested in accruing frequent-flier benefits for their companies. Therefore, it appears that those who are concerned about their own welfare are also the least concerned about the welfare of their companies.

Nonmembers were asked why they did not belong to any frequent-flier program. The distribution of their answers is shown in Table 5. By far the most important reason nonmembers gave for not belonging to a bonus program is that they make too few trips, indicating that airlines in Australia have, by charging enrollment fees and placing various restrictions, indeed succeeded in attracting only true frequent fliers to their programs, reducing unproductive paperwork and administrative costs. The results of cross tabulations and chi-square tests indicate that nonmembers who claim they fly too infrequently do indeed fly less frequently (p = 0), usually travel for pleasure (p = 0.002), are disproportionately female (p = 0.32), tend to be poorer (p = 0), and are younger (p = 0.22).

CONTROL OVER FREQUENT-FLIER BENEFITS AND CORPORATE COSTS

Our corporate survey results show that only 23 percent of the 124 corporations responding said that they confiscated the frequent-flier bonuses earned by their employees flying on company business. Table 6 compares corporate policies with passenger beliefs on arranging travel plans around frequent-flier programs. It is obvious that Australian corporations have failed to convey strict company polices on frequent-flier programs, since employee perceptions are very different from corporate policies.
Table 5. Main Reason For Not Joining a Frequent-Flier Program


Factor Percentage


Make too few trips 74
Reduces flexibility of airline choice 9
Too much of a bother 7
Never heard of program 5
Unattractive rewards 5


 100
Table 6. Comparing Corporate Policies and Passenger Beliefs on
Arranging Travel Plans Around Frequent-Flier Programs


 Do not Allow with
 allow reason No control


Corporations 51% 36% 13%
Passengers 20% 31% 49%


When asked what they considered to be travel management problems, the corporate responses, in descending order of relative frequency, are shown in Table 7. Note that only 10 percent of the corporations surveyed cited frequent-flier programs as a travel management problem.(28)
Table 7. Corporate Identification of Travel Management Problems


Management problem Percentage


Cost of travel 44
Fully booked flights 35
Flight schedule changes 17
Confusing fares 15
Others 12
Reduced air service 11
Frequent-flier programs 10
Changing travel environment 9


[TABULAR DATA FOR TABLE 8 OMITTED]

Altogether, 23 percent of the corporations have their own travel departments. Table 8 shows that the larger corporations are more likely to have travel departments, and those with travel departments are more likely to confiscate travel awards and place more restrictions.(29) This is not surprising since large corporations with travel departments have the monetary incentive as well as the administrative machinery to confiscate or control frequent-flier benefits.

SUMMARY AND CONCLUSIONS

Learning from the American experience and mistakes committed, frequent-flier programs in Australia have been successfully targeted towards frequent business travelers and are more restrictive in both earning and redeeming points, thus largely avoiding the displacement of full and premium fare passengers and the liability contingency problems faced by airlines in America. Interestingly, the Australian programs are also more flexible with multiple redemption bands, thus appropriately rewarding the frequent business traveler on short hauls. The taxation of frequent-flier benefits is a novel idea, and the rest of the world awaits the results of what has always been regarded as an intractable problem of collection.

Based on the passenger survey, the typical frequent-flier program member in Australia is a high-income, middle-aged businessman who makes an average of ten round trips a year.(30) He tends to travel alone, pays higher fares, relies less on travel agents, and places more importance on schedule convenience and on-time performance than cabin services and meals. Frequent fliers usually belong to multiple programs, but tend to concentrate on one, and do not seem to show much interest in hotel or car rental tie-ins. When they cash in their benefits, they prefer free flights to upgrades by a ratio of four to one. They are somewhat concerned with the taxation of benefits, but do not seem to fear the loss of benefits through program termination or bankruptcy.

In conclusion, members of frequent-flier programs in Australia consider the programs as a factor in choosing an airline, but not as crucial as on-time performance, schedule convenience, and low fares. Members are on the whole responsible, and while the system of bonus points given to employees who travel on corporate accounts can potentially encourage abuse, most corporations do not consider it a travel management problem. On the other hand, our study shows that attempts by Australian corporations to seize the travel awards will meet with strong resistance from Australian business travelers who will play the game fairly, but will not play if they cannot get the prize, a finding that not surprisingly parallels the American experience.(31)

ENDNOTES

1 Kurt Hoffman, "An American Revolution," Advertising Age, May 10, 1984, section 7, p. M17.

2 Reported in The Seattle Times, August 24, 1993, p. E4.

3 Kenneth Ryan, "Deregulation in Australia," Australian Aviation, March 1989, p. 97.

4 Curtis M. Grimm and Hugh B. Milloy, "Australian Domestic Aviation Deregulation: Impacts and Implications," Logistics and Transportation Review, Vol. 29, No. 3, 1993, p. 266.

5 Aviation Law Association of Australia Inc., 1990 Conference Papers, 9th Annual Conference, October 1990, p. 12.

6 M.G. Kirby, "Airline Economics of Scale and Australian Domestic Air Transport Policy," Discussion Paper No. 112, Canberra, Center for Economic Policy Research, Australian National University, 1984.

7 P. Forsyth, "The Regulation and Deregulation of Australia's Domestic Airline Industry," in Airline Deregulation: International Experiences, edited by K. Button, (New York: New York University Press, 1991).

8 BTCE, Deregulation of Domestic Aviation: The First Year, (Canberra: Australian Government Publishing Service, 1991).

9 Curtis Grimm and Hugh B. Milloy, op. cit., p. 264.

10 Jim Thorne, "New Times Down Under," Transport World, February 1992, p. 97.

11 "Sky Jockeys," Australian Financial Review, May 14, 1993, p. 2.

12 Ian Thomas, "Gimmicks Fail to Woo Business Travelers," Survey of Business and Incentives Travel, August 5, 1993, p. 41.

13 Chris Farley, "Frequent-Flier Records Scrutinized," The Weekend Review, February 19-20, 1994, pp. 10-11.

14 Lenore Licklin, "Have Points, Won't Travel," The Bulletin, January 11, 1994, p. 44.

15 Ian Thomas, op. cit., p. 41.

16 Ian Thomas, op. cit., p. 41.

17 Chris Falvay, "Ansett Joins Asian Frequent Flier Push," The Australian, February 22, 1993, p. 3.

18 For a more detailed discussion of frequent-flier programs in Australia, see Colleen Ford, "Frequent Flyer Programs," Australian Accountant, February 1993, pp. 52-58.

19 Kenneth Ryan, "Deregulation in Australia," Australian Aviation, March 1989, p. 97.

20 For a detailed discussion of the problems brought about by there overwhelming success of frequent-flier programs in the United States, see Michael Y. Hu, Rex S. Toh, and Stephen Strand, "Frequent-Flier Programs: Problems and Pitfalls," Business Horizons, Vol. 31, No. 4, July-August 1988, pp. 52-57.

21 Ian Thomas, "Sky Jockeys," Australian Financial Review, May 14, 1993, p. 2.

22 For a detailed discussion of the taxation of frequent-flier benefits, see Richard Roberts, "The Importance of Accounting Standards in Tax Law," Australian Accountant, March 1993, p. 57 and Margaret Lyons, "FBT: Frequent Benefits Tax," Business Review Weekly, December 3, 1993, p. 74.

23 It has been reported that 19 percent of the Australian population of 18 million have never flown. See Kenneth Ryan, "Deregulation in Australia: Time Travel or Timed Travel," Australian Aviation, May 1989, p. 22.

24 The computation is as follows: (.75) (.25) / (.48) = .39

25 The computation is as follows: (.25) (.25) / (.52) = .12

26 Rex S. Toh and Michael Y. Hu, op. cit., p. 16.

27 Kurt Hoffman, "Airlines Soaring With Frequent Flyers," Advertising Age, May 10, 1984, Sec. 2, p. M16.

28 For a detailed discussion of the problem of possible abuses of frequent-flier programs and the related costs, see Rex S. Toh, C. Patrick Fleenor, and David W. Arnesen, "Frequent-Flier Games: The Problem of Employee Abuse," The Academy of Management Executive, Vol. 7, No. 1, 1993, pp. 60-72 and Frederick J. Stephenson and Richard J. Fox, "Corporate Strategies for Frequent-Flier Programs," Transportation Journal, Fall 1992, Vol. 32 No. 1, pp. 38-50.

29 For a detailed discussion of different corporate attitudes towards frequent-flier programs by company size, see Frederick J. Stephenson and Richard J. Fox, "Criticisms of Frequent-Flier Plans by Large and Small Corporations," Logistics and Transportation Review, Vol. 29, No. 3, September 1993, pp. 241-258.

30 For a complete demographic profile of a frequent flier in the United States, see Rex S. Toh and Michael Y. Hu, "A Multiple Discriminant Approach to Identifying Frequent Fliers in Airline Travel: Some Implications for Market Segmentation, Target Marketing, and Product Differentiation," The Logistics and Transportation Review, Vol. 26, No. 2, June 1990, pp. 179-197.

31 See Frederick J. Stephenson and Richard J. Fox, "Corporate Attitudes Toward Frequent-Flier Programs," Transportation Journal Vol. 27, No. 1, Fall 1987, pp. 10-22 and Rex S. Toh and Michael Y. Hu, "Frequent-Flier Programs: Passenger Attributes and Attitudes," Transportation Journal, Vol. 28, No. 2, Winter 1988, pp. 11-22.

Mr. William G. Browne is professor, College of Business, Oregon State University, Corvallis, Oregon 97331-2603; Mr. Rex S. Toh is professor, Albers School of Business and Economics, Seattle University, Seattle, Washington 98122; and Mr. Michael Y. Hu is professor, College of Business, Kent State University, Kent, Ohio 44242.
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Publication:Transportation Journal
Date:Dec 22, 1995
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