Both airlines and supermarkets offer customer loyalty programs. However, airline frequent flyer programs seem to be much more profitable. In 2020, the American Airlines AAdvantage program in the United States was appraised to be worth over US$19.5 billion. a. Business executives often fly at the expense of their employer or clients. By contrast, leisure travelers typically pay for their own travel. Compare the price elasticity of the demands for air travel of business vis-à-vis leisure travelers. b. Explain how frequent flyer programs exploit the price inelastic demand of business travelers. c. European low-cost airline Ryanair caters mainly to people traveling for pleasure at their own expense. Can this explain why Ryanair does not run a frequent flyer program?
Both airlines and supermarkets offer customer loyalty programs. However, airline frequent flyer programs seem to be much more profitable. In 2020, the American Airlines AAdvantage program in the United States was appraised to be worth over US$19.5 billion.
a. Business executives often fly at the expense of their employer or clients. By contrast, leisure travelers typically pay for their own travel. Compare the price
b. Explain how frequent flyer programs exploit the price
c. European low-cost airline Ryanair caters mainly to people traveling for pleasure at their own expense. Can this explain why Ryanair does not run a frequent flyer program?
d. Discuss whether there is a substantial segment of supermarket customers who shop at the expense of others.
e. Drawing on your answers above, explain why airline frequent flyer programs yield more profit than supermarket loyalty programs.
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