Airlines must adapt to new customer loyalty programme rules
Air travellers love frequent flyer programmes, and will often shop around in order to build up their points. They're also popular with the airlines themselves, who see them as a cost-effective way of building customer relationships and enhancing brand loyalty. However, the way these schemes are accounted for within an airline's financial reports is changing this summer, and strategic decisions need to be taken now to make sure the benefits justify the costs.
In June last year, the International Financial reporting Interpretations Committee (IFRIC) released its 'Customer Loyalty Programmes' standard 13. This covers all organisations' accounting periods from 1 July 2008 and has particular relevance to airlines with frequent flyer programmes. Until recently, an airline's books have always recognised the liabilities for rewards schemes, but these have been kept very low. The actual cost to the airline was calculated as marginal, because the flight would go ahead anyway.
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