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

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)