CEO Blog

Game changing innovations can be easy – the example of Azul Airlines

Written by Ravindra Bhagwanani on . Posted in CEO Blog


02 March 2015

At the recent Loyalty 2015 conference, the winners of the Loyalty Awards were honoured as well. Among the winners figured the rather unknown Azul Airlines from Brazil. A contemplation that each company can make a difference with some smart innovations at its loyalty program.

Okay, it might be an understatement to call Azul “rather unknown”, but as purely Brazilian domestic carrier until recently – now flights to the US were added – it lacked of international recognition. But the airline is not only the second baby of Jetblue founder David Neeleman, but many of the winning low cost-style elements of Jetblue were actually copied into Azul. To start with the name (Azul is Portuguese for blue) and ending with the name of its FFP, Tudo Azul (all blue) versus TrueBlue at Jetblue. And the irony of history wanted that Jetblue became, for the first time, another winner in the Loyalty Awards this year.

And Azul is an airline carrying more passengers than Etihad – but definitely makes less fuss about it. Focus on good solid work to deliver the promise rather than building up a noisy PR machine. Azul is one of the most profitable airlines in the world measured by profit margins.

Azul won the Loyalty Award in the category “Best Loyalty Partnership” for its co-branded credit card with Itaú Bank. Now what is so special about it? Every program has a credit card these days, although we sometimes realise that related expectations by FFP managers are sky rocketing faster than new skyscrapers in Dubai. Yes, some FFPs like Aeroplan generate 50% and more of their revenue through credit card partners, but these objectives should definitely be much more modest for smaller FFPs – especially when operating in markets like Brazil with a very fierce competition in the credit card segment – and the focus should be put much more on the question how to add value through such partnerships.

And that is exactly what Azul managed to do in its TudoAzul program and why the Award was definitely more than deserved. If you are a distant number 3 in your market as an airline, just providing a slightly more generous earn scheme risks not making the difference in terms of customer perception – but can cause financial harm to your program. So Azul did something much more straight forward: All credit card holders get 10% off on all Azul ticket purchases. Platinum card holders get moreover up to 8 free chauffeured transfers per year to Azul’s main hub in Campinas, outside of São Paulo. This comes in addition to the more recurring benefits such as generous mileage activation bonuses or certain number of lounge passes.

The results Azul has achieved with these simple, straight forward measures are phenomenal, underlining that customers are willing to buy into such concepts if they make sense to them. The over sophisticated design of benefits might be a good and motivating exercise for the involved partners – but too often too far away from the rather basic needs and direct benefits customers are looking for.

So the next time you are looking at giving a boost to your program by some innovations, following some simple rules might yield surprising results:
– Put yourself in the shoes of customers and ask yourself what they might really be looking for
– Keep it simple and understandable: Even by assuming that your members are intelligent, they may simply don’t have the time to understand any too complex ways of thinking
– Run a test among a limited circle of customers on an unpublished basis to validate the idea

Low cost carriers are often said to be successful because they know how to keep things simple (think the no baggage fee Southwest maintained for a long time even after all “full service” carriers in the US had introduced them – except for customers holding a co-branded credit card, flying on their birthday or making their flight booking between 02.20am and 02.30am over the airline’s website!). There is certainly truth to that, but low cost carriers have no exclusive right for simplicity. And yes, nobody needs to feel ashamed anymore to consider the leading low cost carriers as model for the industry today. As the list of this year’s Loyalty Awards winners has shown, with two out of four winners belonging to the low cost league – and two more following on the heels of the winners in the two other Award categories.

While awaiting the Loyalty Awards 2016, we – and millions of frequent flyers out there – are eagerly waiting each day for new creative innovations to be introduced. We know that some programs won’t disappoint us. And hope that “some” might ultimately be replaced by “many”.