Industry
IndiGo, Air India ramp up loyalty programmes. But they have a lot to catch up
Summary
- Both the homegrown carriers are looking to scale up their loyalty programmes to get more people to fly instead of looking to generate revenue from it immediately.
India’s two largest airlines IndiGo and Air India, which dominate the near-duopoly in domestic skies, are ramping up their frequent flyer programmes to gradually build another potential revenue-generation source in a cut-throat market.
Budget carrier IndiGo, operated by InterGlobe Aviation Ltd, in October reached the milestone of one million loyalty flyers under IndiGo BluChip plan. Tata Group-owned Air India Group’s loyalty membership, Maharaja Club, has surged threefold to about 10 million since it completed merger with Vistara in November last year.
“With flying population of India rising, everyone is a potential customer," said Ajay Awtaney, founder of Live From A Lounge, which tracks the aviation sector and frequent flyer programmes (FFPs). “There is a huge opportunity in the market, with a potential of 30-40 million members in the next three to five years."
About 161.3 million Indians travelled by air in 2024 in the world’s third-largest aviation market, according to data by Directorate General of Civil Aviation. Ratings firm Icra Ltd. estimates it to grow 7-10% in the upcoming fiscal, riding on higher incomes and deeper penetration. But it’s also tough to make money ferrying air passengers in the country with among the highest tax on aviation turbine fuel, which accounts for 30-40% of an airline’s cost.
In 2024, IndiGo had a market share of 60.5% with 99.9 million passengers, while Air India group carried 45.8 million flyers.
“The IndiGo BluChip programme has received an extremely positive response, with over one million members enrolling within the first three months of its launch (in October)," said a spokesperson for IndiGo.
Nipun Aggarwal, chief commercial officer of Air India, said in a 10 January media interaction that the enrolment rate under the carrier FFP has jumped from almost 30,000 a month to about 150,000 a month.
Also read | IndiGo bets on overseas flights for growth
Airlines globally offer FFPs in an attempt to retain and grow passenger base. The rewards range from seat upgrades and lounge access to free fight tickets. These points can also be redeemed at hotels, restaurants and clothing brands. Airlines sell these points to credit card providers, allowing their customers to earn miles by not just flying but also on household purchases. Some airlines even offer co-branded cards. Loyalty plans are a substantial source of revenue for larger overseas carriers.
Tiny versus global peers
By value, US’ Delta Airlines SkyMiles is the biggest at $27 billion. By members, American Airlines ‘AAdvantage Program' is the largest with more than loyal flyers.
There is no official or analyst estimates available for the valuation of Air India or IndiGo’s FFPs. However, when Jet Airways was grounded, its frequent flyer programme with about 10 million members was valued at $1.13 billion.
“There is no comparison with foreign airlines; some foreign airlines have more revenue from FFP alone than some Indian airlines," said Sanjay Lazar, chief executive of Avialaz Consultants, a Mumbai-based aviation consultancy. “For context, the Delta FFP alone has a turnover of more than $6 billion per year, whereas SouthWest’s FFP nets it close to $5.9 billion, which is 22.4% of its total revenue."
Also read | Class war: IndiGo shows Air India it means business
During the pandemic, the top three American airlines, Delta, American Airlines and United Airlines, raised $20 billion based on the valuation of their loyalty programmes.
To be sure, IndiGo IndiGo reported a 14% on-year increase in revenue at ₹22,111 crore in FY24, Air India posted a consolidated annual operating revenue of ₹51,365 crore, up 24.5%.
For now, both the homegrown carriers are looking to scale up their loyalty programmes to get more people to fly instead of looking to generate revenue from it immediately.
“Air India has a mature FFP for 30 years, though it has not yet evolved into a supercharged FFP," said Lazar, referring to lack of wider offerings as some of the overseas peers. “But the green shoots are evident, especially with the Tata muscle."
Air India's Maharaja Points can be redeemed with Star Alliance partners, while IndiGo BluChips can be used only with IndiGo.
Also read | Air India eyes regional aviation space in challenge to IndiGo
A spokesperson for Air India told Mint that the carrier is looking to introduce co-branded credit cards as it scales up its member loyalty programme. The airline is in the midst of merging the loyalty programme of Air India Express with Maharaja Club, which will create one loyalty programme for the Group's airline business.
A Maharaja Club member can earn 6-10 points on every ₹100 spent in a six-tiered system. Apart from usual benefits these can be earned and spent with Air India’s 24 Star Alliance partners. However, Air India restricts lounges to premium first and business class passengers only. Depending on credit card partners, the access is further extended.
While the Maharaja Club points can be purchased separately, IndiGo BluChip points cannot be.
An IndiGo BluChip member can earn up to 16 points per ₹100 spent, along with a 50% bonus for bookings through the IndiGo app or the website. But the points can be redeemed on any IndiGo flight for upgrades.
According to Lazar, the biggest challenge for IndiGo and Air India to compete with foreign airline on FFPs is their lack of tie-ups with foreign carriers. An airline having agreements with other carriers allows a member to redeem some of the benefits, including access to lounges and seat upgrades, with other carriers.
Also read | SpiceJet’s path to recovery: A tough, long climb to reclaim market share
Budget airline SpiceJet told Mint that its SpiceClub has seen “remarkable adoption and engagement. We are focused on further enhancing the SpiceClub experience by introducing new benefits, expanding partnerships, and making rewards even more accessible to our members."
Spicejet, however, did not reveal the total number is members for SpiceClub.
“Both Air India and IndiGo are now scratching the surface regarding the potential opportunities," said Awtaney of founder of Live From A Lounge. “Eventually, enrolments will grow further, but what matters is how active the members are."
