Overall, we have noticed weaker economic indicators in our key markets this year. This is not so much reflected in the number of passengers, as we have even been able to grow it, but rather in purchasing power and a drop in average prices.
We are located in the Baltics, a competitive location for the East-West passenger traffic, which is now gone. In addition, the ongoing conflict in the Middle East has also impacted our travel operations to and from the region. We are compensating for this lost capacity by introducing more leisure routes, which are constantly in high demand. We are looking positively at the future, as a fairly optimistic economic recovery is predicted in our key markets, according to central banks.
Similar trends are observed in the wider European aviation industry in Q2-Q3 2024, with most leading airlines also reporting weaker revenue results due to reduced prices and other challenges.
Airlines and travel companies have established various strategies to foster customer loyalty, with loyalty programmes at the core. For instance, our airBaltic Club allows passengers to earn points for flights, which can be redeemed for rewards like free tickets or upgrades. The traditional model focuses on rewarding travel frequency and expenditure, providing a clear path to benefits for regular travellers.
airBaltic, like many other airlines, also uses a tiered membership system, where customers can ascend through different levels, such as Club, Executive, and VIP – each offering progressively enhanced benefits. This not only incentivises more travel but also instils a sense of progression and achievement among its members.
Partnerships play a significant role. airBaltic is collaborating with entities such as Air France-KLM, allowing points to be earned or spent on a broader spectrum of travel services. This cross-utilisation of points expands the appeal of loyalty programmes.
Furthermore, the integration of personalised experiences through data analysis has become key. airBaltic can leverage customer data to offer bespoke travel options or rewards, enhancing the personal connection to their brand.
Speculation on the future of loyalty in 2040
While we have seen air miles primarily used for travel benefits so far, the landscape could look quite different by 2040. With the advent of Web3 technologies, there is a vision for loyalty programmes, where points or tokens could be utilised like digital currency for virtually any online purchase.
For example, imagine a scenario where airBaltic's loyalty points could buy you not just flights or hotel stays but also fashion, tech gadgets, or even virtual goods in a decentralised digital economy. The concept of loyalty would transcend traditional boundaries, offering consumers a sense of ownership and transferability of their earned points, potentially revolutionising how loyalty is perceived and utilised across industries.
Gamification undeniably plays a role in boosting customer redemption rates by making the journey towards rewards more interactive and enjoyable. The immediate feedback from earning stars or points upon purchase can significantly encourage customers to redeem their rewards for that instant gratification. Personalisation further enhances this by tailoring the experience to individual customer habits, making redemption more relevant and likely.
However, it is important to address that redemption rates are not solely reliant on gamification. A gamification strategy can be brilliant, but if the rewards themselves are not substantial or attainable, it will not effectively increase redemption. Many programmes set high thresholds for redemption, which might work for the top 1% of users who engage frequently enough to benefit, but for the broader membership base, this can have the opposite effect, discouraging redemption due to perceived difficulty, or unattainability.
In our programme Planies, we have tackled this by introducing a passive points reward system. Members holding our NFT loyalty card passively accumulate points daily, which they can then redeem. This approach has proven effective for us. However, it is clear that for other companies this principle would only work if there were an initial purchase or some form of engagement because, at the end of the day, the business model must be financially viable. The core issue that companies grapple with is finding the right balance – where gamification not only engages but also ensures that the redemption benefits are within reach for all, not just the most active users.
The impact of Web3 and blockchain technology is already unfolding within the travel sector. As early as 2022, during the World Aviation Festival (WAF), our President and CEO, Martin Gauss, introduced the first aviation travel programme leveraging these technologies. Fast forward to today, and we are witnessing a proliferation of blockchain-based products at major industry events, signalling a shift towards their integration into mainstream travel operations.
The industry perspective
Decentralised platforms: blockchain technology facilitates a move towards decentralised booking platforms, allowing for direct interactions between airlines, service providers, and consumers. This not only cuts down on costs by eliminating intermediaries but also fosters a transparent and secure transaction environment. This trend is increasingly evident as more products are showcased and adopted.
Tokenized loyalty programmes: with Web3, loyalty programmes can evolve into systems where consumers own their rewards as tokens. This concept is taking shape as companies experiment with tokenizing loyalty points, making them tradable or useable across broader ecosystems, thereby enhancing their value and flexibility.
Automation with smart contracts: the implementation of smart contracts in travel operations has begun, automating processes like refunds, bookings, and even dynamic pricing based on demand, which could lead to a more efficient and trust-based system.
The consumer perspective
Sharing economy in loyalty: we have observed a trend where Web3 loyalists prefer communal benefits. From our data, 33% of our business class vouchers were shared with others, indicating a shift towards a sharing economy within loyalty programmes. This sharing aspect is facilitated by the ease of transferring digital assets in a blockchain environment.
Digital communities: the increasing time spent online is fostering a sense of belonging to digital communities. In the travel industry, this could mean loyalty programmes that not only reward travel but also contribute to a digital identity or community membership, enhancing the social aspect of travel loyalty.
This shift towards Web3 technologies in travel is not just about technological innovation; it is about creating an ecosystem where loyalty is not just a transactional relationship but a part of a broader digital community experience. This aligns with the human desire for connection and belonging, which is being increasingly expressed in online environments. As we continue to develop, we expect to see these technologies become more integrated, offering new ways for travellers to engage with brands, share benefits, and participate in a more interconnected and secure travel network.
Arturs Garais is driving Web3 innovation at airBaltic as a Senior Project Manager. His background includes pivotal roles at Amazon and Perkins, and he is now focusing on integrating blockchain into travel loyalty systems. Arturs is an NFT and digital tech enthusiast, speaking at international conferences, like Paris Blockchain Week, to foster Web3 adoption in traditional sectors.
airBaltic is the leading airline in the Baltics and one of Europe’s fastest-growing carriers. As a hybrid airline, it leverages the upsides of both traditional networks and low-cost carriers. Through a network of more than 130 routes from Riga, Tallinn, Vilnius, Tampere, and seasonally, Gran Canaria, airBaltic connects the Baltics with over 80 destinations across Europe, the Middle East, North Africa, and the Caucasus. Founded in 1995, today airBaltic operates one of Europe’s youngest fleets, consisting of 49 Airbus A220-300 aircraft.
The ECOM'21 conference in Riga, Latvia, is a fintech and ecommerce gathering in the Baltics, with diverse industry participation comprising banks, financial institutions, regulators, payment institutions, payment schemes, fintechs, payment tech providers, compliance professionals, ecommerce specialists, and more. During the two days of the conference, industry experts exchange insights, formulate challenges, and agree on actionable solutions regarding business operations, tech, regulatory frameworks, and beyond.
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