VIEWPOINT: The loyalty revolution – why airlines must merge rewards with retailing

Marcus Puffer Consider a common scenario: a gold-tier loyalty member books their annual ski vacation online. Despite their elevated status, the experience remains largely undifferentiated, with the member manually selecting from their entitled benefits like baggage allowances, seat preferences, and travel insurance rather than receiving proactive, contextual recommendations. The loyalty tier serves primarily as a credential for lounge access and priority boarding, rather than as a driver of personalised service during the booking journey. Contrast this with an alternative approach. Upon entering the booking platform, the system immediately recognises the customer’s profile and preferences. Drawing on historical data indicating a pattern of winter sports travel, it proactively suggests a bundled offer combining the flight with a partner rental car service and automatically includes additional ski equipment allowance. Payment is facilitated through an optimised combination of loyalty currency and cash, executed seamlessly in a single transaction. This represents not a distant aspiration, but rather the unrealised potential inherent in today’s airline loyalty infrastructure. The Disconnect Between Data and Experience Airlines have spent decades building loyalty programmes into billion-dollar businesses. They’ve accumulated mountains of customer data: transaction histories, tier progressions, co-brand card spending patterns, partner interactions. Yet this wealth of intelligence remains largely isolated from the systems that shape the customer journey, including the offer engines, booking platforms, and payment processors. The result? A paradox of plenty. Airlines know more about their customers than ever before, but that knowledge rarely influences what travelers see when they’re ready to buy. Loyalty becomes something that happens after the transaction, not something that shapes it. Meanwhile, travelers have evolved. They expect Amazon-level personalisation, not static catalogues. They want seamless experiences across flights, hotels, and ground transport, not fragmented touchpoints where their loyalty and preferences aren’t recognized across the travel journey. From Rewards to Recognition The fundamental shift needed is architectural, not aspirational. Airlines must embed loyalty intelligence directly into their retailing infrastructure, creating what industry leaders call a “Unified Customer Data Layer.” This provides a real-time view of each traveler that’s accessible across all commercial functions. This means loyalty data doesn’t just sit in a database somewhere. It actively shapes offer creation, dynamic pricing, and personalised bundles at the moment of decision. When a frequent flyer who routinely books business class searches for a flight, the system can proactively suggest relevant ancillaries, surface partner benefits, and even predict willingness to pay based on historical behaviour. The opportunity extends far beyond individual flights. As airlines expand their partner ecosystems (hotels, car rentals, lifestyle brands, experiences), loyalty becomes the connective tissue that makes these relationships valuable. A co-branded credit card holder who regularly spends on dining shouldn’t just earn miles; they should receive restaurant offers when traveling to new cities. A member who donates miles to charity signals values that could inform carbon offset recommendations. The Technical Foundation Making this vision real requires breaking down walls between traditionally separate systems. Airlines need unified platforms that handle both cash and miles transactions, that merchandise air and non-air products in the same flow, that enable hybrid payment models without forcing customers into different booking channels. The architecture must support what IATA calls the Offer and Order model, treating every interaction as a dynamic, personalised proposition rather than a static fare display. It must integrate seamlessly with loyalty platforms, partner APIs, and emerging standards like NDC and ONE Order. Co-branded credit cards are a good example of untapped potential. Airlines earn billions from these partnerships and the cards themselves generate incredibly rich data about spending patterns, lifestyle preferences, and how close someone is to their next reward threshold. But too often, that data stays trapped in the payments ecosystem rather than feeding into the systems that actually create offers. The capabilities exist on both sides. What’s missing is tight integration that lets loyalty platforms, payment data, and offer engines work together in real time. When that connection exists, you move from generic promotions to personalized experiences that reflect actual customer behavior. Intelligence at Scale With the right data foundation, artificial intelligence becomes transformative rather than incremental. Airlines can move beyond basic segmentation (“leisure traveler” vs. “business traveler”) to create micro-segments that enable AI to anticipate   individual desires and behaviour. This allows systems to deliver tailored offers that reflect likelihood to upgrade, ancillary preferences, churn risk, and optimal price sensitivity for each customer. AI can power context-aware recommendations throughout the journey, suggesting lounge access after a delay, bundling airport transfers with hotel bookings, dynamically adjusting redemption offers based on miles expiration dates. It can identify anomalies that signal fraud or service failures before they escalate. It can even enable personalised AI agents that handle booking changes, cancellations, and member servicing with genuine understanding of each customer’s history and preferences. The Convergence Imperative The opportunity isn’t about adding loyalty features to retailing systems or vice versa. It’s about fundamentally reconceiving them as one integrated capability. Loyalty becomes the recognition layer that makes retailing personal. Retailing becomes the activation mechanism that makes loyalty tangible. Airlines that achieve this convergence will unlock benefits across the board: higher conversion rates through relevance, increased ancillary attachment, stronger partner monetisation, lower operational costs from unified platforms, and perhaps most importantly, deeper customer relationships built on experiences that deliver value. The traveler who receives that perfect ski vacation bundle, pre-populated with their preferences and paid for seamlessly with their preferred mix of miles and money, doesn’t just complete a transaction. They experience recognition. They feel understood. And in an industry where switching costs are low and options are abundant, that emotional connection might be loyalty’s most valuable currency of all. The technology exists. The customer expectations are clear. The question now is which airlines will move first, and how quickly their competitors will follow. (Note: Marcus Puffer is Vice President & Head of Loyalty Management Solutions at IBS Software.) For Editorial Inquiries Contact: Editor Matt Driskill at [email protected] For Advertising Inquiries Contact: Head of Sales Sally Passey at [email protected]