/\

AD

SAS Airbus 767 in 1990s.
SAS Airbus 767 in 1990s.

Aviation

1990s: A case in points

European airline market deregulation pushes SAS into the loyalty program game. Hello, EuroBonus.

One of earliest customer loyalty programs was the American Sperry & Hutchinson Green Stamps program in the 1930s, in which consumers received stamps for their purchases at participating merchants. The stamps were glued into booklets, and then exchanged for products that equaled the value of the stamps.

The world started to change in the late 1980s. The Berlin Wall came down, the Iron Curtain was lifted and European integration accelerated. The European Community became the European Union and began its expansion to the current continent-wide entity.

The airline industry was one of the first to undergo a major change when the EEC began its deregulation of the common market in 1987. In 1992, Sweden opened its domestic market to competition, stripping SAS of its monopoly status, and in 1993, new EU legislation did the same for the common market. Sweden and Norway, non-member states, signed separate agreements with the EU.

To prepare for the new situation, SAS decided to invest in better service, create a new tourist class price category and establish a loyalty program, EuroBonus.

The model for EuroBonus came from the US where travelers had been able to earn points for their air miles, and then use the points to book flights. That hadn’t been possible for SAS because in Scandinavia, such free trips were considered taxable income. A new Swedish legislation abolished that, for trips outside of Sweden.

Also, companies were caught off guard and they didn’t have their points policies in place, and when the points went to their employees - the cardholders - instead of the company that had paid for the trip, they, too, took aim at SAS. That didn’t sit well witj the airline’s management.

“The [corporations] should be pleased with us. The only thing we’re trying to do here is increase our customers’ loyalty to us, and they’ll get their rebates in the end, thanks to their deals as our major customers,” said Vice President Geir Olsen, who was in charge of EuroBonus.

When everything was new, there were all kinds of concerns, one of them being that the point hunters would book expensive SAS flights with the corporate money, regardless of other options out there. That, too, Olsen whiffed away.

“The risk of that happening is minimal. Business travelers are rational people who understand that irrational decisions are not cost-effective for their companies. Let’s let those who work hard for Swedish industry and have 200 travel days a year enjoy it a little,” he said. 

When SAS launched the EuroBonus program in 1992, many feared that it was too late and that other airlines, by acting earlier had stolen potential SAS customers. On April 21, Dagens Industri, a Swedish financial paper, wrote that American Airlines already had “over 10,000 Swedish businessmen in their system.” The article ran under the headline, “Bonus war between airlines”.

The war wasn’t simply between American and European airlines. KLM had launched its loyalty program in January 1992, Lufthansa and British Airways launched their schemes a couple of months later, and Swissair launched its loyalty program about a month before SAS launched EuroBonus.

This was a serious matter at the SAS head office. “There’s not a chance we’ll survive if we get rid of the bonus program,” said Olsen.

They didn’t – and they survived. And today, there are over four million EuroBonus members.

Last edited: December 28, 2016

AD

Close map

Category

From the article

Share this tips

Close

Looking for something special?

Filter your search by

Close