FFB Insider: The Battle for Kiev

On our global site, FrequentFlyerBonuses.com we track and list bonuses for over 160 airline and hotel loyalty programs. We see offers from every corner of the globe except Antarctica. One area that we have seen a consistent number of mileage bonus offers for flying is from the Ukraine. In particular, Kiev, a city of roughly 2.8 million people which is home to Aerosvit and Ukraine International Airlines, who are duking it out for their share of the market.

Bonus offers for competitive routes, but no matching allowed
For the better part of two years both airlines have maintained a strategy for attracting and retaining loyal customers by consistently offering promotions for flying to or from Kiev. In fact Kiev is one of the few cities in the world that has enjoyed some sort of flight bonus offer every day of the year since mid 2009. What makes the competition interesting between Aerosvit and Ukraine International is that there little to no matching of the FFP promotions they run. Unlike airlines in the U.S. who go head to head and match their competitors flight bonus offers, in the Ukraine it seems to be norm to not do so.  The majority of the bonus offers doled out by these two airlines are on routes that they both compete on but they seem to be perfectly happy taking turns at offering bonus miles on those routes. Its as if they are discussing their promo ideas with each other. I could just see the conversation: “We are going to offer double miles for Kiev-Simferopol flights in July, you can have August”

So why offer a bonus in the first place? In the terms of our current subject, there are two reasons to offer bonus miles on the routes that your rival also flies. First is to try to pull your rival’s frequent flyers over to your airline and to also keep your customers from defecting to the other airline (customer retention) both of which definitely play a role in the Kiev situation. For many of the established routes that both Aerosvit and UIA fly it is unlikely they are offering bonus miles to stimulate overall demand and rather are offering the bonuses for the two reasons we state right above.

We’re launching a new route, have some bonus miles
Continuing on the topic of stimulating demand, both Ukraine based airlines are active in route launch bonus offers. This is where the bonuses are used more to stimulate demand and attract new customers to the new route. There are some frequent flyers who may not be aware of a new route that is being flown by their favorite airline until they see an email offering them double miles for flying it in the first month or so. In this case the bonus offer is more of marketing tool rather then customer loyalty tool. Where it takes on more of a loyalty tool is that route is already flown by another airline and the bonus offer is put in place to attract the other airlines frequent flyers on that particular route.

Status for sale
 In January of this year, Ukraine International took an unprecedented step whereby you could buy status miles to make up the difference if you didn’t fly enough in 2010 to reach an elite level. What made this offer unique was that you did not have to fly at all, you could have a zero mile balance in the Panorama Club program and buy Gold Status for US$1000. Would such an offer be considered a product dilution (too many status members) or a clever marketing move to retain flyers who may now focus more of their flying on UIA since they can enjoy the perks of being elite. Technically its both, in the eyes of their current elite customers they will see it as dilution as you have more people competing for lounge space etc. while the airline sees it as a great customer retention tool.

Hey wait a minute, we want a piece of the action
The battle for Kiev is not only being fought by the hometown airlines, earlier this year Air France KLM wanted a piece of the action by offering a bonus  for residents of the Ukraine only. The offer was for Double Flying Blue Miles for flights between Kiev and Paris, Amsterdam, Copenhagen, Geneva, Barcelona, Dusseldorf, Manchester, Madrid, Munich, Stockholm, Milan, Lisbon or London. All the routes except for Manchester are flown by either Aerosvit or Ukraine International and definitely points at Air France KLM wanting to cherry pick the international business traveller from the two Ukrainian airlines.

What will the future hold?
As the country slowly recovers from their large economic downturn in 2008 and 2009 the two airlines should continue to see the significant growth that they have been experiencing in the past 18-24 months (UIA is seeing growth excess of 20%). However with only a limited amount frequent or premium travellers flying within or in and out of the Ukraine the airlines will have to continue to harness the marketing powers of their FFPs. By using route bonus offers the airlines hope to achieve that little bit of incremental revenue by keeping their own or stealing each others passengers at the small cost of issuing more miles.

This article is part of the FFB Insider, our corporate/B2B newsletter for those who work in the travel, travel rewards and/or loyalty industries. It offers insights into the world of bonus offers and other loyalty promotions found in the world of travel. It also features updates and news on the FFB Group. The FFB Insider is sent once a month and you can subscribe to it here.

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