2. Introduction
• Frequent flyer or loyalty programs(FFPs)
allow passengers to accumulate points or
miles, each time they travel with a certain
airline or partner airline.
• These points or miles can be exchanged
for:-
1. A free ticket.
2. A free companion ticket.
3. An upgrade to a business or first class ticket.
4. Other non air travel awards.
3. History
•The very first modern frequent-flyer program was created in
1972 by Western Direct Marketing, for United Airlines.
•In 1979 Texas International Airlines created the first frequent-
flyer program that used mileage tracking to give 'rewards' to its
passengers.
• In 1980 Western Airlines created its Travel Bank, which
ultimately became part of Delta Air Lines' program upon their
merger in 1987.
4. • Since then, frequent-flyer programs have grown
enormously. As of January 2005, a total of 14 trillion
frequent-flyer miles had been accumulated by people
worldwide, which corresponds to a total value of 700
billion US dollars.
5. Approaches
There are three approaches to FFP accounting:-
• Redemptions of the points: This is used as a contingent
liability. On the basis that it is impossible to quantify
accurately the timing and amount of awards.
• Incremental cost technique: This recognizes the future
liability in providing for the future cost of carrying those
passengers who have passed the points threshold and are
likely to be granted an award.
• Defered revenue technique: This refers to a certain
proportion of the revenue earned from the sale of the
tickets which conferred FFP points the awards is granted
and used.
6. Example
Every airline sets different names for their frequent flyer
programs some of the examples are such as:
Air India = “ Flying returns”.
Lufthansa airlines = “ Miles and More”.
Japan airlines = “ Jal Mileage Bank”.
Thai airways = “ Royal Orchid Plus”.