A blockchain loyalty revolution, led by airBaltic

A new generation of airline loyalty programs is coming, being developed, tracked and sold on the blockchain. And airBaltic is leading the way. The carrier has previously announced its “Planies” NFT program. In an exclusive interview with PaxEx.Aero, CEO Martin Gauss explains how the company sees it as a starting point for a fully tokenized loyalty scheme.

There is no other airline management in the world where there are so many NFTs held by top management. It helps, because we know what we’re talking about.

– AirBaltic CEO Martin Gauss

Loyalty programs as they exist today can be worth billions to an airline. But Gauss sees the current structure as too restrictive for consumers. He believes that the tokenized approach strengthens the members, at the same time as it gives increased value to the carrier.

Flight ticket for PaxEx.Aero to meet Mr. Gauss was paid for by airBaltic. As always, our opinions remain completely independent.

Buy loyalty, guaranteed rewards

airBaltic wants their loyalty program to appeal far beyond the borders of the Baltic states, and far beyond just travelers. Gauss knows that it will not happen with a more traditional program. The next iteration of airBaltic Club will therefore be a tokenized loyalty program, built on the blockchain.

With accounts linked to non-fungible tokens (NFT), the airline expects loyalty – or at least the associated benefits – to be freely bought and sold on the open market.

It’s not just for our frequent pilots. We also want it to be attractive to someone in Shanghai or New York who may never want to fly us. Knowing that they can sell the points or the account to someone else creates the value.

airBaltic will sell “Planies” NFTs as part of the transition; The target launch price is approximately $ 300. And just keeping NFT will earn one membership point every day.

airBaltic expects to issue enough points for each member to earn a free trip once a year. “If you do nothing, you will get at least three tickets over three years,” Gauss explains. “It’s a real value. If you invest in that NFT, you should at least get your money back. “

In many ways, this is similar to paying the annual fee on a cobranded credit card and getting some points as a reward. It opens up targeted marketing opportunities.

But Gauss, who sips a Bored Apes Yacht Club mug during the conversation, also sees potential for significant upside. “We do not want to make it super expensive. What the market does with it then, due to additional benefits, we have no influence. “

Making that claim on the back of a massive downturn in the tokenized economy is not an easy task. But Gauss is not deterred.

Develop a benefit ecosystem

The wider range of benefits associated with these NFTs is where airBaltic hopes to create value. This is also where the tokenization conversation begins to struggle.

airBaltic has experience in issuing NFTs. The company has more than a dozen series of its “City Collection” tokens on the market. And today it holds little benefits to keep one. Gauss wants that to change.

The member wants an NFT and has many benefits. The collection of points becomes much more interesting.

He describes an idea for program segmentation among NFT holders. He states that the program members, for example, can live in different places. “We can think of what we give to people who have a background in Dubai versus elsewhere. Why not solder among these holders of the frequent flyer NFT a Dubai ticket? You want a completely different interaction with your customers.”

When he is pressured into why NFTs are required to activate this – after all, a well-run program knows which members live in Dubai, even without a blockchain – he distracts. Gauss once again addresses potential – but not yet existing – benefits of City Collection NFTs. Can they be a proof of concept for these benefits, despite the fact that that approach remains just a concept so far?

“We can look at who is holding [a city collection NFT] and offer a free hotel, for example. We would not issue it. Someone from the tourism side would. It is marketing where the customer gets real value while the city gets extra attention. “

In this scenario, customers show some interest in buying an NFT. It helps with targeted marketing, but is it loyalty? The most important thing for airBaltic, however, is that the benefits do not cost the airline anything. Gauss often remarked that closing the business case is crucial to any decision the airline makes. With a tourism advice or a hotel or a restaurant or literally anyone else covering the cost of the promotion, airBaltic’s exposure remains sufficiently low.

Will consumers buy an NFT for the chance that perhaps a tourism council will find a way to offer a free or discounted hotel room in the future? It’s tough to sell on many levels. Especially in an untested market.

Develop a closer contact with customers

Can tokenization of the program lead to better engagement with consumers? A steady stream of points earned certainly helps to make the program a little more attractive. And Gauss teases the idea of ​​building “community and connecting your customers who want to be closer to you in another way.”

He also believes that interaction with members will be easier. “If you hold an NFT, it’s much, much easier to check if it’s you, to reach you because of the blockchain.”

But, like all NFT, he also recognizes the value of the transaction.

Like all airlines, we give points for flying. It is a currency. But it is a complicated currency. The potential tokenomics of frequent flyer points give you a whole new way of looking at what you can do with points, allowing them to be exchanged not just for Ether, but any other currency where a swap is possible.

If I give you when you fly or otherwise interact with us something of real value, not just a limited value to redeem with the airline, I think we’re entering new territory for the frequent flyer program.

Not only could the points be exchanged for other currencies, but Gauss envisions a scenario where entire accounts are traded on the open market. “You cannot move the frequent flyer card to anyone else today. You can do that in the future if it’s an NFT. This is not something we do yet, but why not? You have a card. You have earned all this. It has value. Why not? It’s provocative. “

Of course, the airline will only allow such transactions if it also benefits from it. Gauss sees alternatives there as well. Most notably, he expects to configure the loyalty account’s NFTs to pay out royalties on each transaction. Yes, you can sell your elite status to another customer. But airBaltic is going to take a cut, so will OpenSea to process the transaction.

The value of the bonus status would be detached from the person, but the value itself would remain. It’s quite revolutionary.

Does this require a blockchain? Absolutely not. In fact, the airline must vouch for the existing accounts for a transaction to make sense. Very little of this benefits from a zero trust environment. But the blockchain-based smart contracts appeal to the company, as does the potential for royalties. And theoretically comfort among traders with the underlying technology.

Also lacking in the conversation is the broader value the airlines get out of owning that relationship with program members. That kind of long-term value disappears when the account is separated from the consumer. But if the airline makes more money along

The next generation of tokenized loyalty

Airplanes are just a first step for airBaltic. It is a proof of concept, just as the City Collection NFTs are proof that the company can manage to issue the chips and process benefits related to them. The next generation, where the program completely converts to a tokenized offer, can look very, very different.

Among other things, Gauss expects it to live on another blockchain, one that is not linked to Ethereum as the current iteration. Today, a draw means that the points are more interchangeable, but it comes with higher transaction and environmental costs. The future blockchain “is probably not yet developed today” to support a full-fledged distribution.

And massive improvements in efficiency and cost will be needed to scale. Gauss believes “If you as a frequent flyer have an NFT as your card and at the end of the day the points are tokens, we will save a LOT of money on the complexity and cost of the programs.”

Exactly where these savings are realized, however, remains limited to internal company documentation.

airBaltic is hardly the only airline to develop a tokenized loyalty program. However, it is the largest and most established that makes such aggressive moves. At least for now.

Gauss secures his efforts only slightly, and notices that the market is young, perhaps too young to accept such a dramatic change.

We have many things in the pipeline. But we have first shown that we can issue it and that it is an interest. If all else fails, we’ll cancel it. Because we do not want to do anything that does not make money for us and increase the value of the program.

Although such a result would be disappointing, all costs are borne internally, and Gauss sees that the knowledge developed is a valuable investment.

As with many other measures the company has built internally, Gauss is simply “hopeful that it will lead to a better airline in the future.”