The largest Latin American low fare passenger carrier, GOL Linhas Aereas Inteligentes S.A. (GOL - Analyst Report), announced that it will enhance its current loyalty program by commissioning a new mileage accrual model for domestic and international flights.
Instead of the distance travelled, the new model will take the price of the ticket in account to calculate the mileage accrued for a passenger. However, the new model does not have any provision to accrue miles for promotional fares unlike the earlier one, which accrues miles up to 100% of fixed fares and 125% of flexible fares depending upon the length of flight.
On the flip side, the company will continue to take distance travelled as a gauge to calculate accrued miles on international routes. Currently, a passenger accrues 5,000 miles on flights to the U.S., and while flying to Central and Latin America miles accrued by the passenger will be 3,000 and 1,000, respectively.
The new model, which will be implemented on Oct 13, 2013, will benefit GOL SMILES customers, particularly the one within the Gold and Silver categories. SMILES Diamond clients will receive 100% bonus on miles collected while Gold and Silver clients will get 50% and 25% bonus on miles collected.
Notably, GOL’s SMILES program is aimed at increasing customer loyalty and offering a cost effective flight. At the end of last year the company has 9.03 million customers under the program.
During the second quarter of 2013, GOL reported a loss of 76 cents, which was way below the Zacks Consensus Estimate of 28 cents. The poor performance of the company has spilled over into the third quarter as the company reported soft operating performance in July, particularly in the domestic front.
However, the company achieved a key milestone as the low cost carrier attained its immediate goal of expanding its code share agreement with premier U.S. passenger carrier, Delta Airline Inc. (DAL - Analyst Report).
Loyalty program enhancements are consistent practises of passenger carriers to hold on to their frequent customers by increasing the attractiveness of its products. We believe the new change will encourage the premium customers to travel more and redeem free tickets, which in turn will improve the current subdued traffic situations.
GOL currently carries a Zacks Rank #3 (Hold). Other stocks worth mentioning within this sector are Hawaiian Holding Inc. (HA - Snapshot Report) and Republic Airways Holdings Inc. (RJET - Snapshot Report). HA currently carries a Zacks Rank #1 (Strong Buy) while RJET holds a Zacks Rank #2 (Buy).