Nathalie Chantal McCaughey / 'Not just a pie in the sky': an investigation into the cash-equivalent value of loyalty currency and the impact of a frequent flyer program on its members

Name: Nathalie Chantal McCaughey
Organization: Monash University – Melbourne - Australia
Supervisor: Prof. Peter J Forsyth
Doctoral Committee: Prof. Kenneth J. Button (George Mason University, USA), Prof. Andreas Wittmer (Universität St. Gallen, Switzerland)
Email address: n.mccaughey(at)
Date of completion: June 2014

Abstract of thesis: This thesis examines three interrelated aspects around Frequent Flyer Programs (FFPs): the cash-equivalent value (purchasing power) of loyalty currency, the impact of FFPs on consumer behaviour and surplus, and the taxation issues surrounding FFPs. Unlike most previous research on FFPs, this research uses data from an actual FFP, specifically the Virgin Australia Velocity Rewards program, to examine these aspects. The focus on one specific FFP and using its detailed data is a contribution to FFP literature in itself. No prior research has investigated the impact of a specific FFP on its members.

The first aspect investigated is the estimation of the cash-equivalent value of Velocity Points, the loyalty currency of the Velocity Rewards program. Using publicly available Velocity Rewards data the cash-equivalent value of a Velocity Point in 2010 is estimated to range between AU$0.0066 and AU$0.0084. This range excludes the value of status benefit to the status member. The Velocity Points gained by a FFP member per flight equate to an in-kind discount on an average airfare of 3.3 per cent for Red members, 3.96 per cent for Silver members and 4.63 per cent for Gold members.

The second aspect under consideration is whether the Velocity Rewards program can impact its members such that they fly more and/or spend more with Virgin Blue. This aspect is investigated with a proprietary stated-preference dataset from the Velocity Rewards program spanning three years from 2006 to 2008. A particularity of this dataset is that the FFP changed in 2007 from a simple bulk discount program to a complex status-tier program. By taking advantage of this ‘quasi’ experiment provided by the dataset across two very different program structures, it is shown that members change their consumption behaviour particularly when close to the next status tier threshold in order to achieve higher tier status. This is an expected reaction to frequent flyer programs and is what the airlines aim to achieve. Members buy more airfares and at higher prices. This thesis shows that under the new status-tier structure, the consumer surplus of FFP members has decreased by around 6 per cent. This implies that the introduction of the status-tier structure has been a successful strategy for Virgin Blue. The status-tier structure has allowed for a noticeable increase in the efficiency of Virgin Blue to extract additional consumer surplus from Velocity Rewards members. A detailed survey undertaken in 2010 among a representative sample of over 3300 Velocity Rewards members confirms the impact of the FFP on consumer behaviour. The most interest finding of the survey is that a large proportion of leisure and business travellers admitted a willingness to pay a higher fare – a FFP premium- to fly with Virgin Blue because of their Velocity Rewards membership. The average FFP premium is estimated to be around 8 per cent and is statistically different between leisure and business travellers. The cash-equivalent value of a Velocity Point as encapsulated in the FFP premium is estimated to range between AU$0.0108 and AU$0.0153, depending on the FFP status of a member.

The final aspect considered in this thesis is the taxation of FFP rewards in Australia. Although it has long been recognised that FFP rewards earned on employer-funded business flights should be subject to taxation, this is currently not taking place. One of the main arguments against the implementation of taxation is the lack of a monetary tax base. This thesis argues that the cash-equivalent value of loyalty currency can be estimated with public data and is appropriate as a tax base. The legal hurdles to FFP reward taxation in Australia are also addressed. This thesis makes the following contributions to the knowledge on FFPs:

  • It is shown that a cash-equivalent value of loyalty currency can be estimated.
  • It is shown that Velocity Rewards impacts consumer choices, willingness to pay and consumer surplus.
  • It is shown that Velocity Reward members admit paying a FFP premium and that the magnitude of this premium can be estimated.
  • It is shown that taxation of FFP rewards in Australia is possible. Finally, the majority of these insights were gained with data that have not been available to researchers previously.

Andrea Trimarchi / Labour Relations in Aviation: Current and Future Scenarios under International, European and Domestic Law

Name: Andrea Trimarchi
Organization: Leiden University, International Institute of Air and Space Law
Supervisor: Prof. Pablo Mendes De Leon and Prof. Barend Barentsen     
Email address: a.trimarchi89(at)
Expected date of completion: December 2019

Abstract of thesis:     

Civil aviation is a strategically essential sector of the global economy. It performs a cardinal role in facilitating globalisation, trade and tourism, as well as promoting economic growth, in particular in developing countries.

The air transport industry generates a total of more than 5 million direct jobs, provided mostly by airlines, airports and manufacturers, and almost 6 million indirect jobs through purchases of goods and services from companies involved in the broader entire aviation supply chain. These numbers grow exponentially if a number of collateral factors are taken into consideration. It is indeed estimated that the aviation industry generates a total of almost 30 million of jobs (direct, indirect or induced), due to its “catalytic impact on tourism and trade”.

Employment in the aviation sector is intrinsically characterised by a plethora of peculiar features. Airlines’ employees are a good example of this specificity, as they may be based in countries other than the country where their employment contract is concluded, as well as be subjected to different – and in certain instances several - governing law. Moreover, aircrew is generally required to work long hours, night work, and operate from multiple bases.

On the one hand, the evolution of air transport evidently increased the competitive nature of the aviation industry, conferring significant benefits to consumers, not only in terms of price but also in terms of accessibility. The experiences of deregulation in the US and liberalisation in the EU are eloquent in that regard. On the other hand, the strong commercial competition and the increasing prevalence of new business models – so-called ‘budget’ or ‘low-cost’ airlines – have been found to have contributed to the emergence of a number of atypical and specific contractual forms including, inter alia, self-employment, fixed-term work, work via temporary work agencies, zero-hour contracts and pay-to-fly schemes.

The objective of this doctoral study is to analyse the current legal scenario governing labour conditions in the aviation sector. This study will aim to provide specific answers to a plethora of questions. It will firstly bring to light if, and to what extent, the lack of a global regime governing employment in the civil aviation industry may significantly affect commercial air transport. The study intends to address whether there is the need the numerous and varied domestic laws and regulations to converge towards a more international and harmonised approach, consisting in the implementation of ad hoc and new legal instrument(s). Furthermore, taking the lead from the above investigation, the research points at fostering discussion as to whether ICAO, ILO, IATA shall be entitled to pursue such a normative objective on an global level – subjective element of the research – or whether individual States should carry out an harmonisation process in that regard. Moreover,  the research will focus on what legal form – whether an international law convention or ICAO SARPs or ILO  such systematic intervention shall assume – objective element of the research –. In other words, the study wants to assess which international organisation would be better equipped to perform a central role in promoting a smooth and progressive harmonisation towards a more comprehensive international regime, which would aim at levelling the playing field. Another research’s objective will be that of scrutinising and examining the legal implications that may arise from a fragmented regulation of labour issues in aviation. Many relevant aspects are indeed believed to be – potentially and concretely – affected by such a legal scenario. These may include, but are not limited to, aviation safety, airlines and alliances competition and jurisdiction.

Philippe Villard / Clear Skies or Ongoing Turbulence? Canadian Airport Policy between Airport Operators, Airlines, and the Federal Government

Title: Clear Skies or Ongoing Turbulence? Canadian Airport Policy between Airport Operators, Airlines, and the Federal Government
Name PhD candidate: Philippe VILLARD
Organization: Department of Political Science, Concordia University (Montréal, QC, Canada)
Supervisor: Patrik Marier
Email address:
Available at:
Completed: June 2015

Abstract of thesis: Using the case of Canada’s airport policy, this dissertation seeks to give an account of long-lasting conflicts between key actors of a policy sector who otherwise do not challenge the core policies and orientations of their sector and share the same core representations. The argument of this dissertation offers a response to the paradoxical outcome where a long-lasting policy has remained stable over time, despite engendering momentous conflicts and tensions between actors (to the point of threatening the stability of the policy sector) and being attacked by virtually all actors.

This objective is sought by analyzing the Canadian airport sector and its four main platforms: Toronto, Montreal, Vancouver and Calgary. The Canadian airport sector is highly puzzling, since long-lasting conflicts over the airport rent, the access to airport infrastructure and the funding and administration of airport screening have polluted the relations between the key stakeholders for years, while none of the key actors involved has challenged the main policy orientations and policy instruments used to regulate the sector. The study of the Canadian airport sector with a refocused and amended cognitive analysis of public policy framework developed by Muller and Jobert is really fruitful: it results in a comprehensive analysis of the conflicts, their nature, the possible ways to solve them, and it also considerably expands the explanatory power of the cognitive analysis of public policy.

 phd  > phd database  > other