United sets hunt for $50M loyalty assignment

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UAL Corp.'s United Airlines is looking for an agency to handle a $50 million assignment for its Mileage Plus loyalty program, according to an executive with knowledge of the review.

The assignment comes as United struggles to stave off bankruptcy and shore up its ties to business travelers, a crucial group. The Mileage Plus loyalty-program account is currently with Brierley & Partners, Chicago, Dallas and Los Angeles, 20% owned by WPP Group.

Triad Consulting Corp., Troy, Mich., is handling a review process for an unidentified airline. An executive with knowledge of the review identified the marketer as United. A request for information, sent out by Triad, seeks an agency to handle direct, e-mail, interactive and customer-relationship communications for the frequent-flier program. The carrier plans to issue requests for proposals to agencies in September and to ink a deal with an agency by mid-December.

A United spokeswoman said she could not confirm "speculation" about a review. A Triad executive declined to comment, and Brierley executives were not available to comment.

A second executive familiar with United said the carrier decreased spending on its loyalty program in the last year. But Patrick LaPointe, senior VP, Frequency Marketing, a Cincinnati-based company that designs and runs loyalty programs, said it's no surprise that a beleaguered carrier in a troubled industry would refocus its loyalty efforts.

"The loyalty program becomes increasingly important in a down cycle because it's the first place you can look to pick up incremental profitability," Mr. LaPointe said. He said he is aware that a major airline issued an RFI, but that he could not confirm it was for United. His agency is not participating in the review.

Loyalty programs are a way to appeal to the frequent business travelers that airlines depend on heavily. As business travel has been curtailed in the limping economy, major airlines have been hurt, in part by competition from low-cost carriers such as JetBlue, Southwest and AirTran. "The business travel that has occurred is at a much lower average fare than in the past," said Jim Corridore, an analyst with Standard & Poor's.

United retained bankruptcy attorneys in the wake of Sept. 11 and speculation is that the airline might pursue that option. Its stock currently trades in the $5 range, down from a 52-week high of $35.

Mr. LaPointe speculated that a United review could be "motivated by being in the black zone from a brand perspective due to all of the financial difficulties they've had and the union labor difficulties they've had."

United reduced its measured-media ad spending to $57.3 million last year from $78.4 million in 2000, according to Taylor Nelson Sofres' CMR. The loyalty-program spending is not included in those figures.

business travelers

Since Sept. 11, the airline's U.S. branding work, handled by Publicis Groupe's Fallon Worldwide, Minneapolis, has focused on United employees talking in emotional, documentary-style ads about why they work for the airline. United recently started campaigns in Europe and Asia, created by Fallon and aimed at business travelers. The European ads emphasize benefits such as legroom. Publicis' Frankel & Co., Chicago handles promotional work for the airline.

For a budget-strapped marketer, loyal customers are the most profitable target. "The return you get on every dollar you spend marketing to your frequent-flier member base in a down cycle has got to be a multiple of the return that you'd get on the same dollar spent in pursuit of the general universe of fliers," Mr. LaPointe said.

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