Prepaid vs. Subscriptions

In recent years, airlines have adopted various business models to boost customer loyalty and secure predictable revenue. Two popular approaches—prepaid flight programs and flight subscriptions—offer different methods for engaging passengers. While prepaid programs initially appeared promising, our research and experience suggest that well-designed flight subscriptions are more effective in driving long-term loyalty.

The Rise and Decline of Prepaid Flight Programs

Prepaid flight programs were first introduced in the 1990s with the launch of American Airlines’ Airpass in 1992, which allowed travelers to pre-purchase flights in bulk at discounted rates. This model particularly appealed to frequent business travelers with predictable schedules. The 2010s saw a surge in prepaid programs as airlines sought alternatives to traditional ticket sales to boost loyalty and enhance revenue predictability. During this period, more than 40 airlines, including market leaders like Air France, KLM, Singapore Airlines, Etihad, and British Airways, launched prepaid plans to boost passenger loyalty.

At Caravelo, we analyzed 93 different airline “loyalty programs” (excluding mileage plans) that we grouped into four categories:

Flight subscriptions: A recurring payment model that gives travelers access to a set number of flights per billing cycle (e.g., monthly, bi-monthly, or quarterly).
Club memberships: A loyalty program offering members exclusive perks, discounts, and benefits for a recurring fee.
All-you-can-fly: A program offering unlimited flights within a specific period, often with strict booking rules to monetize distressed inventory.
Prepaid: A model where travelers purchase a set number of flights or credits upfront at a discounted rate.

For each program, we checked whether it was still available or had been discontinued. One key finding was that prepaid programs were the most popular category, accounting for 50% of the 93 identified initiatives (followed by club memberships at 30%). However, when looking at discontinued programs only, we found that 83% of all discontinued programs from our study were prepaid solutions, and 60% of these were discontinued within just two years of launching.

Notable examples include Air France’s Le Pass, discontinued in 2021 after launching in 2018, and KLM’s Flight Bundle, which operated from 2017 to 2021. Even American Airlines’ Airpass, which lasted three decades, was eventually discontinued in 2022. Ultimately, it seems that existing prepaid programs have been reduced to niche offerings, appealing primarily to frequent corporate travelers with highly predictable travel routes.

Caravelo’s Experience with Prepaid Solutions

Why were these programs discontinued? While we don’t have all the answers, our firsthand experience operating prepaid models for Viva Air revealed several challenges.

The high upfront payments posed a significant barrier to entry. Only passengers with predictable, high-volume travel needs were willing to commit, limiting the pool of potential customers. For most travelers, paying large sums upfront is neither feasible nor attractive unless they are certain they will use the flights.

Also, prepaid programs rarely stimulate new demand. Passengers typically purchase the number of flights they know they will use, but the modest discounts—usually only 10-15%—are not enough to encourage additional trips. This restricts the program’s ability to increase flight frequency or generate ancillary revenue from services such as baggage fees or seat upgrades.

Additionally, many savvy travelers engaged in pricing arbitrage—using their prepaid credits when ticket prices were high and purchasing cheaper flights separately. This led to revenue dilution, with frequent flyers benefiting from the deepest discounts without strengthening their loyalty to the airline.

During the same period, our flight subscription programs with Volaris and Alaska Airlines saw faster growth and attracted a more diverse customer base, reinforcing the hypothesis that subscription models are better suited to drive long-term passenger loyalty.

Why Flight Subscription Programs Are More Effective

Flight subscription models stand out over prepaid programs in several important ways. First, subscriptions offer lower barriers to entry. Instead of requiring a large upfront payment, they use a monthly billing model, making them more appealing to a broader range of travelers. Also, this approach aligns with modern consumer habits, as passengers are already familiar with using subscription services across various areas of life—from streaming platforms like Netflix to grocery deliveries. In contrast, prepaid models, with their high upfront costs, feel outdated.

Flight subscriptions also stimulate demand more effectively. Unlike prepaid credits, which often come with long expiration periods (up to a year), subscription programs allocate a fixed number of flights per billing cycle, with unused flights expiring at the end of the month. This structure encourages more frequent travel, as passengers are motivated to use their credits before they expire. In our work with Volaris, Alaska, and Wizz, we’ve seen that in some cases, up to 50% of all flights taken by subscribers are unplanned, highlighting how these programs drive spontaneous travel. As a result, airlines benefit from both increased flight frequency and higher ancillary revenue.

Finally, subscription models foster “loyalty by default”. Once subscribed, passengers tend to fly exclusively with the airline to maximize the value of their subscription, reducing fare shopping and driving retention. By creating this continuous engagement, our airline partners have successfully grown market share in key target markets and strengthened their overall customer loyalty.

The future favors subscriptions

While prepaid flight programs had their moment in the spotlight, their rigid structure and limited ability to stimulate demand have relegated them to niche use cases. In contrast, flight subscription programs offer greater flexibility, scalability, and potential for long-term loyalty. By lowering the barriers to entry and aligning with current consumer behavior, subscriptions create a recurring revenue stream for airlines while encouraging passengers to travel more frequently. For airlines looking to build stronger relationships with their passengers and boost loyalty, we believe flight subscriptions provide a more compelling and sustainable solution than prepaid programs.

To learn more about how flight subscription models can transform your airline’s loyalty strategy, visit our blog or contact our team for more information.