* Low-cost giants set up loyalty schemes to tap data
* Aim to copy Amazon.com with highly personalised offers
* Large online customer bases give advantage
* Data analytics may also streamline operations
By Conor Humphries
DUBLIN, Aug 18 (Reuters) - Europe's low-cost airlines oncemocked the air miles programmes run by flag carriers asexpensive relics of a bygone era. But after watching wide-eyedas customer databases were valued at billions of dollars, theyare scrambling to catch up.
Europe's two largest low-cost carriers, Ryanair andeasyJet have both swallowed their pride in the past yearand launched customer loyalty schemes and both have announcedsignificant investments in data analytics.
Their aim is to ape retailers like Amazon.com and Tesco indriving profits by leveraging data from vast online customerbases to create highly personalised offers and adapt services tocustomer preferences more quickly.
"This has transformed retail and it's going to transformairlines," said Kenny Jacobs, a former Tesco executivespearheading Ryanair's digital drive as chief marketing officer.
He has overseen the hiring of 150 IT specialists since hewas appointed two and a half years ago. "Airlines are not goodat this. We're still crap compared to what retailers do."
easyJet chief executive Carolyn McCall, who last yearappointed the company's first head of data science to oversee ateam of 25 data analytics specialists, has described data as"incredibly important" for the airline.
A spokesman for easyJet described the potential benefitsfrom digitisation and data analytics as "exponential".
Both airlines have promised a detailed breakdown of theirdigital data drives and the financial returns in the autumn.
John Walton, who writes for online aviation publicationRunway Girl Network, said that from the customer's point ofview, they and other airlines had some way to go.
"I see few visible signs of European airlines - or indeedother airlines - using the rich data they hold to drive bookingsand revenues," he said, citing a lack of useful, targeted offersfrom any of the half a dozen airline loyalty schemes he held.
DIFFERENT APPROACHES
Ryanair and easyJet are taking different approaches, withRyanair focusing squarely on selling optional extras whileeasyJet sees ticket pricing at the heart of its data drive.
easyJet was first to move, investing in artificialintelligence over the past few years to drive the algorithm thatdetermines seat pricing in real time depending on demand.
Its computers track over a billion searches on the easyJetsite annually to see what prices, destinations or travel timesprompted them to book or leave the web site and adjust all threeas soon as possible.
Spokesman Paul Moore said that kind of data more thancompensated for the airline's later collection of personalinformation through its Flight Club loyalty scheme.
"We don't have the legacy frequent flyer systems the legacycarriers have, but we have been selling online far longer and atfar greater scale than they have," he said.
"The data we have on purchasing patterns and flight patternsis, we suspect, larger and richer by some way."
Ryanair, whose business model is to cut fares as far aspossible to fill planes and make money selling optional extras,was a little later to the game. It has spent much of the pasttwo years overhauling its web and phone offerings and ispreparing a push to get more of its 100 million customers toregister for its My Ryanair loyalty programme.
It is a far cry from the early 1990s, when Michael O'Learyscrapped the airline's Frequent Flyer scheme on taking over aschief executive. Soon after, easyJet began a campaign forfrequent flyer schemes to be scrapped as "disguised bribery".
First introduced in the 1980s, air miles programmes allowingcustomers to earn free flights by sticking to one carrier weresometimes set up as independent entities. In 2014, analysts puta value of up to $2.5 billion on the loyalty division of Qantaswhen it was considering floating it or selling a part.
"TREND OF THE FUTURE"
Alongside increasing sales of tickets and ancillaries,better digital infrastructure can also enable innovations likeautomatically rebooking customers after cancelled flights andsending stranded passengers hotel reservations to their phones.
Legacy airlines are also investing heavily, with Lufthansa Chief Executive Carsten Spohr describing digitisationas the "trend of the future" with plans to invest 400 million inthe 'digitisation' of the group's airlines by 2020.
But the most dramatic improvements in recent years have comefrom the low cost side, said Rob Kemp, who provides feedback tomajor European airlines in his role as Chief Technology Officerat Momondo Group, which runs ticket price comparison websites.
"The low-cost carriers are really taking that as a clearmission. I just don't see as much of that from the largerairlines at the moment," Kemp said.
Ryanair's primary target is to use highly personalisedmarketing to boost ancillary revenues - charges for extras likechecked-in bags, premium seats, fast track security clearance,which accounted for 24 percent of Ryanair's revenues last year.
Ryanair in the past employed a low-cost scatter-gunapproach, offering every service from car hire to travelinsurance to new luggage to every customer, irrespective ofwhether they had bought them in the past.
A more streamlined system might offer someone booking alast-minute mid-week flight to London a train ticket, Jacobssaid, while someone with three children booking the same flightsix months ahead might be offered a discount on a large hirecar.
"It's more about profitability than market share," he said."You've got a website that's getting so many visits, how do youmonetize that? How are you getting those customers to buy more?" (Additional reporting by Victoria Bryan and Sarah Young;editing by Philippa Fletcher)
easyJet (EZJ)