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Feature: Cash for miles
18 February 2011
Spinning off the frequent flyer program (FFP) was a hot topic a couple of years ago but after the crisis it has taken a backseat for most airlines. Patrick Winters investigates how an airline can raise cash from the FFP and if now is the right time.
In a volatile market, where weather and especially fuel
prices can lead to slim margins, the frequent flyer program
(FFP) can be the only steady stream of cash.
Importantly, the majority of income does not come from the
airline, but from outside. Credit card partners, supermarkets,
and car hire companies all inject cash into the aviation
Airlines with homogenous home markets can often make the
most money from their FFP - Australia’s flag
carrier Qantas is a good example. The Qantas FFP has 7.4
million members, compared to Australia’s
population of about 22 million.
That is about a third of the country’s
population. The program’s earnings before
taxes are $328 million.
Qantas’ FFP has been successful because it is
run as a separate company, with a separate balance sheet. It
has morphed from a loyalty program into a coalition program
with 490 partners. At one...
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