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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.

Read more: frequent flyer programme FFP Jose Maluf TAM David Adams Aeroplan Evert De Boer Carlson Marketing Michael Kanacher

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 industry.

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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