ITA Airways is the new Alitalia – a small Italian state airline that the EU keeps slow-walking Lufthansa’s ability to buy. It’s Alitalia with a new name, without some of its legacy costs, but with many of the same problems with its business model.
One thing that’s different about ITA Airways, though, is the frequent flyer program. ITA Airways is a member of SkyTeam but it only has limited participation. They don’t fully link up with all other members of the alliance.
They were never able to fold in the old Alitalia frequent flyer program. They had to start from scratch, hence the new Volare program. And now the Alitalia MilleMiglia program has even been sold out from under them to Trenitalia, the Italian train company. TrenItalia gets the program’s marketing database of 6.2 million members, though of course there will be a bit of overlap between that and its own existing customer file.
The actual price this sold for hasn’t been disclosed. Global Flight’s Ravindra estimates that the MilleMiglia program sold for “a low 1-digit million amount.”
- When Etihad was running up against foreign ownership restrictions on airlines they were taking stakes in, they pumped additional dollars into money-losing carriers by buying stakes in their frequent flyer programs at inflated prices. In 2015 one estimate was that MilleMiglia was worth Є 112 million.
- When Etihad walked away, and Alitalia began to teeter, most estimates had the loyalty program down by more than half.
- The EU wouldn’t allow ITA Airways to buy the loyalty program. The bankruptcy administrator tried to sell it for at least 50 million Euros but no one was interested.
- The program, as a standalone, loses money – it lost 6 million euros last year.
The lesson in this is similar to one we learned with the collapse of GlobalPass (the old coalition LatinPass program) and now also with InterMiles (the standalone program out of the ashes of defunct Jet Airways, another Etihad investment). Frequent flyer programs can be profitable and valuable companies – but when they become untethered from their travel partner they lose most of that value.
- They no longer have access to spoiling inventory for low-cost redemptions
- They no longer are a single airline’s biggest travel buyer for negotiating bulk deals
- They lack the brand that consumers are attracted to
- They don’t have the same elite benefits to offer with their host company.
People can accumulate miles, even through a credit card and online shopping portal, but redemptions have to be purchased on the open market. The clear path to value is gone, the consumer trust in value is gone, and the loyalty program loses its luster. It’s just a customer list at that point.
Aeroplan charted a path that would have taken it down this road, and may have been the strongest test of whether it was possible to transition from airline frequent flyer program to standalone while still delivering on a strong value proposition. However, Air Canada bought back the loyalty brought, bringing in-house the program it had spun off 15 years earlier… mileage obligations and all.
The Alitalia frequent flyer program was never worth as much as Etihad’s investments implied, but was worth far more when there was an… Alitalia. And the refusal of the EU to allow ITA Airways to acquire it as an asset of the bankrupt carrier guaranteed the loss of value in the program and for its 6.2 million members.
This reminds me of when Delta took over Pan Am’s European operations. The most valuable item was Pan Am’s FF data base. Delta cozy upped to these folks with offers to roll over their points/miles. If you remember, Delta pretty much abandoned the rest (Frankfurt & A310 jets) pretty quickly.
At this point, the Pan Am data base was still valid. However, the Alitalia data base is old and stale and static. Not of much value.
Indeed: the programs by themselves have almost zero value.
Airlines love to artificially move profits from flying into to the frequent flyer program (there’s probably some obscure reason for this), but the result is a completely inaccurate financial picture. These programs (when accounted for truthfully) are most likely unprofitable. Continuous devaluations support this, as well as Delta’s finances vs. AA and UA improving after (and notwithstanding) their restructuring theirs into “SkyPesos”.
@Exit Row Seat,Just a question: what happened with Northwest, which looked strongly bound to KLM, was it the same story than DL/PanAm one?
@Exit Row Seat. LOL: Delta acquired Pan Am’s coveted transatlantic routes (this was 1991, 12 years before Open Skies, so airlines required rights to fly a route) and the Pan Am Shuttle; the customer database came along with the route acquisition and was peanuts. Delta still flies to Europe to this day.
Northwest Airlines WorldPerks miles carried over into the Delta SkyMiles program when Delta swallowed Northwest. The NW-KLM connection was closer in some ways than DL-AF/KL have come to be; but with regard to the FPP rolls, the NW FFP members were merged into the DL FFP membership rolls. And NW routes to Europe were mostly picked up by Delta or AF or KL at some point. It never was like Delta scaling back at FRA after the Delta acquisition of some PA routes.
as AMS remained nearly as important for NW and then DL for TATL service after DL’s acquisition of NW as AMS had been for NW and KL — with the caveat that Delta was already deeply in bed with AF and that CDG remained important for DL even after DL’s acquisition of NW:
@Jake
By the time of the DL acquisition of PA, PA had already sold its rights to Heathrow to AA or UA (can’t remember which). All Delta got was Gatwick which was second tier. Delta eventually clawed its way into Heathrow (just like JetBlue today) and picked up volume via Virgin Atlantic to the cash cow called Heathrow. As for Frankfurt, it was a Lufthansa hub. Why go head to head with the flag carrier of Deutschland!
NWA WorldPerks was a useful frequent flyer program. The mileage necessary for a LAX-BKK round trip was 40,000 miles, which I could gather on 2 1/2 of the same round trips and I also used NWA for some domestic trips. When Delta took over, the writing was on the wall, use it fast or it would be devalued to a point that it would no longer really useable. Further, that trip started having an additional transit in far flung places like Minneapolis for the most reasonable priced tickets so it was either pay more for the least tiring and least time consuming trip or waste an extra part of a day flying. How many miles awarded started going down, too. After the takeover by Delta, I moved on to taking mostly EVA to BKK or PNH. Delta’s adjustments probably lessened the value of what remained of WorldPerks as taken over.
United picked up from PanAm the round the world route that went JFK-LHR and onward.
the article is quite precise but for the sake of information it also had to talk about the Class Action that 250 members of the MilleMiglia Program are doing for having recognized damages of 1.5 million euros. To find out more, just write to class.1000m@gmail.com.
ITA’s SkyTeam integration is curiously getting better. For FB, miles and XP will post, but you have to call (so integration isn’t perfect). ST elite+ members now get fast-tracked security, free bag, and lounge access, although at FCO AF/KL passengers aren’t let in the ITA Hangar lounge, which has the best free coffee and cocktails of any business class lounge out there.
Still wondering when the realignment to Star Alliance will happen.