Robb sends me this article in German suggesting that Lufthansa will be spinning off the Miles&More frequent flyer program into a separate entity. (Thank goodness for Google Translate built into Chrome!)
The article suggests that the Miles&More program — much smaller than those of US airlines like United, Delta, and American — contributed 700 million euros in profit to the airline in 2012, with 2013 results expected to be similar. That’s a net of about a billion dollars. Frequent flyer programs, even outside the U.S., are big businesses.
Air Canada’s Aeroplan was the first frequent flyer program to spin off as a public company, in 2005. At the time it was expected that United – -whose loyalty program exists as a separate wholly-owned subsidiary — would eventually do the same, but the financial crisis intervened.
Around the world the spinning off of programs hasn’t been exactly common, but it isn’t rare either.
- Multiplus Fidelidade program was completely spun off from TAM in Brazil.
- Virgin Australia’s program is spun off but wholly owned.
- Qantas made moves to separate its program but aborted the attempt.
- The Mileage Company manages the Avios program, not British Airways per se
- AeroMexico owns just 29% of its Club Premier program.
- Gol Smiles spun-off mid-year
- Air Berlin sold 70% of its topbonus program to Etihad
- Etihad also owns a majority of the Jet Airways (India) JetPrivilege program
In general spun-off programs which aren’t wholly-owned by their associated airline tend to bifurcate, serving the loyalty needs of an airline and also as an all-purpose loyalty program aimed at a mass audience of its non-flying members. A move of this sort likely puts Lufthansa more firmly into the broader loyalty game, focusing on the bulk of its 20 million members rather than predominantly on its frequent travelers.
To me it underscores how far frequent flyer programs have come over the past three decades — they’ve been the most successful marketing innovation likely ever — and a majority of miles are no longer earned directly by flying. That’s why, eventually, frequent flyer programs will be back in front of the Supreme Court, so that state contracts claims will no longer be pre-empted by the Airline Deregulation Act.