Airline loyalty programmes, FFPs, data and revenues

Although airlines on the whole are financially stronger and becoming more countercyclical than at any previous time, investors often ask if an airline plans to spin off its loyalty programme. The perceived opportunity is for an airline to generate short term cash and reduce management distractions in what are typically complex organisations.

Yet the increasingly common view is that loyalty divisions - like an LCC subsidiary - are too valuable for total control to be given up. These units are core to an airline, unlike previous assets (hotels, GDS stakes) that airlines have disposed of. Loyalty programmes are a licence to print currency.

Through design, and accounting, they are almost always profitable - so selling them off creates revenue conflict between the airline and loyalty programme shareholders. The advantage is that outside ownership and management can bring loyalty programmes the innovative environment they need to benefit the airline but can also, increasingly, achieve the new objective: utilising data.