El Al to Spin Off Matmid Club Frequent Flier Program?

This Boeing 777-258ER aircraft operated by El Al Israel Airlines Limited taxis on the tarmac at Hong Kong International Airport. Photograph by FlyerTalk member ORDnHKG. Click on the photograph for a trip report written by ORDnHKG.

FlyerTalk members are discussing the recent news of the intentions of El Al Israel Airlines Limited to spin off its Matmid Club frequent flier loyalty program into its own separate legal entity in addition to issuing new branded credit cards in Israel.

Will this move benefit — and possibly even save — the flag carrier of Israel, which announced last month losses having widened by 22 percent and revenue decreased by 3.6 percent?

Could El Al — which supposedly has a market value of $95,000,000.00 with a financial debt to the banks of $700,000,000.00 — possibly go bankrupt? If so, could that actually be a good scenario?

An announcement from Qantas almost seven years ago revealed intentions to spin off the Frequent Flyer loyalty program, which may currently be worth as much as $2.5 billion. A more recent announcement from this past January suggests that the sale of as much as 49 percent of the Qantas Frequent Flyer loyalty program will be a way to infuse cash back to the Australian carrier, which has struggled financially in recent years and has had FlyerTalk members concerned as to whether it will even survive at all.

ACE Aviation Holdings sold off the remainder of the Aeroplan frequent flier loyalty program on May 28, 2008 as the parent company of Air Canada. Since that sale — after years of reporting losses quarter after quarter — Air Canada forecasted that its earnings for the first quarter of 2014 would be stronger than expected

…but it reported a net loss of $341 million — or $1.20 per diluted share — for the first quarter, as it was supposedly impacted by a lower Canadian dollar. Revenues were reported to have increased by approximately $113 million.

Did the sale of Aeroplan help Air Canada financially? Is Air Canada actually better off as a result of that sale — and would buying back Aeroplan ever be considered in the future? Have FlyerTalk members benefited from that sale over the years — and should members of the El Al Matmid Club frequent flier loyalty program be concerned?

Is selling a frequent flier loyalty program — or spinning it off into its own entity — a possible trend in commercial aviation in recent years; and is it only to be confined to carriers strapped for cash?

FlyerTalk member shadesofgrey1x recently speculated that Delta Air Lines will announce the sale or spin-off of its SkyMiles frequent flier loyalty program within 36 months, as in the year 2017, the SkyMiles frequent flier loyalty program “will be in a great position to separate fully or partially from Delta Air Lines. With a monetarily fixed earn to burn on all mileage earning and redemption and up to 3 years of financials on some aspects it will be easy to access the year to year earning potential and possible liabilities for any full or partial sale.”

Do you agree?

I personally fail to see how El Al — which has had its fair share of woes recently — will benefit from spinning off its Matmid Club frequent flier loyalty program into its own separate legal entity. Then again, I do not claim to be an expert on spinning off frequent flier loyalty programs; nor do I claim to be one on television — although I did offer some thoughts when speculation arose this past December pertaining to having the Miles & More frequent flier loyalty program become its own independent company from Lufthansa.

What are your thoughts?

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