Originally Posted by
luckypierre
I am having difficulty understanding how a FF spin off would work, particularly from the side of the acquiring firm. Presumably the airline would retain control of "pricing" for seats, so if the airline chose to double the redemption price for a seat, that part of the acquisition is suddenly half as valuable?
It seems to me that in this era of rapidly devaluing programs it would be extremely difficult to establish a value for the acquisition or do any planning since managerial control of your primary resource-the FF miles-would be another party's hands.
Air Canada is the only airline to spinoff its reward program in North America, correct?
I can't recall a floating/IPO of the loyalty program unit being done by any North American carrier beside AC -- not to say that there has never been another spin-off in the North American market.
Of course not all spin-offs are a product of M&A activity, even as many are. And of course not all floating of a unit involves full divestiture of all equity rights in the floated unit.
Many a company has spun-off or floated a unit when management knew the assets' long-term growth potential was either not all as lucrative as selling it off sooner than later or was a lot more lucrative uncoupled.
A floating of such an airline loyalty program unit may be a lot more achievable when there is a frothy stock market and involves a carrier operating in a air service market that is widely dominated by a near-monopoly, duopoly or a very concentrated oligopoly.