Originally Posted by Radiocycle
Many of the US carriers are considering spinning off thier Lyalty program (or a portion of it) in an IPO.
AC successfully sold (in an IPO) about 20% of the AC loyalty program. I can't imagine NWA shutting down or limiting the WP's program, it makes money as it is.
RC
Exclude my economic ignorance but how exactly do the carriers make this money and how do they actually ascertain that money made is from the loyalty programs?
Is this extra revenue additional to what they would make if the FF program did not exist or is that due to customers they attract from competitors because of the FF program. If there were no FF programs would the same number of people not fly and different factors will keep them loyal to the airline. Or is the presumption that because a NW plat brings them a particular revenue that the revenue would have been lost if not for the FF miles? Or do they make the money because of the 'scam' whereby the majority of miles issued are never redeeemed?
Must say I had imagined that the FF programs were a burden to airlines because of the cost of elite services, complimentary upgrades, non-profitable mileage runs by aspiring elites, and relatively cheap award travel but I obviously got it wrong; that's what I like about FT, you learn something new everyday.