Miles for shares?
 

Is there any frequent flyer program that rewards customers with shares in the company they fly with?

I think this would strengthen the relationship between the airline and the passengers/shareholders a lot. "Do I fly with $competitor or with my company?"

I would like 100,000 shares of AMR please. :eek:

How would that even work?

There are only a fixed number of shares available. Even if they gave out a tiny amount to each person every year, it would quickly become a significant portion of the entire company.

Plus the company could only technically give away the shares that it owns itself. Private shareholders aren't going to give away their shares. The only solution then would be to issue more shares. I guarantee you most board members are not going to allow issuing more shares, because that would quickly devalue their shares.

It could only work for a very short period of time if at all.

I'd actually like to see this the other way around... miles for owning shares.

No, never has been and never would. Maybe you meant what Johndoe123 said?

This makes sense. You are invested in the company, they reward you for your loyalty. ^

I'd much rather get a cash dividend. Go ahead and buy miles with it if you so desire. Essentially that's what they would be doing if they gave you miles; just giving you the dividend value in miles.

LUV (WN) is the only airline I see that currently offers dividends.

Technically this program is more than possible - think about stock options the company issues to its employees - these are additional shares issued by the company and not taken from existing shareholders. So why not do that with your customers if you can do that with you employees?

I think the issue with not having such an arrangements is not because it's technically possible but because:
- first of all in my opinion most Americans will just not feel comfortable owning individual shares - most people don't know how to deal with them and feel much better with cash or miles.
- there will be tax issues when selling these shares - as "tax cost basis" of these shares is uncertain (worse yet probably zero)
- share prices constantly change so from financial perspective the company will issue rewards inherently variable in value - not a deal-killer in and by itself but making gloom idea even gloomier

On the other side I like this idea for its creativity!!! Maybe you can create an airline that will implement such a program and break the ice?

The reasons you cite are all good ones. They could simply offer cash back, much as some credit cards do, and encourage or even enable you to *opt* to buy stock at the market price with that cash back. That would solve everything, but I really don't see how it is much different than just saying, "If you like us, own us."

Cruise lines have done something similar. Shareholders in Carnival and Royal Caribbean can get a sihpboard credit on cruises for owning at least 100 shares. It takes a bit of work; you have to fax in a copy of a brokerage statement proving ownership. Still, it works out pretty nicely.

Implementing this for an airline would be tricky. To have the airline hand out miles to every shareholder wouldn't work. You would end up with mutual funds sitting on mountains of unusable miles.

Perhaps a program where shareholders could earn double or triple miles on flights could be implemented. You would have to go through the headache of proving you own a sufficient number of shares every time you fly.

The idea has merit, I just can't quite see how it gets implemented.

Stock options are not additional shares. They are the right to purchase shares at a set price in the future. And if the price happens to drop below what your options' strike is, they are essentially worthless. Also they require whoever sold/gave you the option to be willing to sell you these options at that price. Meaning the company would still be losing shares if everyone exercises their options.

No matter what you do, shares will have to be given out from the pool of available shares which is not limitless.

I like the idea of being able to trade in miles for shares. In a similar fashion that you can use them for hotel stays.

Value the miles at whatever they are valued in the balance sheet, value the stock every quarter and put it in the website. The airline would mail you the certificate. Then all you need to do is send it to your broker or frame it if you want.

British Airways offered shareholder discounts, and it sounds as if this will be continued for IAG shareholders:

http://www.flyertalk.com/forum/briti...-discount.html

For hotels:

I seem to recall that Loews' Hotels gives (gave?) some sort of discount to shareholders.

Also a smallish chain called Jameson Inns had a program starting in 2005 where you'd get stock for staying. This struck me as pretty interesting, though I never participated.

"...The frequent stay program awards 10 percent of a member’s hotel room charges in the form of common stock to each qualified guest of Jameson Inn or Signature Inn hotels. Customers qualify by enrolling online and staying at least three nights during a 12 month period..."

http://www.thetruecitizen.com/news/2.../News/053.html

Do you know how much shipboard credit shareholders get? Thanks.

It depends on the length of the cruise. From RCL site:
RCL Shareholder benefit page

Nice find! I was thinking of something like that, though 10% might be a lot.

Companies could either issue new shares or they could buy back shares from the market (which is, in a manner of speaking, a silent dividend). They could issue similar things as shares, there are several variations on the topic out there. :-)

The shares (or similar papers) could be handed out in a competition: "Our 1.000 top mileage accruers this year will receive..." Or a more long-term loyalty approach might be another idea: "If you fly with us every quarter for 5 consecutive years, you'll get...." Or a simple draw: "For every mile in your account you will have one ticket in the raffle..."

The shares/papers could be available for purchase for miles (someone mentioned that already). Reminds me of http://www.gwei.org :-)

Or there could be "virtual" shares that don't give you real ownership and don't give you cash dividends but dividends in miles. The more profit the airline makes, the more miles you will receive. (Then again not many airlines pay dividends, so this might limit itself.)

Of course, giving miles to shareholders (if they are natural persons) would be another interesting idea.

Yes, there might be tax issues in the US and some other jurisdictions, but the same is true for miles in the first place (ask the Germans). And airlines exist in most countries, so there might be countries where such a program might not be too difficult to pull off.

The airline could cooperate with one online broker only ("If you open an account with Hobo Booby Trading (Senchen) Inc, you will receive...) thus entering a marketing cooperation with them, earning commissions AND strengthening the emotional tie with frequent passengers. Legally, the shares could be awarded by the online broker and not the airline, if that makes it easier for the airline.

Many banks have "reward points" programmes where you can use points to buy investment products or pay back loans. So I don't see why an airline-broker-tandem couldn't come up with some clever scheme. :-)

For Carnival Corporation brands, see http://phx.corporate-ir.net/phoenix....l-sharebenefit. We've pocketed $500 in credit so far since buying the shares, with another $50+£50 for next year's booked cruises. Plus, the stock earns dividends.

Well, yes and no. I though about that for a while. The company that runs the Customer Retention Program/Frequent Flyer Program/Miles Scheme has to put money aside for miles earned by customers anyway. (Would that be what they call "Provisions" in IFRS?) Because, some day, some miles will be used for something which costs money. (One of the reasons why miles expire is to limit this stack of horded money.) That way, you probably get some high value mileage millionaires to become share holders, and not John onceayearholidayflightineconomywithchildren Doe.

Instead of retaining the money for this future expense, the same amount of money could be labelled as retained earnings and thus become new equity. New shares would, at max, reflect this added equity (probably less).

So the relation share<=>equity would not become worse (and most likely even better). However, there is usually some "phantasy" in a share, so a share of a company is often more worth than the according fraction of the equity. So javacodeguy is not completely wrong: A system like that might delute the value of previous share holders.

Then again, if the system is successful, the airline will become more profitable than without this system, increasing the value of each share.

So real life calculations by an expert in this field would be interesting to read. :-)

I see many possible variations on the topic: For example, when an airline needs to raise new equity: They could invite some of their frequent flyers to buy equity with miles. We all know that certain miles have a certain internal value, so that wouldn't be too difficult.

Another possibility would be an auction of shares or stock options for miles: "One bid sealed auction. We have 100.000 shares to give away. How many do you want (max 1.000), how many miles do you bid per share? We will distribute the shares in a way that maximises our profit. T&C apply. Your broker might charge extra fees to add these shares to your portfolio."

^