ANDREWCX

This sort of thing always seems short sighted to me. You can only effectively spin-off a business unit that is profitable (assuming you aren't selling it to a competitor that is) so you loose at least part of the ownership (and profitability) of the program in return for a short term cash influx. The airline however still has the liability in reality since people will blame the airline if the loyalty program fails or changes rules negatively (witness the feelings people on FT have towards TACA over Globalpass's recent actions).

FF programs let an airline derive income from something other than flying people around via partners such as Credit Cards in return for future flights when the airline feels like giving them.

The whole thing reminds me of the way the Australian government has for the past few decades been privatizing government enterprises - they have earnt short term income from the sales but at the end of the day have reduced their non-tax income base (of course they argue that it is better to have free market competition etc). Of course they have only managed to sell profitable enterprises like Telstra & Qantas - other attempted privatizations haven't happened because there was no interest because there was no way to make a profit and still meet the service requirements demanded by the public - The Government tried to privatize Australia Post and Australian National Railways but nobody wanted them since you simply can't run them at a profit.

Now outsourcing is a different matter - if someone can do the day to day stuff better and cheaper than it can be done in house then by all means they should do it. Note that I say better as well as cheaper - outsourcing call centers to India in the way most people do is plain stupid since they look only at price and undertrain / under support the staff in them and overestimate their skill and level of english while failing to understand cultural differences. The problem with outsourcing call centers is that it is usually done to the lowest price vendor who obviously pays it's staff the least and provides the least training etc so staff morale is poor and retention is low so most staff are fairly unskilled and lack detailed knowledge that long term employee's build up. And of course you are paying the outsourcers in such a way as they make a profit so in theory you should be able to set up the same thing inhouse cheaper with better paid staff (assuming you have the right size - the majors all do, obviously some of the smaller companies like Midwest might not have the resources to do this),

RustyC

Indeed, ValuJet not only tried to outsource the job function to SabreTech but also the crash responsibility. Fortunately courts generally have taken a dim view of trying to avoid liability through outsourcing.

chaunceysf

Sorry, I think this is a rotten idea. Now, if the FFP changes rules or conditions, we can protest by taking our $$ elsewhere (since most of us have multiple FFP accounts) and fly another airline. The airlines listen (sometimes). If the airline and the FFP are separate, there is a lesser incentive to get the airline to listen to our complaints, because the airline itself is at least one step further removed from us.