InsideFlyer magazine Urges Airlines to Consider Spin-Off of FFPs to Raise Money
Jun 28, 2005, 3:58 pm
#1
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InsideFlyer magazine Urges Airlines to Consider Spin-Off of FFPs to Raise Money
http://biz.yahoo.com/prnews/050628/latu122.html?.v=10
Economic Analysis Conducted by Magazine Finds Many Airlines and Program Members Would Benefit From the Capitalization of Frequent Flyer Programs
COLORADO SPRINGS, Colo., June 28 /PRNewswire/ -- In past years, InsideFlyer magazine predicted that Air Canada would be the first airline to spin off its frequent flyer program, Aeroplan, into a separate business entity. This prediction is now becoming a reality, as the chief executive officer of ACE Aviation Holdings Inc. (Air Canada's parent company), Robert Milton, announced that Aeroplan "is in a position to go to the public markets."
For its July issue, InsideFlyer analyzed the pros and cons of a transaction of this type and found that the capitalization of an airline's frequent flyer program might very well prove beneficial both to the airline, as well as the members of the program.
In the article, several statistics are listed in support of this conclusion, such as:
* Though Air Canada is only selling an 18-percent share in Aeroplan, the
deal will earn the airline $200 million.
* Several financial analysts have predicted that those who invest in the
Aeroplan stock offering can expect returns of close to 8.75 percent.
* In 2002, United Airlines (UAL) effectively "sold" all of its stock in
Mileage Plus, Inc. and Mileage Plus Holdings, Inc. to its wholly owned
subsidiary, UAL Loyalty Services, Inc. (ULS) for a total of $1.4
billion. In 2003, ULS accounted for five percent of UAL's total
revenues.
* American AAdvantage reports annual revenue in excess of $1 billion
related to the third-party sales of miles.
In addition to the financial benefits, InsideFlyer argues that a stand- alone, public frequent flyer company would also benefit members by way of offering a more secure currency should any particular airline go out of business.
"We don't believe that members of frequent flyer programs will be harmed if the industry follows through with public spin-offs," says Randy Petersen, publisher and editor of InsideFlyer magazine. "And while one could argue that this is risky for the airline given that these programs represent a core value, the move to capitalize this asset would not interfere with the airlines' current mode of operating the program for their own passengers."
The article, titled "Hidden Assets?" is published in its entirety at www.insideflyer.com.
InsideFlyer magazine is the largest publisher of frequent flyer program information in the world.
For more information, please contact us at:
CONTACT:
Randy Petersen
InsideFlyer magazine
1930 Frequent Flyer Point
Colorado Springs, Colo. 80915
[email protected]
(719) 597-8889
Economic Analysis Conducted by Magazine Finds Many Airlines and Program Members Would Benefit From the Capitalization of Frequent Flyer Programs
COLORADO SPRINGS, Colo., June 28 /PRNewswire/ -- In past years, InsideFlyer magazine predicted that Air Canada would be the first airline to spin off its frequent flyer program, Aeroplan, into a separate business entity. This prediction is now becoming a reality, as the chief executive officer of ACE Aviation Holdings Inc. (Air Canada's parent company), Robert Milton, announced that Aeroplan "is in a position to go to the public markets."
For its July issue, InsideFlyer analyzed the pros and cons of a transaction of this type and found that the capitalization of an airline's frequent flyer program might very well prove beneficial both to the airline, as well as the members of the program.
In the article, several statistics are listed in support of this conclusion, such as:
* Though Air Canada is only selling an 18-percent share in Aeroplan, the
deal will earn the airline $200 million.
* Several financial analysts have predicted that those who invest in the
Aeroplan stock offering can expect returns of close to 8.75 percent.
* In 2002, United Airlines (UAL) effectively "sold" all of its stock in
Mileage Plus, Inc. and Mileage Plus Holdings, Inc. to its wholly owned
subsidiary, UAL Loyalty Services, Inc. (ULS) for a total of $1.4
billion. In 2003, ULS accounted for five percent of UAL's total
revenues.
* American AAdvantage reports annual revenue in excess of $1 billion
related to the third-party sales of miles.
In addition to the financial benefits, InsideFlyer argues that a stand- alone, public frequent flyer company would also benefit members by way of offering a more secure currency should any particular airline go out of business.
"We don't believe that members of frequent flyer programs will be harmed if the industry follows through with public spin-offs," says Randy Petersen, publisher and editor of InsideFlyer magazine. "And while one could argue that this is risky for the airline given that these programs represent a core value, the move to capitalize this asset would not interfere with the airlines' current mode of operating the program for their own passengers."
The article, titled "Hidden Assets?" is published in its entirety at www.insideflyer.com.
InsideFlyer magazine is the largest publisher of frequent flyer program information in the world.
For more information, please contact us at:
CONTACT:
Randy Petersen
InsideFlyer magazine
1930 Frequent Flyer Point
Colorado Springs, Colo. 80915
[email protected]
(719) 597-8889
Jun 28, 2005, 4:58 pm
#2
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More evidence that "InsideFlyer" now seems its customer base as airlines, as opposed to frequent flyers.
It certainly seems there's no understanding of the massive cutbacks FFers have endured on the road to making Aeroplan a frequent shopper program, and therefore a marketable unit on its own.
It certainly seems there's no understanding of the massive cutbacks FFers have endured on the road to making Aeroplan a frequent shopper program, and therefore a marketable unit on its own.
Jun 28, 2005, 5:24 pm
#3
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I'm assuming that you have read the magazine? Or does your expert analysis come from only reading a single article. In case you missed it, here's something from Randy's editorial in the very same issue:
"Now on to Delta SkyMiles. Surfing around its Web site, I came across this notice posted in its award redemption area: "As a result of high Award Travel requests during the peak summer travel season, we are no longer accepting award reservation requests for travel on Air France and KLM for the travel period June 1 through August 31, 2005." This is as sad a day as I've seen for any program in a long while. The major media just loves to beat up on these programs with the perception that no one can get free seats, and now we see this. What gives? I'm well aware that KLM is blending some of their operations into Air France, but both airlines promised no interruptions with the introduction of the new Flying Blue frequent flyer program. And what makes this summer any different than any other summer? If Delta SkyMiles and the entire SkyTeam membership want to earn any respect at all from frequent flyers, this type of restriction is simply unacceptable. Delta SkyMiles, this reflects badly on you. Sure, this will save you money since you don't have to pay these airlines to handle some of your award requests, but frankly, if I were you, I'd pay any price required to make this right for your members. Either have an alliance that works, or resign SkyTeam and join the Star Alliance. I'd recommend oneworld, but then you might have to argue about earning and burning miles across the Atlantic. Very disappointing."
And if you have any eavesdropping equipment, you might try and listen in on Thursday morning very early when Randy has a scheduled call with KLM in Amsterdam and link to Air France in Paris about this. While he has no award redemption plans on this airline or its partners for this period, it really doesn't matter, its not good for members of these programs and he's not afraid to point this out in public as well as follow through.
And in case you haven't noticed.... many other airline and their frequent flyer program - who are not going public - have made changes as well. It's hardly about Aeroplan.
"Now on to Delta SkyMiles. Surfing around its Web site, I came across this notice posted in its award redemption area: "As a result of high Award Travel requests during the peak summer travel season, we are no longer accepting award reservation requests for travel on Air France and KLM for the travel period June 1 through August 31, 2005." This is as sad a day as I've seen for any program in a long while. The major media just loves to beat up on these programs with the perception that no one can get free seats, and now we see this. What gives? I'm well aware that KLM is blending some of their operations into Air France, but both airlines promised no interruptions with the introduction of the new Flying Blue frequent flyer program. And what makes this summer any different than any other summer? If Delta SkyMiles and the entire SkyTeam membership want to earn any respect at all from frequent flyers, this type of restriction is simply unacceptable. Delta SkyMiles, this reflects badly on you. Sure, this will save you money since you don't have to pay these airlines to handle some of your award requests, but frankly, if I were you, I'd pay any price required to make this right for your members. Either have an alliance that works, or resign SkyTeam and join the Star Alliance. I'd recommend oneworld, but then you might have to argue about earning and burning miles across the Atlantic. Very disappointing."
And if you have any eavesdropping equipment, you might try and listen in on Thursday morning very early when Randy has a scheduled call with KLM in Amsterdam and link to Air France in Paris about this. While he has no award redemption plans on this airline or its partners for this period, it really doesn't matter, its not good for members of these programs and he's not afraid to point this out in public as well as follow through.
And in case you haven't noticed.... many other airline and their frequent flyer program - who are not going public - have made changes as well. It's hardly about Aeroplan.
Originally Posted by Ken hAAmer
More evidence that "InsideFlyer" now seems its customer base as airlines, as opposed to frequent flyers.
It certainly seems there's no understanding of the massive cutbacks FFers have endured on the road to making Aeroplan a frequent shopper program, and therefore a marketable unit on its own.
It certainly seems there's no understanding of the massive cutbacks FFers have endured on the road to making Aeroplan a frequent shopper program, and therefore a marketable unit on its own.
Jun 28, 2005, 6:29 pm
#5
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Originally Posted by tracon
Does RP write his own posts? I notice he refers to himself as "Randy" twice in the above posting. Don't most people writing in the first person refer to themselves as "I"?
Jun 28, 2005, 6:36 pm
#6
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Originally Posted by Randy Petersen
I'm assuming that you have read the magazine? Or does your expert analysis come from only reading a single article. In case you missed it, here's something from Randy's editorial in the very same issue:
"Now on to Delta SkyMiles. Surfing around its Web site, I came across this notice posted in its award redemption area: "As a result of high Award Travel requests during the peak summer travel season, we are no longer accepting award reservation requests for travel on Air France and KLM for the travel period June 1 through August 31, 2005." This is as sad a day as I've seen for any program in a long while. The major media just loves to beat up on these programs with the perception that no one can get free seats, and now we see this. What gives? I'm well aware that KLM is blending some of their operations into Air France, but both airlines promised no interruptions with the introduction of the new Flying Blue frequent flyer program. And what makes this summer any different than any other summer? If Delta SkyMiles and the entire SkyTeam membership want to earn any respect at all from frequent flyers, this type of restriction is simply unacceptable. Delta SkyMiles, this reflects badly on you. Sure, this will save you money since you don't have to pay these airlines to handle some of your award requests, but frankly, if I were you, I'd pay any price required to make this right for your members. Either have an alliance that works, or resign SkyTeam and join the Star Alliance. I'd recommend oneworld, but then you might have to argue about earning and burning miles across the Atlantic. Very disappointing."
And if you have any eavesdropping equipment, you might try and listen in on Thursday morning very early when Randy has a scheduled call with KLM in Amsterdam and link to Air France in Paris about this. While he has no award redemption plans on this airline or its partners for this period, it really doesn't matter, its not good for members of these programs and he's not afraid to point this out in public as well as follow through.
And in case you haven't noticed.... many other airline and their frequent flyer program - who are not going public - have made changes as well. It's hardly about Aeroplan.
"Now on to Delta SkyMiles. Surfing around its Web site, I came across this notice posted in its award redemption area: "As a result of high Award Travel requests during the peak summer travel season, we are no longer accepting award reservation requests for travel on Air France and KLM for the travel period June 1 through August 31, 2005." This is as sad a day as I've seen for any program in a long while. The major media just loves to beat up on these programs with the perception that no one can get free seats, and now we see this. What gives? I'm well aware that KLM is blending some of their operations into Air France, but both airlines promised no interruptions with the introduction of the new Flying Blue frequent flyer program. And what makes this summer any different than any other summer? If Delta SkyMiles and the entire SkyTeam membership want to earn any respect at all from frequent flyers, this type of restriction is simply unacceptable. Delta SkyMiles, this reflects badly on you. Sure, this will save you money since you don't have to pay these airlines to handle some of your award requests, but frankly, if I were you, I'd pay any price required to make this right for your members. Either have an alliance that works, or resign SkyTeam and join the Star Alliance. I'd recommend oneworld, but then you might have to argue about earning and burning miles across the Atlantic. Very disappointing."
And if you have any eavesdropping equipment, you might try and listen in on Thursday morning very early when Randy has a scheduled call with KLM in Amsterdam and link to Air France in Paris about this. While he has no award redemption plans on this airline or its partners for this period, it really doesn't matter, its not good for members of these programs and he's not afraid to point this out in public as well as follow through.
And in case you haven't noticed.... many other airline and their frequent flyer program - who are not going public - have made changes as well. It's hardly about Aeroplan.
If not, then some explanations are needed!
Jun 29, 2005, 5:18 am
#8
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Originally Posted by airbus320
SL: Re-read the post under Randy's handle. I think it was written by a member of his staff. No one refers to himself in the third person.
I do not imply that RP is Napoleon, by no means!
Jun 29, 2005, 8:49 am
#9
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Join Date: May 1998
Location: Colorado Springs, CO
Posts: 6,540
No I wrote the post, no one else. As for the negative, it's his/her own opinion, but usually it helps before spouting off about anything that one would read the piece being referenced. The point being made in the article is that instead of continually making cuts which effect both employees and passengers of these airlines, let's be smart and leverage a hidden asset. Apparently this member hasn't been able to string together a few words to get this far in the article. As for the "more evidence" I guess i missed his/her first evidence accusation. Since InsideFlyer thought up and still pays the bills for FlyerTalk (over $300,000 USD so far), i have yet to find any airline that would consider FlyerTalk as a customer base for the airlines. With the constant watchdog that FlyerTalk is for the industry, more people would see it 180 degrees from the accusation of this member. But I will not edit his/her post, after all, he/her did not flame me personally as a member, though i did write the piece.
As for referring to myself in third person, more likely I was thinking of the person who wrote the article, not the member of FlyerTalk.
I'll be a man and apologize for my comments which sidetracked the topic. I am sorry.
As for referring to myself in third person, more likely I was thinking of the person who wrote the article, not the member of FlyerTalk.
I'll be a man and apologize for my comments which sidetracked the topic. I am sorry.
Jun 29, 2005, 8:57 am
#10
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Jun 29, 2005, 10:14 am
#11
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Join Date: Nov 2000
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I read the article, I have some concerns about some of the wording used in the article Randy. We can talk about it in more details at PM if you wish but here are some of my concerns:
and this:
A few comments:
There is no disclosure from this article that this isn't meant as any kind of investment advice. And from the nature of your business, unless I am mistaken, you are not in the business of providing financial advice. I think some of the language used definitely needs to be 'clearer' about that. Also, even if this is not meant as a recommendation of anykind, but just an opinion piece, it's important that you always disclose you seek doing business with the parties you discuss in your article. As far as I know, you do have or attempt to have business relationships with the said airlines and their subsidiaries, any possible conflict of interest must be disclosed. Finally, I am familiar with UBS Canada's position on this issue, I can flip this over to Fadi, I am just concerned whether they actually approved you quoted them in this fashion, I don't know, you may well have. UBS Canada (I don't work for them) buys research on Income Trusts from Canadian banks even though they had great capabilities elsewhere. But when it comes to Income Trusts, the locals (Canadians) do it extensively, so they simply buy research from Canadians. I know they plan to hire a dedicated analyst to cover Income Trusts but not yet to my knowledge. I am genuinely concerned about how this was published without taking the necessary precautions to make sure it is being understood as what it really meant to be, which is just frequent flyer discussion to inform and discuss, nothing more. Somebody else might not see it that way and that could be very dangerous, especially the U.S. is A LOT stricter than Canada as to what's allowed and what's not.
I think any further discussion on this specific angle should be done on PM.
And what value might we be talking about? We estimate that the Aeroplan program will land at a valuation of nearly $1.2 billion, and that a program such as American's (which we pick along with Mileage Plus as the logical first candidates for the stock market among U.S.-based programs) could fetch a valuation greater than $2.5 billion.
Frankly, we're surprised that this topic has not been mentioned by the airlines, as they continue to seek ways to raise capital. Granted, the trend seems to be in cutting costs, and we think the industry might be a little too narrow-minded for such consideration. We called several airline industry analysts and were even more surprised that the topic hasn't even been considered by the likes of JP Morgan and others. American and United have for some time treated their frequent flyer programs as separate business units, so to spin them off would be no major concession and would undoubtably lead to a better prospects of raising even more capital.
Frankly, we're surprised that this topic has not been mentioned by the airlines, as they continue to seek ways to raise capital. Granted, the trend seems to be in cutting costs, and we think the industry might be a little too narrow-minded for such consideration. We called several airline industry analysts and were even more surprised that the topic hasn't even been considered by the likes of JP Morgan and others. American and United have for some time treated their frequent flyer programs as separate business units, so to spin them off would be no major concession and would undoubtably lead to a better prospects of raising even more capital.
We asked Fadi Chamoun, airline analyst, UBS Securities Canada about the Income Trust (a tax-efficient offer) for Aeroplan, and he noted "It is somewhat unique to Air Canada and Aeroplan. The main reason is that over the years, Aeroplan has become less reliant on Air Canada for its revenues then you would see in other propriety loyalty programs." He went on to say that the interest is in high-yielding income and that "Aeroplan does provide a more sustainable and less risky business model than the airline." At this time, not many would argue that point.
There is no disclosure from this article that this isn't meant as any kind of investment advice. And from the nature of your business, unless I am mistaken, you are not in the business of providing financial advice. I think some of the language used definitely needs to be 'clearer' about that. Also, even if this is not meant as a recommendation of anykind, but just an opinion piece, it's important that you always disclose you seek doing business with the parties you discuss in your article. As far as I know, you do have or attempt to have business relationships with the said airlines and their subsidiaries, any possible conflict of interest must be disclosed. Finally, I am familiar with UBS Canada's position on this issue, I can flip this over to Fadi, I am just concerned whether they actually approved you quoted them in this fashion, I don't know, you may well have. UBS Canada (I don't work for them) buys research on Income Trusts from Canadian banks even though they had great capabilities elsewhere. But when it comes to Income Trusts, the locals (Canadians) do it extensively, so they simply buy research from Canadians. I know they plan to hire a dedicated analyst to cover Income Trusts but not yet to my knowledge. I am genuinely concerned about how this was published without taking the necessary precautions to make sure it is being understood as what it really meant to be, which is just frequent flyer discussion to inform and discuss, nothing more. Somebody else might not see it that way and that could be very dangerous, especially the U.S. is A LOT stricter than Canada as to what's allowed and what's not.
I think any further discussion on this specific angle should be done on PM.
Jun 29, 2005, 1:40 pm
#12
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Originally Posted by Guava
I read the article, I have some concerns about some of the wording used in the article Randy. We can talk about it in more details at PM if you wish but here are some of my concerns:
and this:
A few comments:
There is no disclosure from this article that this isn't meant as any kind of investment advice. And from the nature of your business, unless I am mistaken, you are not in the business of providing financial advice. I think some of the language used definitely needs to be 'clearer' about that. Also, even if this is not meant as a recommendation of anykind, but just an opinion piece, it's important that you always disclose you seek doing business with the parties you discuss in your article. As far as I know, you do have or attempt to have business relationships with the said airlines and their subsidiaries, any possible conflict of interest must be disclosed. Finally, I am familiar with UBS Canada's position on this issue, I can flip this over to Fadi, I am just concerned whether they actually approved you quoted them in this fashion, I don't know, you may well have. UBS Canada (I don't work for them) buys research on Income Trusts from Canadian banks even though they had great capabilities elsewhere. But when it comes to Income Trusts, the locals (Canadians) do it extensively, so they simply buy research from Canadians. I know they plan to hire a dedicated analyst to cover Income Trusts but not yet to my knowledge. I am genuinely concerned about how this was published without taking the necessary precautions to make sure it is being understood as what it really meant to be, which is just frequent flyer discussion to inform and discuss, nothing more. Somebody else might not see it that way and that could be very dangerous, especially the U.S. is A LOT stricter than Canada as to what's allowed and what's not.
I think any further discussion on this specific angle should be done on PM.
and this:
A few comments:
There is no disclosure from this article that this isn't meant as any kind of investment advice. And from the nature of your business, unless I am mistaken, you are not in the business of providing financial advice. I think some of the language used definitely needs to be 'clearer' about that. Also, even if this is not meant as a recommendation of anykind, but just an opinion piece, it's important that you always disclose you seek doing business with the parties you discuss in your article. As far as I know, you do have or attempt to have business relationships with the said airlines and their subsidiaries, any possible conflict of interest must be disclosed. Finally, I am familiar with UBS Canada's position on this issue, I can flip this over to Fadi, I am just concerned whether they actually approved you quoted them in this fashion, I don't know, you may well have. UBS Canada (I don't work for them) buys research on Income Trusts from Canadian banks even though they had great capabilities elsewhere. But when it comes to Income Trusts, the locals (Canadians) do it extensively, so they simply buy research from Canadians. I know they plan to hire a dedicated analyst to cover Income Trusts but not yet to my knowledge. I am genuinely concerned about how this was published without taking the necessary precautions to make sure it is being understood as what it really meant to be, which is just frequent flyer discussion to inform and discuss, nothing more. Somebody else might not see it that way and that could be very dangerous, especially the U.S. is A LOT stricter than Canada as to what's allowed and what's not.
I think any further discussion on this specific angle should be done on PM.
Jun 29, 2005, 4:01 pm
#13
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Originally Posted by Super Larry
Don't you think this post should have been done on PM rather than publicly? Now that you throw the first stone publicly, you don't want to handle the response publicly?
Jun 30, 2005, 7:31 am
#14
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i was referring to that particular thread and for a correction, the percentage of OT posts as a whole was 76.1%. Sorry to mislead you with the 80% stat.
Originally Posted by parnel
its just part of the 80% trash that gets posted here per RP.
Jul 2, 2005, 7:48 am
#15
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Guava,
What you posted would be generally applicable if talking about a financial services firm or talking about a media outlet which is mentioning a firm that has a controlling financial interest in said media outlet -- at least that's generally the standard in the US. As InsideFlyer is neither a financial services firm nor a media outlet beneficially owned by a firm about which it is reporting, such a disclosure would not be the standard in the US.
What you posted would be generally applicable if talking about a financial services firm or talking about a media outlet which is mentioning a firm that has a controlling financial interest in said media outlet -- at least that's generally the standard in the US. As InsideFlyer is neither a financial services firm nor a media outlet beneficially owned by a firm about which it is reporting, such a disclosure would not be the standard in the US.