Advertisement
Airlines mull spin-off of mileage programs

In a conference call earlier today with securities analysts, Northwest Airlines chief Doug Steenland admitted that the airline is considering spinning off its WorldPerks frequent flyer program as a freestanding company, as Air Canada did with its Aeroplan program in 2005.

A MarketWatch summary of the call quotes Steenland as follows: "We're committed to looking to maximize the value of the assets that we have, with respect to our shareholders, and for that reason, we're giving it a look."

Advertisement

Northwest's isn't the only program rumored to be in line for sale.

Just last week, MarketWatch reported that US Airways was considering a similar move, quoting that carrier's CEO Dog Parker thusly: "If it makes sense for shareholders, we'll probably do it."

TheStreet.com reported two weeks ago that American is contemplating spinning off several of its subsidiaries, including AAdvantage, the largest and most robust of the airline loyalty programs.

And a September 26 article in the Chicago Tribune details internal discussions at United regarding divestiture of various divisions, including the airline's Mileage Plus program. According to the article, Mileage Plus generated revenue of $600 million in 2006 and could be worth $7.5 billion.

Clearly there's a growing consensus that there are financial benefits to be realized for airlines and for their stockholders from operating mileage programs as freestanding businesses. For those of us who do not own airline stock, the analysis may be very different. In a future blog entry, we'll look at how such spinoffs are likely to affect consumers.

Read comments or add your own insight!
Please enable JavaScript to properly view and use this web site.