How much is a mileage program worth?

It's more than an academic question, since ultimately it says a lot about how the airlines manage the programs and, in particular, how consumer-friendly the programs will be.

But getting a complete picture of the programs' revenues and costs has never been a straightforward matter. While the airlines often operate their mileage schemes as semi-autonomous businesses, the programs' financial results have always been merged with those of the airlines, leaving us in the dark as to their revenues, expenses, and bottom lines.

But a recent article in the Chicago Tribune gives us some insight into the financials of United's Mileage Plus program. The article reports that an investment bank has estimated the value of United's Mileage Plus as a freestanding company at $7.5 billion. Paradoxically, United itself, including Mileage Plus, has a market value of just $5.5 billion.

Why is an investment bank deconstructing Mileage Plus? Because it represents unrealized value for United. The investment bank's analyst suggests that spinning off Mileage Plus as an independent company would "transform the $3.8 billion liability on its balance sheet into a $7.5 billion business."

Which raises the question: Would an independent Mileage Plus be a plus for the consumers who participate in the program?

It could go either way.

On one hand, the profit motive would pressure a freestanding Mileage Plus to increase mileage-earning opportunities (to maximize revenues) while further reducing award availability (to reduce costs). I.e., more miles chasing fewer award seats.

On the other hand, an independent Mileage Plus with a long-term business perspective might become more customer focused and readjust the award ratio in favor of its members.

These considerations are hardly unique to United. All of the major airlines have probably contemplated spinning off their loyalty programs, as Air Canada did in 2005.

If they do, consumers can only hope that the considerable financial benefits enjoyed by the airlines will trickle down to the flyers (and buyers) who make the programs such profitable enterprises.