Not for sale: The world's largest frequent flyer program

While it's taken place on a different frequency than the public pronouncements about the desirability and likelihood of airline mergers (Delta and United, anyone?), there's been much recent speculation regarding the airlines' plans to sell their frequent flyer programs.

One of those threads appears to have been put to rest, at least for the time being.

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Until recently, an Icelandic investment company, FL Group, held a 9.1% stake in AMR, the parent company of American Airlines. And in fact, the FL Group was very much a part of the conversation regarding the spin-off of mileage programs, pressing AMR both publicly and behind the scenes to put AAdvantage, the world's largest such program, up for sale.

Motivating the FL Group, as well as others promoting the spin-off of frequent flyer programs and other airline subsidiaries, is the prospect of a short-term windfall for investors. Selling off the non-core parts of the business, the reasoning goes, will yield more shareholder value.

At least partly in response to such pressure from FL and other shareholders, AMR in late November announced plans to divest its American Eagle regional airline subsidiary. But there was nothing said about spinning off AAdvantage. So, two days after American released the American Eagle news, FL sold most of its AMR stock.

While such behind-the-scenes financial machinations may seem trivial or arcane to most of us, there is a real-world upshot to the story's resolution.

Reading between the saga's final lines, it's safe to assume that AMR had signaled to FL that no AAdvantage spin-off was forthcoming any time soon. Otherwise FL would have maintained their significant holdings, anticipating the uptick in value when AAdvantage was finally sold.

And the fact that AMR apparently has no plans to sell AAdvantage is a major development, and should be immensely heartening to members of the program. While spinning off mileage programs may be good for airline shareholders, it's bound to be bad for members of the affected programs. Award seats are in short enough supply as it is. If the programs were operated with an eye solely on the bottom line, awards could only become scarcer still.

In this case, no news is good news.

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