If you’re a regular reader of this blog, you’ll have noticed that I regularly circle back to two topics: the airlines’ ongoing devaluation of mileage programs, and the rumors that one or more major airlines will spin off their mileage programs as freestanding businesses.
The topics are inextricably linked, although there’s room for argument as to how the one would affect the other. My best guess is that while selling off their loyalty programs would be good for the airlines’ balance sheets, and for the airlines’ stockholders, it would make a bad situation even worse for consumers participating in the programs. After all, if the airlines can’t meet their customers’ expectations when the programs are under their direct control, the chances of any improvement under a profit-driven regime seem remote at best.
According to an article in TheStreet.com, there are two groups pushing especially hard for loyalty program spinoffs. The first, as I’ve always suggested, is investor groups who anticipate a stock price spike in the event the airlines sell their non-core businesses.
The other group apparently lobbying for such transactions is slightly less obvious: the investment bankers who would broker the sale of the programs, generating enormous fees in the process. It probably goes without saying that no traveler-advocacy groups have weighed in on the side of independent loyalty programs.
In the end, it will be up to airline managers to balance the interests of stockholders against the needs of the traveling public and decide whether to champion program spinoffs. Of course, the calculation isn’t quite as objective or transparent as that cursory description might suggest.
Top executives at many large corporations stand to reap substantial performance bonuses if their companies’ stock price meets certain benchmarks. Which could give them a compelling financial reason to favor asset sales.
There’s no such incentive to do right by their own customers.
The deck, in other words, is stacked in favor of spinning off mileage programs. Program members, take note.