I was wondering with all the chatter at Jet Airways about increasing ancillary revenue, when were they going to take a profit centre approach towards their frequent flyer program. It turns out, this year is a good time for them to take that road, as per their annual report which was published a while back.
The annual report states that a special resolution has been requested for voting with shareholders to establish a 100% subsidiary which will look at managing and marketing the Jet Privilege loyalty program.
The loyalty industry is evolving in India. Your Company proposes to leverage this evolving business opportunity by setting up a marketing services company engaged in the business of managing reward points and loyalty programs for its program partners. Initially, the marketing services company will be a 100% subsidiary company. As and when negotiations with the potential knowledge partners crystallize into a concrete decision, it is proposed that some percentage of the Company’s stake be offered to the knowledge partners.
Your Company currently runs a frequent flyer programme, the JetPrivilege programme, through which members can earn and redeem JPMiles. The JetPrivilege programme is managed and operated in-house. Your Company proposes to transfer the JetPrivilege programme to the marketing services company and in the process transform the JetPrivilege programme into a larger retail-based coalition loyalty program and through its operations unlock greater commercial value.
Approval of the Shareholders for transfer of the JetPrivilege programme to the subsidiary company will be sought through postal ballot in due course.
Therefore, the Board of Directors, at the Meeting held on 24th
May, 2012, granted its unanimous approval for an investment up to 100% in the Share Capital of the proposed maketing services company.
While there is no timeline to the move, Jet Airways already seems to be in high gear on marketing JetPrivilege as the preferred currency for rewarding customers. It already has the most number of partners who award miles for non-flying transactions. It recently broke off its decade-old credit card partnership with Citibank and will now have 3 co-branded credit cards with different banks in the market.
AAdvantage and Mileage Plus are two U.S.-based programs I know which are run with a profit-centre approach, essentially, sell as many miles to partners who will give it away to their customers and then make those miles redeemable on their own metal as well as partner airlines. These programs have turnover in billions of dollars.
In India, I don’t see any competition for 9W in the early days. Air India as it is, is a bad program as compared to Jet Airways (too less partnerships, not many earning opportunities beyond flying) and Kingfisher, we don’t know if it will survive or not. I am guessing if it gets taken into the fold of British Airways (and eventually oneworld), Avios will be the currency of choice rather than KingClub miles which are the current currency of that program, but this move is a while away. So Jet Airways clearly has an advantage for the time being (if they join *A this advantage grows).
On the redemption end as well, while my favourite crib is that premium cabin redemptions are not available, or rarely available, seems like Jet Airways has either had too many miles expire last year, or helped too many redemptions as compared to the year before.
Take a look at this extract from their balancesheet at March 2012. Their addition of miles provisioning to the program has reduced to only 32% of the year before and redemptions have been 4 times more than 2010-2011.
Now Jet Airways, I’d love to earn more miles, only if you were to make international premium cabin redemption a little easier please…pretty please!