Airline Cost Cutting: The Axe is on Lounges

"United Airlines announced this month that it was
shutting four of its 38 Red Carpet clubs, after closing three others in
the United States and overseas in the last few years," reports the New York Times. "Delta recently closed nine of its 47 Crown Rooms in the United States and abroad, while both American Airlines and US Airways are closing one club each."

Recent and upcoming closures of at least one lounge:

• US Airways (Baltimore-Washington International)
• United (Cleveland; Hartsfield-Jackson Atlanta International;
  Baltimore; Dallas Fort Worth International; Minneapolis St. Paul
  International; Sydney, Australia; and London Heathrow Airport)
• Delta (Boston; Cincinnati; Kansas City, Missouri; Seattle; San
  Juan, Puerto Rico; Phoenix; Denver; Honolulu; and London Gatwick
  Airport)

Source : Click Here
Source : COLLOQUY

When Loyalty Program Saves the Airline: United Story

UAL Corporation, the holding company whose primary subsidiary is United Airlines, has announced that it has reached an agreement in principle with its Mileage Plus co-branded bank card partner, Chase Bank, and Paymentech, one of its credit card processors, to extend the term of their respective agreements.

As part of the transaction, United will receive a payment of $600
million from Chase, which relates to the advance purchase of frequent-flyer miles and the extension of the contract. The company
also expects this transaction will improve cash flow by about $200
million in the next two years.

In addition, the level of reserve or holdback that United is
required to maintain under its credit card processing agreement with
Chase / Paymentech L.L.C. has been reduced to $25 million. This
reduction will result in the release of approximately $350 million in
previously restricted cash.

As a result of its agreement with Chase, the company expects to
increase its cash position by approximately $1.2 billion, including $1
billion in the short term and an additional $200 million over the next
two years. Combined with the previously announced approximately $550
million raised from new transactions in the second and third quarters,
the company will have increased its total cash balance by $1.7 billion
and continues to have more than $3 billion in unencumbered hard assets.

Source: United Airlines

Source: COLLOQUY

Qantas: Another Airline to sell Loyalty?

Qantas To Vote On Spinoff Of Frequent-Flier Program






"The sum of the parts is worth moe than the whole." That maxim may
be particularly applicable in the case of airlines and their
frequent-flier programs.

The strategic thinking behind the announcement made by Qantas,
Australia's dominant airline, of a plan to spin off its customer
loyalty programs conformed to the rationale of finding value through
judicious breakups. In a statement, Chief Executive Officer Geoff Dixon
remarked that improvements to the company's frequent-flier program in
the past year have reinforced Qantas's view of its value as a
stand-alone business after further enhancements are made. The partial
initial public offering plan, along with the future ownership structure
of the programs, will be voted on by the Qantas board at its next
meeting in August, Dixon said. The plan could be completed as soon as
this year.

A floating of the frequent-flier program as an independent entity was pioneered by Air Canada
(other-otc:
AIDIF -

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) as part of a radical restructuring under protection from creditors. That resulted in the successful IPO of Groupe Aeroplan
(other-otc:
GAPFF -

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) in 2005. Today, Groupe Aeroplan commands a market value of 3.45 billion Canadian dollars ($3.39 billion), more than quadruple Air Canada's 799 million Canadian dollars ($784.54 million).

The Australian newspaper reported last year that Qantas had
planned to offer Groupe Aeroplan a strategic stake of less than 50% in
a domestic listing that could value Qantas's own frequent-flier program
in the billions of dollars.

Also on Tuesday, Qantas unveiled a new program for frequent fliers
on routes operated by it and its budget unit, Jetstar, that would allow
redemption of frequent-flier points for any seat on any flight. That is
similar to the incentive program its smaller competitor Virgin Blue
(other-otc:
VBHLF -

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)
launched in November 2005 to popular acclaim. Virgin Blue said that
while its program was free to join online, Qantas's charges a
membership fee of 82.50 Australian dollars ($79.33).

Qantas said the membership of its frequent-flier program has
expanded to more than 5 million over its 21-year history and that it is
currently adding more than 5,000 passengers each week.

In Tuesday trading in Sydney, Qantas
(other-otc:
QUBSF -

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people
) shares surged by 6.6%, to close at 3.24 Australian dollars ($3.12).