nuggetsyl
Topic Author
Posts: 156
Joined: Wed May 24, 2006 11:46 pm

Wow Ua Hidden Money

Wed Oct 10, 2007 9:53 pm

Looks like united had money they never tapped in chaper 7.

http://www.fool.com/investing/value/...ds-flights-of-financial-fancy.aspx
 
StarGoldLHR
Posts: 1346
Joined: Mon Feb 16, 2004 1:29 am

RE: Wow Ua Hidden Money

Wed Oct 10, 2007 10:00 pm

How is a Frequent Flyer program worth Billions ?

It's a list of peoples addresses at the end of the day.

Mailshots ? wow-wee more junk mail.
Credit Card schemes... already been done.
Magazine subscriptions.. nowt exciting here.

Parting United from it's Frequent Flyers will see the airline lose it's most valuable passengers...

At the same time those miles are a debt..flights owed.

Whilst United could cancel the program at any time.. it's life blood is its frequent flyers.

This was the lesson they learnt in bankruptcy...keep the FF to survive... have they just forgotten this ?
So far in 2008 45 flights and Gold already. JFK, IAD, LGA, SIN, HKG, NRT, AKL, PPT, LAX still to book ! Home Airport LCY
 
UnitedTristar
Posts: 861
Joined: Fri May 21, 2004 6:45 am

RE: Wow Ua Hidden Money

Wed Oct 10, 2007 11:02 pm

(by Oct 10 2007 in Civil Aviation)
 
gigneil
Posts: 14133
Joined: Fri Nov 08, 2002 10:25 am

RE: Wow Ua Hidden Money

Wed Oct 10, 2007 11:12 pm

Quoting StarGoldLHR (Reply 1):
Parting United from it's Frequent Flyers will see the airline lose it's most valuable passengers...

It won't do any such thing. Spinning off the program won't suddenly make our miles worthless, but attracting new investment to it will do wonders.

Yeah, it is a list of addresses. That's a massive marketing opportunity there.

NS
 
itsnotfinals
Posts: 1573
Joined: Sun Mar 04, 2007 8:51 am

RE: Wow Ua Hidden Money

Wed Oct 10, 2007 11:29 pm

Quoting Nuggetsyl (Thread starter):
Looks like united had money they never tapped in chaper 7.

Chapter 7 is for liquidation, I think you meant Chapter 11 which is reorganization
Speedbird 178 Heavy, FINAL runway 27L
 
Viscount724
Posts: 19316
Joined: Thu Oct 12, 2006 7:32 pm

RE: Wow Ua Hidden Money

Wed Oct 10, 2007 11:34 pm

Quoting StarGoldLHR (Reply 1):
How is a Frequent Flyer program worth Billions ?

It's a list of peoples addresses at the end of the day.

You're forgetting that FFPs generate a huge amount of revenue from all the miles sold to hotels, car rental companies, other participating airlines, retailers, banks, credit card companies, etc. etc. They buy the miles from the airline before they can award them to their customers. A major airline's FFP is one of its major assets which is why some are starting to spin them off to generate large amounts of cash. The FFPs are often more profitable than the airline itself, apart from the market intelligence they provide.

AC was the first airline to start this trend 2 yeaars ago. They're gradually selling off their FFP, Aeroplan, and just announced a further transaction which is going to generate $481 million in cash. The first transaction 2 years ago generted $287 million, and at that time AC estimated the total value of their FFP at about $2.5 billion, and AC's is far from the world's largest FFP AC will still own about 20% after the latest sale. Anyone who invested in the first part of the Aeroplan sale in 2005 has more than doubled their investment now.
http://www.canada.com/nationalpost/f...34a-45c2-8fc4-2a97764d53f8&k=67301
 
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jedward
Posts: 79
Joined: Fri Nov 04, 2005 12:20 am

RE: Wow Ua Hidden Money

Wed Oct 10, 2007 11:38 pm

Quoting Nuggetsyl (Thread starter):
Looks like united had money they never tapped in chaper 7.

FWIW, UA never entered Ch 7 (liquidation), rather they sought protection under Ch. 11 (reorganization).

Quoting StarGoldLHR (Reply 1):
At the same time those miles are a debt..

Yes and no; FF programs are an interesting liability as there's the chance the airline may never have to make good on the promise (i.e. the reward), and if a liability is realized against the balance sheet, it is only against FF accounts that have enough points for a minimum reward. That said the cost of the reward would be the cost of providing the service, not necessarily the revenue foregone by the airline in providing the award.

Moreover FF programs can also represent a major revenue center though the sale of miles to partners (i.e. Chase for UA and CO, Citi for AA, Amex for DL, etc.) While we do not know how much these contracts are worth one would suspect for the major airlines the number would be in the hundreds of millions of dollars...all for a "fake" currency.

Sure some customers will redeem for the high value rewards (i.e. SQ F) but regardless of how many miles are minted the airlines are under no obligation to increase the amount of free seats (or charge double for booking a FF award without capacity controls) and some customers may not even use their miles!

Crazy stuff.
As Christ died to make men holy, let men die to make us rich. --S.C.
 
nuggetsyl
Topic Author
Posts: 156
Joined: Wed May 24, 2006 11:46 pm

RE: Wow Ua Hidden Money

Thu Oct 11, 2007 1:31 am

Quoting Itsnotfinals (Reply 4):
Chapter 7 is for liquidation, I think you meant Chapter 11 which is reorganization



Quoting JEdward (Reply 6):
FWIW, UA never entered Ch 7 (liquidation), rather they sought protection under Ch. 11 (reorganization).


yikes looks like i made a boo boo.

thanks
 
atlaaron
Posts: 975
Joined: Mon Apr 24, 2006 11:30 pm

RE: Wow Ua Hidden Money

Thu Oct 11, 2007 2:24 am

Quoting StarGoldLHR (Reply 1):
Parting United from it's Frequent Flyers will see the airline lose it's most valuable passengers...

If I am not mistaken AC parting itself from it's FF program and it has went quite well.
 
scrubbsywg
Posts: 1097
Joined: Fri Mar 02, 2007 9:35 am

RE: Wow Ua Hidden Money

Thu Oct 11, 2007 5:42 am

i think saying that a FFP is 'hidden money' is like saying an airline is rich because of buildings and planes it owns.
 
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aloha73g
Posts: 1935
Joined: Mon Jul 07, 2003 6:30 pm

RE: Wow Ua Hidden Money

Thu Oct 11, 2007 6:23 am

Aloha Airlines earns over $10 million each year selling AlohaPass Miles to First Hawaiian Bank.....Can you imagine how much more the big airlines make?

-Aloha!
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Alias1024
Posts: 2547
Joined: Mon Oct 25, 2004 11:13 am

RE: Wow Ua Hidden Money

Thu Oct 11, 2007 6:38 am

Quoting Viscount724 (Reply 5):
You're forgetting that FFPs generate a huge amount of revenue from all the miles sold to hotels, car rental companies, other participating airlines, retailers, banks, credit card companies, etc. etc. They buy the miles from the airline before they can award them to their customers. A major airline's FFP is one of its major assets which is why some are starting to spin them off to generate large amounts of cash.

 checkmark 

I don't think airlines such as UA should be selling their FFPs. The article mentioned the potential value in both the FFP and UA's maintenance operations, and mentioned that both are big revenue earners. It would seem that these operations could be very important revenue sources the next time the economy hits the skids. Business travel revenue won't be there, but people will still use those frequent flier credit cards, and airlines will still need to get maintenance performed on their aircraft. Of course none of this matters if your goal is to merge or part out the company to the highest bidder.
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