Germany’s Lufthansa airline plans to reorganize its frequent flyer program Miles & More to make it more streamlined and efficient, boosting business growth.
The move is part of a wider restructuring of Germany’s largest airline, which aims to boost operating profit to 2.3 billion euros ($3.2 billion) and includes 3,500 job cuts, the expansion of discount unit Germanwings, as well as outsourcing.
The Miles & More reorganization is expected to be completed by the end of the year according to Nils Haupt, Director Communications, The Americas, for Lufthansa.
Published reports say that the airline plans to spin off the frequent flyer program, which has nearly 25 million customers and more than 300 partner companies, as a standalone business in the spring.
Haupt told Loyalty 360 that regarding a “possible starbust into an own juridical entity within the company,” no final decision has been made yet and there are no plans to sell the customer loyalty program.
“For Lufthansa, the aspect of customer restraint and with that the closeness to its loyal passengers is too important,” Haupt said. “Therefore, Miles & More will stay in the ownership of Lufthansa.”
Haupt said that the Miles & More customer loyalty program holds important significance.
“Lufthansa wants to accommodate the growing relevance and decided to further develop the Miles & More organization,” Haupt said. “With this background, all processes and entities related to Miles & More will be bundled. The goal of the organized restructuring is to make the Miles & More program more efficient, boost sustainable and profitable growth, and increase added value.”
Haupt clarified that the program bundling means one organization will be responsible for all Miles & More-related matters. Currently, Haupt said, there are several Lufthansa departments with specified Miles & More responsibilities.
“Customer feedback is always key when it comes to restructuring,” Haupt said. “The customer would like to see clear processes and responsibilities.”
Loyalty programs traditionally reward passengers with money off air travel, based on the number of miles they have flown with a particular airline. Now, airlines can generate cash by selling miles and points to other businesses like credit card and car rental firms, which in turn use the offer of extra miles to attract customers.
Air Berlin, Germany’s second largest airline, sold 70% of its Topbonus loyalty program to Etihad Airways for 184 million euros last year.
According to a 2012 IATA report on loyalty programs, when United Airlines filed for bankruptcy in 2002, the only part of its operations that was making money was its frequent flyer program. It also noted Air Canada’s Aeroplan raised $250 million in 2007 for just 12.5% of the company.
“Our goal is to become more efficient in all areas of the company, support profitable growth, and increase added value,” Haupt explained. “With this background, we are reorganizing all processes related to Miles & More and will bring them together in a new department. The implementation of the reorganization within the Lufthansa Passage is already taking place and will be completed by the end of 2013.”