December 9, 2013 / 1:02 PM / in 4 years

Lufthansa plans to revamp frequent flyer program

FRANKFURT (Reuters) - Germany’s Lufthansa LHAG.DE plans to reorganize its frequent flyer program Miles & More in a bid to boost growth at the business, joining a trend among airlines, some of which have spun off customer loyalty schemes.

Lufthansa aircrafts sit on the tarmac at Frankfurt airport July 12, 2013. REUTERS/Ralph Orlowski

The revamp 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 should be completed in the next couple of months, a spokesman for Lufthansa said on Monday, declining to provide details.

German newspaper Frankfurter Allgemeine Zeitung (FAZ) earlier reported the airline was planning to spin off the frequent flyer program, which has more than 20 million customers, as a standalone business.

A decision could be taken in the spring and the unit, which would report to the Passenger division, would start operation in the second half of next year, the paper said.

The spokesman declined to comment on the possibility of putting Miles & More into a separate unit, but said there were no plans to sell Miles & More.

Loyalty programs traditionally reward passengers with money off air travel, based on the number of miles they have flown with a particular airline.

Nowadays 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 Canada ACb.TO hived off its frequent flyer program in 2007 while Air Berlin AB1.DE, Germany’s second largest airline, sold 70 percent of its Topbonus 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 percent of the company.

Lufthansa does not publish financial figures for Miles & More but FAZ, citing company sources, estimated it contributed around 700 million euros to group profit last year.

($1 = 0.7308 euros)

Reporting by Marilyn Gerlach; Editing by Mark Potter

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