Jet Airways charts new route

Jet Airways is venturing into the loyalty management business. It also plans to set up an academy to train cabin crew. The airline's gross revenue for 2011-12 rose 17 per cent to Rs 15,173 crore (Rs 151.73 billion). However, it recorded a Rs 1,236-crore (Rs 12.36 billion) loss due to the tough operating environment.

The airline has sought shareholders' approval to set up a marketing services company to manage the airline's and its shareholders' loyalty programmes and set up a training school for cabin crew.

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Kingfisher Airlines, which runs a training academy, had also proposed to outsource its loyalty programme (the frequent flier programme).

Among global airline majors, Air Canada had hived off its loyalty programme in 2002. Jet Airways and Kingfisher did not respond to email queries seeking comments.

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Typically, outsourcing involves design, implementation and management of loyalty management programmes. This includes fixing reward points and 'earn and burn' programmes, managing records and mailing point statements and details on rewards.

Loyalty management companies prepare an activity-based calendar and communication touch points, including special email offers on festivals, for clients.

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Industry experts say the move could help Jet Airways clean its balance sheet. Companies that carry out loyalty programmes have to report the fair value of the liability of points to the company in the balance sheet.

Outsourcing the process could mean transfer of the points liability to the new company, though it can be retained by an organisation.

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"This helps in cleaning the balance sheet of the parent organisation and transferring the programme management and liability to the new company.

"Success for the new company depends on how well it is able to sell the programme currency to other partners and the arbitrage it can gain on issuance and redemption of points.

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"It also depends on whether the partners align themselves to the programme brand, instead of running their own programme," said Brian Almeida, managing director of Direxions Marketing, a leading loyalty management company.

Currently, Jet Airways manages its JetPrivilege frequent flier programme in-house. It also has several tie-ups with hotels, retail and lifestyle brands.

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Jet's programme was designed and managed by Direxions Marketing for a few years. A Jet Airways executive, however, maintained the programme had always been run in-house.

The airline now plans to transfer its Jet Privilege programme to the proposed subsidiary company and in the process, transform the programme into a larger retail-based coalition loyalty programme to unlock commercial value.

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The marketing services company would initially be a 100 per cent subsidiary. However, the airline proposes to sell stake in the company later, shareholders were told.

Jet Airways plans to train its own crew by setting up an academy that would also train cabin crew aspirants and staff members of other airlines. This, too, would be a subsidiary of the airline.