 "Etihad invests $ 150 million in Jet Airways loyalty biz")
Etihad Airways has picked up 50.1% stake in Jet Airways frequent flyer programme for $ 150 million (over Rs 900 crore) completing the hive off of the airline's loyalty business. Etihad's investment in Jet Airways frequent flyer programme is a part of its overall $ 600 million investment in the airline which was sealed last April. The fresh infusion of funds from Etihad will boost Jet Airways which has been facing an adverse impact of high operating costs leading to loss in all quarters this fiscal.
On Tuesday, the airline announced that the board of Jet Privilege Private Limited (JPPL) has allotted 50.1% shares to Etihad and the remainder to Jet Airways. It said with the issue of the shares to Etihad, JPPL ceases to be a subsidiary of Jet Airways.
Last week the airline received share holders approval for the sale of frequent flyer programme to JPPL. The Competition Commission of India gave its nod to Etihad's investment last month.
Till now Jet Airways managed its frequent flier programme in-house. It also has several tie-ups with hotels, retail and lifestyle brands. Typically, outsourcing of loyalty programme 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.
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.