Jet Airways won’t sell entire stake in loyalty programme
MUMBAI : Cash strapped Jet Airways has no plan to totally exit Jet Privilege Pvt. Ltd (JPPL), its frequent flyer programme, even if it receives a lucrative proposal, said a person with the direct knowledge of the matter.
The airline is seeking to sell only a portion of its 49.9% stake in JPPL, and will keep a significant stake after any deal, said the person, requesting anonymity.
“Jet Airways will not completely exit JPPL even if it finds a buyer who’s willing to pay a good valuation,” said the person said. “At present, a large part of JPPL’s revenue comes from redemption of JPPL miles on Jet Airways flights or those on its network. Therefore, the airline will want to stay connected to its loyal customer base through JPPL.”
A spokesperson for Jet Airways said the airline is continuing to “pursue fund-raising initiatives” but declined to comment on specific plans.
Jet Airways is in a rush to raise cash to stay afloat as high fuel prices and a weak rupee as well as intense competition have hit its financial health.
Directors of the airline have earlier approved a turnaround plan, which includes cutting costs by more than ₹2,000 crore over two years, leveraging its stake in the Jet Privilege programme, improving pricing and capital infusion.
Jet Privilege was incorporated in 2012 as a wholly-owned unit of Jet Airways, but was hived off as an independent entity in 2014 after Etihad Airways PJSC bought a 50.1% stake for $150 million valuing the firm at $300 million. Etihad’s investment in Jet Privilege was part of its overall $600 million investment in Jet Airways announced in April 2013.
On Point Loyalty, a global management consulting focused on airline loyalty programmes, had valued Jet Privilege at $1.131 billion, or about ₹7,300 crore, last year (based on the average rupee exchange rate in November).
Over the years, frequent-flyer programmes have become profit centres for airlines, globally, many of whom are said to be making higher profits by tying up with mileage partners such as banks, hotels and credit-card companies.
“Jet Airways will have to stay invested in JPPL, because at the end of the day an airline is needed to redeem the miles for passengers,” said Mark Martin, founder and chief executive of aviation consultancy Martin Consulting.
“It would want to have access to its own passenger data and not hand it over to someone else on a platter.”
As per the latest available filings, Jet Privilege posted 30.5% growth in revenue to ₹509 crore in FY17. It had net worth of ₹1,744 crore as of end-March 2017.