Qantas frequent flyer float flops

Qantas frequent flyer float flops
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Plans to partially float Qantas Airways frequent flyer business have been formally shelved, ending months of speculation about whether the airline will reduce ties with one of its most profitable businesses.

According to the Australian Financial Review, Qantas management advised it will not pursue a partial float or trade sale of the $2.5 billion loyalty business after examining the option, a decision that is expected to be ­supported by the board when they meet next week ahead of the airline’s annual results release next Thursday.

The airline had been exploring floating 30 – 40% of the airline’s ­10 million-member frequent flyer program in a move that was part of a wider ­strategic review.

The airline is still considering other options, such as splitting the domestic and international business to attract more foreign investment.

A trade or private equity sale of ­Qantas Loyalty was previously ruled out because potential buyers wanted more than 50% ownership of the business, something the airline was unwilling to relinquish control of.

It is expected Qantas chief executive Alan Joyce will announce the decision on 28 August when the airline releases its annual results. This will give a market update on the structural review and its transformation program, which is aiming to cut $2 billion of costs over the next three years.

Since 2008, Qantas has doubled the membership of the loyalty program from 5 million to more than 10 million, with the division posting a record first-half result in February of underlying earnings before interest and tax at $146 million.

If Qantas did float the business it would require Qantas Loyalty to strike a firm agreement on the percentage of seats available for ­frequent flyer redemptions, as has occurred with other airline loyalty ­program floats in Canada and Brazil. 

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