Jet Airways, the country’s largest airline by market share, is hiving off its highly popular Jet Privilege loyalty programme into a new wholly owned subsidiary, which will be set up over the next six weeks.
Under the Jet Privilege programme, the members can earn and redeem JPMiles by buying air tickets or other stuff. So far the programme has been managed and operated in-house by Jet.
Jet Privilege will be transferred to the marketing services company being set up and the airline plans to ratchet it up into a larger retail-based coalition loyalty program to unlock greater commercial value, the company said in its annual report.
The investment to set up the new subsidiary will be funded through internal accruals.
Initially, the marketing services company will be a 100% subsidiary. As and when we get partners, some percentage of the company’s stake will be offered to them, Jet said.
“The company is making the right move in the right direction. Globally, airlines like Air Canada and Cathay Pacific has listed such subsidiaries and have earned good revenues out of such initiatives. Jet Airways should have done this earlier. It is a good move,” said Kapil Kaul, CEO – South Asia Centre for Asia Pacific Aviation.
Meantime, Jet managed to post a net profit for the first quarter despite increasing fuel costs.
After five quarterly losses, Jet Airways reported a net profit of `24.70 crore for the April-June quarter. Sales rose 30% to `4,587 crore during the period.
It also announced a credit card co-branding deal with HDFC Bank, two months after a similar deal with Citibank, which continued for 13 years, ended abruptly.
“HDFC is a better partner in terms of better reach,” said Sudheer Raghavan, chief commercial officer, Jet.
The airline also intends to focus on the ancillary business in order to further increase its revenues going ahead.
Any revenues generated other than ticket fares are ancillary revenues. Currently, ancillary services contribute $170 million to Jet Airways’ overall revenue, which is around 3%. The company is aiming to take this number to 10-15% in the next couple of years.