And then there were two. After many years of being the industry pioneer, Groupe Aeroplan have now been joined by another FFP spin off – by TAM in Brazil. There has been much talk about other airlines spinning off their programs, although with the recession much of that has been no more than just talk. However, perhaps TAM will be the the start of a new wave of spin-offs as airlines look at new ways of generating additional profits and learning from Aeroplan.

Qantas has been the other airline where there has been much talk about a spin off of their FFP. Certainly, QF have been forward thinking and have been weathering the recessionary storm by taking lots of, early, pre-emptive measures both in terms of capacity and operational costs. Qantas, like Air Canada, hold a very special place in their home markets, which would certainly imply that QF could have similar success that Groupe Aeroplan enjoys today.

Perhaps 2010 will be the year not just of baggage charges, but also of FFP spin off?

BA have just announced that they have made an operating profit (note the word operating and not bottom line!) in their 3rd Quarter of £25m compared to the operating loss in the same period last year of £51m. And, whilst the loss in the quarter at £50m was better than the £122m in the same period, it is still a loss.

Overall passenger revenue is down by 13% with premium traffic down 9.7% in the quarter although they note that whilst volumes are stable the yield is starting to show improvement.

Interestingly enough, “other revenue” is showing a 9.2% increase on the comparable period. BA attribute this to “new web based ancillary sales” (for example their new seat charge) and “increased use of Airmiles for hotel and leisure activity bookings”.

They don’t break out the Airmiles figures nor the ancillary sales, all of which could be comparisons from small numbers in the previous year. It is only recently that BA have dipped their toe into the unbundling of their product. However, it is significant that BA have chosen to mention this, perhaps indicating that they will be moving full steam ahead in both the ancillary and loyalty areas.

With TAM in Brazil having floated its Frequent Flyer Program and joining Groupe Aeroplan maybe BA will be dusting down plans to sell its loyalty program?

Click here to go to the BA Press Release with the full details of their Q3 results.

I was on a very empty British Airways 747-400 the other day. In an aircraft with some 70 business class seats there were just 15 people. Although this quarter is traditionally a quiet one it struck me that even that didn’t account for so many empty seats.

Was it because in the run up to the initial Christmas strike that many people choose to book with another carrier worried that BA might be on strike and/or that the action might actually push the company over the edge into bankruptcy? BA has some £2 billion of cash on hand and many analysts believe that this should allow them to ride out any prolonged action. However, what is the impact on the brand as well as future bookings?

On the plus side, as I was getting on the bus (yes, even at T5 you can still end up getting bused to and from the aircraft!) to catch my connecting flight, there were a number of BA staff enroute back home. On one of their bags was a tag encouraging colleagues to vote “No” to the strike action.

Only time will tell if that crew member is still in a very small minority, but, I thought it was a very telling sign.

It has been an interesting few weeks with various airlines reporting their numbers. Ryanair’s figures showed increased passenger numbers, but those travelling seem to be spending less on items like onboard sales as revenue growth of ancillaries slowed. In the past, ancillary revenue growth has been faster than the increase in passenger numbers.

However, FlyBe have had a dramatic increase in their ancillary sales per passenger. It appears that they are reaping the benefits of the integration of BA’s regional services which they bought a couple of years ago. BA paid FlyBe to take the perennial loss making service of their hands and it shows what can be done with a clear strategy.

BA, did at least, have the sense to retain a stake in FlyBe, so they are, at least going to share in any flotation or sale further down the line. I wonder if BA will be looking at their short haul European network to see if there are any lessons they can learn/apply from FlyBe?

For more information about Flybe’s results, click here to go to their website and the Press Release with full details.

It’s been an interesting week for US airline profitability. On one hand, the likes of AirTran and Allegiant rack up record profits and even Continental eek out a profit. Yet the majors like Delta, American and United all remain mired in the red. Having said that, there are some bright spots in all of the majors results.

So what’s going on?

Is it that AirTran and Allegiant are newer airlines and/or have lower costs? Or perhaps it is better strategy and execution – Allegiant, for example, view themselves as a travel company rather than just an airline. They don’t seem to view ancillary revenue as being, well ancillary! To them it is a core part of their offering.

With IATA reporting that global air travel demand fell 3.5% in 2009 (despite a pick up in December 2009) how is it that some airlines are managing better than others? IATA, which represents some 93% of airline global traffic, said that airlines flew at 75.6% load factor – or put another way 3 out of every 4 available seats were sold.

Clearly, there are a number of factors at play and it isn’t as simple as traditional carrier versus LCC or even old versus new. Airline profitability in Latin America will be the subject of the Ai conference that is being held in Buenos Aires on 6/7th of May – more details by clicking here. It will also be a core topic for the “Mega Event” which will be in Montreal on 11/12th of November (updated website will follow, but you can click here for the link to last year’s conference website.)

***STOP PRESS****

Airline Information will shortly be officially launching their 2010 Mega Event. The 6th Annual FFP conference along with the 4th Annual Ancillary Revenue event are going to be held in Montreal on 11th and 12th of November.

Mark your diaries and check out Airline Information’s website for more updates shortly.

We all know that horrible feeling waiting for your bag to arrive. Now that horrible feeling starts at departures as you’re asked to stump up money to check in your bag. What started out at Ryanair as a way of saving money has been taken up by airlines across the world as they struggle to make money.

And make money from these charges they are. According to new research from Jay Sorensen at IdeaWorks* the 5 major US airlines will generate some $117 million in baggage fee revenue in 2010. Interestingly enough, the research points out that Southwest Airlines have opted not to take this approach and have been advertising heavily with their “bags fly free on Southwest” as their USP.

The other interesting piece in this research is the consumer reaction. So far, American consumers, seem to have swallowed these charges. However, they reacted negatively when the same airlines tried to increase base fares.

Time will tell if the Southwest or the charging approach brings in passengers and profits!

Click here to read Jay’s full research

To find out more about IdeaWorks click here

* IdeaWorks and Michael Smith from SeaMountain are associates

For those of you that have been following the twists and turns of FlyGlobespan’s demise the latest update is that E-Clear plc don’t have all the money owed! So the company truly looks as if it is empty and only time will tell where the money has actually gone.

However, there are much wider implications than just another company going bust. What will happen to people who have paid for flights with FlyGlobespan (and all the other companies that E-clear plc were processing but may not have paid over to the merchant) in the belief that paying with a credit card protects them? In the UK, under the Consumer Credit Act, customers paying over £100 have statutory protection if the merchant goes bust. It will be interesting to see how this is handled.

As I’ve mentioned before, what does your merchant acquirer agreement say? What will be the implications for your direct sales (at least in the UK market) if consumers lose confidence in using direct sites now that the apparent protection of paying with a credit card might be worthless as well?

2010 is certainly going to be an interesting year and, if you haven’t checked those merchant acquirer details and put in place some contingency plans, now might be a good time to go and do that!

It appears that E-Clear plc were given until Friday to prove to the UK court that they had the money owed to the administrators of FlyGlobespan. Weekend press reports are speculating that administrators are being lined up for E-clear plc which would imply that they haven’t (yet) provided the necessary evidence to the court.

Leaving aside whether or not they will or will not prove to the court’s satisfaction that they have the money, the key lesson from all of this is for merchants to check their acquirer agreements. What do they say? Can they increase holdbacks? What contingency plans does the business have should their acquirer not be able to process transactions are vitally important questions.

Often people look at payments and just think it is some back room function. However, it is vital to any company’s distribution strategy – if you want to sell to people, how you get paid is fundamental. The merchant acquirer is just one part of that and understanding all the implications of getting paid can mean the difference between a successful business and one that’s bust. Ask FlyGlobespan about the importance of getting paid.

Watch this space for more updates on PwC, E-Clear plc and FlyGlobespan.

For those of you following the ins and outs of what role E-Clear plc played in the downfall of FlyGlobespan it has been a roller coaster of a week. The administrators of FlyGlobespan have gone to court, apparently seeking their money and/or to put E Clear plc into administration. The court have given E-clear until Friday this week to prove they have the money owed.

The clear lesson from this, is that airlines/travel companies should be off checking the details of their merchant acquirer’s contract. What level of holdbacks can they impose and how long can they keep money due to the merchant would be good items to check immediately. Having contingency plans should that merchant acquirer go into administration would also be a sensible move.

Some merchant acquirers, at least in the UK, are operating in a rather unregulated (in terms of the Financial Services Authority rules) arena. For many airlines and travel companies, there are fewer merchant acquirers keen to do business as this area of business is considered higher risk and several companies have withdrawn from the market. 2010 looks like in one of those back office areas of payments could have dramatic consequences for those that haven’t planned for the worst!