Etihad Airways today announced the purchase of a majority stake in a new entity incorporated to own airberlin’s topbonus frequent flyer program, the first step in the establishment of a global loyalty management platform.
The new entity will seek to offer new opportunities for topbonus members to collect and redeem topbonus miles around the world, including the ability to use PointsPayTM to convert miles into cash payments at more than 30 million outlets worldwide.
Etihad Airways has taken a 70 per cent holding in the new company, with airberlin taking the remaining 30 per cent. The total transaction value is €200 million, which is being financed by an equity injection of €50 million and debt financing of €150 million, provided by HSBC International and Commerzbank.
The entity will become part of a new loyalty management company being established by Etihad Airways. This company will allow Etihad Airways and its partners to target the fast-growing, profitable global loyalty management market more effectively. The new loyalty group will have global scale and a critical mass of valuable, high-spending consumers.
It is planned that Etihad Guest, which expanded to become a multi-airline program in June when Seychelles Plus, the Air Seychelles frequent flyer program, started participating in the program, will cooperate with the new company.
James Hogan, Etihad Airways’ President and Chief Executive Officer, said: “This new investment creates an excellent growth opportunity for us to capitalise on the loyalty management market, while offering a greater range of benefits to passengers from multiple partner airlines.
“The acquisition of a stake in the new topbonus company is part of our strategic evolution to create a ‘house of brands’ loyalty management company, with global scale.
"The loyalty program sector is a faster growing and higher margin business than the airline industry. This new approach allows both our companies to reap greater rewards together, with opportunities to generate sustained profits from our loyalty programs.
"The new company also provides an attractive vehicle for other airlines looking to generate further revenues from the fast-growing loyalty management sector."
Hartmut Mehdorn, airberlin’s Chief Executive Officer, said: "This is a fantastic deal for our customers, offering new opportunities for them to collect topbonus miles around the world and redeem them in the most effective way.
“It is also a deal which offers airberlin an exciting future strategy for our FFP, while improving liquidity, our balance sheet and our equity position.”
Etihad Airways and airberlin initiated reciprocal ‘earn and burn’ for miles on each other’s frequent flyer programs in January 2012 and the new deal will greatly enhance synergies between the two programs.
Together, topbonus (3.1 million members) and Etihad Guest (1.82 million members) have nearly five million members worldwide. Etihad Guest currently has 173 partners and topbonus has 123.
topbonus, Germany's second largest frequent flyer program, is growing at a rate of more than 1,000 new members a day.
These members are expected to benefit from new opportunities under the new company. It is planned that PointsPayTM, the facility that allows Etihad Guest members to convert their miles to make cash payments at more than 30 million outlets worldwide, will be extended to topbonus members.
Etihad Guest members use the PointsPayTM iPhone app or visit the PointsPayTM website to arrange for their miles to be transferred into funds. The funds are then loaded directly to a PointsPayTM prepaid card which can be used to shop in-store or online.
airberlin announced in November 2012 its decision to separate topbonus from the core airline operation and place it into a new entity, seeking external investment to develop the business further. Participating in the new loyalty management company will enable airberlin to offer its customers a greater range of benefits.
The deal was preceded by a comprehensive review process undertaken by Credit Suisse and KPMG on behalf of airberlin in Germany, and PricewaterhouseCoopers (London) instructed by Etihad Airways in the UAE.