Loyalty programs are a cash cow for airlines to the point that some airlines sell a stake or the whole cow for a quick profit hit. Those who have taken the gamble tend to not seen it pay off and more often than not find themselves paying for it, or in the case of Air Canada creating a whole new competing loyalty program.
In 2014 Virgin sold part of its Velocity business to Affinity Equity Partners (AEP). Since the sale the program it has grown to be the third biggest loyalty program in Australia behind Qantas and Woolworths. Virgin now has sellers remorse and has enter an agreement to buy back the 35 per cent of its Velocity program it sold to AEP for $700 million. This is more than double what they sold it for to the group five years earlier.
Virgin has experienced some rocky annual results of late but the shining star of their company has been the Velocity division which saw earnings (before interest and tax) up 12 per cent to $122.2 million.
Personally I think this is a smart move by Virgin which in the end after a initial financial hit see the company not only in a stronger position financially but increase value with its customers for years to come!