Air Berlin is still operating, albeit on life support. The airline’s topbonus loyalty program is arguably in a worse state, filing for insolvency protection and suspending both earning and redemption of points effective immediately. In an announcement this morning to members the company explained the situation to members:
This unfortunate development follows airberlin’s decision last week to file for insolvency. Given airberlin’s current situation and the consequential impact on the frequent flyer program, topbonus was left with no other option.
The earning and redemption of miles remain suspended.
The account access to review your profile and miles balances and your topbonus membership remain valid.
In the clarification FAQ the program notes that previously issued award tickets remain valid, as does elite status. At least for now. The company emphasizes that “The topbonus program remains operational in the other functionalities (account login, access to member profile, miles balance, etc.). Your topbonus membership remains valid.” For those who have status the benefits continue to be honored but that likely won’t last once airline operations halt (assuming that comes to pass).
I’m typically more conservative than not when it comes to predicting the outcome of bankruptcy situations but this one surprises me for a few reasons.
Air Berlin sells off Topbonus loyalty program
The topbonus program is not owned by AirBerlin. Etihad owns and operates the program, though that transaction was arguably more about trying to funnel cash into AirBerlin than taking over the loyalty program and making it truly independent. Still, the loyalty arm could conceivably operate separately even as the airline collapses. Even with the headlines of “Etihad pulling support” shuttering the loyalty program seems a very short-sighted move to me where the marginally longer term view (i.e. 6 weeks instead of 6 days) should be able to deliver much greater returns.
Air Berlin files for bankruptcy protection
If nothing else, the marketing data in the loyalty program should have significant value. Between that and sales of points to third party partners the loyalty programs generally pay for themselves and then some. Suspending the program now, while trying to sell off the various profitable components for maximum value, does not make much sense to me.
Yes, the topbonus loyalty program has been a great target for those who love that sort of thing. Lots of promos and lots of matches meant earning points without flying too often on Air Berlin was viable. And letting people cash out large balances increases short-term negative cash flow. Maybe a buyer will still want the customer data, even after this incident sours those travelers. But the points liability on the books remains, at least in theory, and that hurts the value of the program as it is sold off.
In the end a bunch of customers lost out on their account balances. Not officially yet, of course, but writing that off as bad “debt” seems the smart sentiment right now. Ouch.
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Why surprised? Its been discussed in OMAAT’s comments this is inevetable if there’s no takeover on AB.
It is not inevitable and the reasons I believe such are detailed in what I wrote.
Loyalty programs make money for the airlines. In this case the goal is maximizing the value of the assets that can be sold off piecemeal since the airline is not viable long-term. Destroying one of those money-making assets makes very little sense to me.