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Airlines Mull Frequent-Flier Spinoffs

CHARLOTTE, N.C. -- Anybody want to buy a frequent-flier program?

That shouldn't be a problem. Not to say that legacy airlines move in lockstep, but in the past month, five of the six have said they are evaluating frequent-flier program spinoffs.

This movement has two principal sets of backers. One is made of investors such as the Icelandic company FL Group, which has apparently lost money by choosing the wrong time to buy 9.1% of the shares of American parent AMR (AMR). In September, CEO Hannes Smarason wrote AMR a letter urging a quick spinoff.

"We believe that there is no time to lose," he noted.

The other group that champions spinoffs is made of investment banks "looking for fees," according to US Airways (LCC) CEO Doug Parker. The airline, though skeptical, is reviewing a spinoff, promoted by "people coming and making pitches to us about it," Parker said last month.

But clearly, many industry insiders see value in spinning off mileage programs.

"To a certain extent, these programs print money," says Jay Sorensen, president of the airline marketing consultant IdeaWorks. They sell miles that cost little to produce but have vast appeal. United (UAUA) says Mileage Plus 2006 revenue was $600 million. Revenue from American Advantage is believed to exceed $1 billion. Founded in 1981, Advantage was the first frequent-flier program, and it was quickly copied by competitors.

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