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James Hogan, the president and chief executive of Etihad Airways, left, with Hartmut Mehdorn, the head of the Air Berlin board, at a press conference in Berlin on December 18. Michael Kappler / AFP
James Hogan, the president and chief executive of Etihad Airways, left, with Hartmut Mehdorn, the head of the Air Berlin board, at a press conference in Berlin on December 18. Michael Kappler / AFP

Sharaf DG and Air Miles deal latest in loyalty scheme tie-ups

With Etihad buying a 70 per cent stake in a 200 million vehicle set up to hold Air Berlin's air miles recently, it seems loyalty schemes are becoming big business across the GGC region.

With Etihad Airways buying a 70 per cent stake in a 200 million (Dh970.9m) vehicle set up to hold Air Berlin's air miles recently, it seems loyalty schemes are becoming big business across the GCC region.

The UAE carrier announced it was taking the stake in loss making Air Berlin's TopBonus scheme of 3.1 million members to incorporate it into its own 1.8 million member Etihad Guest programme and create the world's biggest air miles scheme.

And today, customers at the region's largest multi-brand electronic retailer, Sharaf DG, and more than 1.3 million Air Miles members will learn that they are to benefit from a partnership between the two companies to be launched next year.

"Air Miles, the Arabian Gulf region's leading loyalty programme will be collaborating with Sharaf DG, offering more than 25,000 products from reputed international brands in the UAE and Bahrain, to deliver even greater benefits to the shopping and flying public," said Ian Hainey, the managing director of IHC Consulting, who is involved with the launch of this latest loyalty offering.

Certainly more and more companies are setting up their own versions. Carrefour and Virgin both launched loyalty programmes in the Emirates this year, joining other big players such as Al Tayer, which runs the Amber card scheme, and Landmark Group, which brandishes the Shukran card. Shukran's membership has grown to more than 2.7 million in the region since the programme's launch in October 2010, with more than 1 million in the Emirates.

"By 2012 the global loyalty market is expected to be worth more than US$100 billion [Dh367.3bn] and this growth is being reflected across the region," said Mark Mortimer-Davies, the chief executive of Air Miles Middle East and a spokesman for global loyalty company Aimia in the Middle East region.

"While there are currently no published figures for the UAE, there is tremendous growth anticipated and we expect Air Miles Middle East has the potential to grow to five times its size by 2017," he said.

So what's in it for Etihad?

"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," said James Hogan, the president and chief executive of Etihad Airways, which owns a 29.2 per cent stake in the German carrier.

"The loyalty programme 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 programmes," he added.

"The new company also provides an attractive vehicle for other airlines looking to generate further revenues from the fast-growing loyalty management sector."

Marketing experts agree. "Loyalty programmes can be extremely valuable platforms for generating extra revenue from existing customers for your core business via promotions and direct marketing," said Rana Eldibs, a marketing consultant for a global company based in Dubai, with more than 15 years experience in the region.

"As well as creating extra revenue streams through the marketing of a whole range of products and services to your database that are not core offerings such as branded credit cards, electronic items like mobile phones or even travel deals."

Some in the airline industry suggest that the move to invest in Air Berlin's loyalty scheme may be about more than just the opportunities to be found there.

"Air Berlin is caught between the low cost airlines at one side and the national carriers on the other and for all European airlines at the moment there is less money around," said Peter Morris, the chief economist at the Ascend aviation consultancy based in the United Kingdom.

"You could look at this move as a way for Etihad to achieve wider strategic goals. There are very strict rules about overseas companies owning stakes in airlines and in Europe overseas entities are not allowed to own more than 50 per cent. And at the heart of it this is a perfectly legal and legitimate way for Etihad to cope with the regulatory framework which still exists around world aviation and gain positioning in Europe.

"In Abu Dhabi, Etihad has a limited catchment area of perhaps 2 million people. It's certainly not the 200 million of Europe."

lbarnard@thenational.ae

* With additional reporting by David Black

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