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Can Airline Loyalty Programs Generate Income for Struggling Airlines?

As airlines face new challenges seemingly every day now, the temptation exists for them to bolster their financials by selling off portions of the operations and reaping the benefits. One interesting asset that has garnered attention in recent years is the airline frequent flyer program.

A new white paper – “Spinning Off Frequent Flyer Programs in Turbulent Times” – issued by the loyalty marketing expert Evert de Boer, senior director, Global Airline Practice, Carlson Marketing, explores the pros and cons of spinning off frequent flyer programs in light of the current economic climate.


According to de Boer, there are six good reasons for selling off an airline’s frequent flyer program.

  1. Raise Capital
  2. Unlock Value
  3. Improve Margins
  4. Accelerate Revenue Growth
  5. Achieve Economies of Scale
  6. Improve CRM (customer relationship management) and Data Analytical Capabilities


Of course, if there were only good reasons, everyone would do it. He cites seven cautions as well.

  1. Program Delivery considering how intertwined the program is in the airline operations
  2. New Owners May Have a Short-term View
  3. Unpredictability of Future Events
  4. Capital Gain is a One-off
  5. Imbalance of Power Between the Frequent Flyer Program and the Airline
  6. Impact of Global Alliances
  7. Current Liabilities

Additional Considerations

The current economic downturn adds another set of wrinkles to be evaluated and their impact debated based on the individual airline’s situation.

  • Less Capital Available to Buy the Program
  • Less Travel and Lower Consumer Spending
  • Higher Incidence Rate of Credit Card Defaults and Lower Credit Ratings
  • Reduction in Network Size
  • More Miles Being Awarded, Fewer Miles Being Redeemed
  • Increased Opportunity for Arbitrage
  • Less Appetite for Adjustments to the Balance Sheet
  • Potential Partners Become More Wary


As the economy improves around the world, serious consideration of spinning off frequent flyer programs will once again be a hot topic of conversation. De Boer identifies likely carriers as those with “large legacies with a dominate program in a large and homogenous home market.” Unlikely candidates are “airlines that dominate a small home market and serve a high percentage of transfer traffic through their respective hubs.”

Optical Transport Network Gets Completed in Germany

LGS announced today it had successfully completed the European Dense Wave Division Multiplexed – Optical Transport Network (DWDM-OTN) for the U.S. Army.

This project, valued at more than $35 million, caps off a three and a half year effort to design, deploy and system test an installation information infrastructure in Europe that will link the forward-deployed soldiers to worldwide Command and Control (C2) and information systems.

The project was managed by the U.S Army’s Product Manager Defense Communications Systems Europe (PM DCS -E) located at Funari Barracks in Mannheim, Germany. PM DCS-E is a subordinate organization to PM Network Service Center (PM NSC) and Program Executive Office Enterprise Information Systems (PEO EIS). The U.S. Army’s 5th Signal command will have operations and maintenance responsibility for this new optical network in Germany.

“We are always working to find new, better and more effective ways to give the warfighter the best capabilities and solutions possible,” said LTC Joseph Dupont. “As we continue to provide ‘Everything Over IP’ in Europe, we needed a more robust network capable of supporting real time services and unified capabilities such as Voice over IP, IP video streaming and conferencing. DWDM provides that robust network.”

The DWDM-OTN Network project, awarded in the spring of 2006, consists of three DWDM rings spanning some 2,100 kilometers connecting 15 access locations supporting Army installations throughout Germany, Italy and Belgium. The U.S. Army selected the Alcatel-Lucent Metropolis Wavelength Services Manager (WSM) for implementing the rings which can provide up to forty 10 Gbps (gigabits per second) of transmission capacity each.

“This project demonstrates our ability to deliver full-scale communications solutions that include both products and multi-vendor network integration services that meet our customers’ needs,” said Ron Iverson, CEO, LGS. “We work in lock step with our customers throughout every phase of the project to ensure the network not only meets, but exceeds their expectations.”

LGS network integration team worked closely with the U.S. Army program manager to design and implement the middleware portion of the transport network, which provides Multi-Protocol Label Switching (MPLS) services. The middleware system consists of MPLS/IP routers, and encryption devices that connect I3MP, Army Communities of Interests (COINs) and Legacy networks to the DWDM-OTN network. The middleware network allows the Army to consolidate or eliminate legacy systems in the region and continue the transformation from a TDM to IP network centric architecture.

LGS responsibilities also included designing and implementing a state-of-the-art secured out-of-band (OOB) management system that allows an alternate capability to securely configure all OTN network elements, troubleshoot and resolve network problems.

Renewable Jet-Fueled Rocket Approaches the Sound Barrier

Renewable jet propellant-8 (JP-8) fuel developed and produced by the Energy & Environmental Research Center (EERC) at the University of North Dakota was successfully flown in a rocket built by Flometrics, a product engineering company specializing in fluid dynamics and thermodynamics based in San Diego, California. The fuel burn was so successful that the rocket approached Mach 1 (the speed of sound) and reached an altitude of about 20,000 feet. The launch was conducted on a hot summer day in the Mojave Desert, home to numerous aviation and rocket tests throughout history, just outside of San Diego.

“The demonstration worked very well, and we were pleased with the fuel. In fact, it performed better than expected,” said Steve Harrington, President of Flometrics. “The initial launch was a little explosive, which we call a hard-start, but it ended up working very well. The rocket appeared to have reached the transonic regime close to Mach 1. The data are currently being evaluated for more details on this exciting flight,” he said.

The EERC’s fuel was created from completely renewable crop oils, such as canola and soybeans. Developed through a variety of existing contracts, the fuel was vigorously tested at the Wright–Patterson Air Force Base Air Force Research Laboratory (AFRL), a cosponsor of the test along with the EERC and Flometrics, and meets all of the screening criteria for JP-8 aviation fuel, a petroleum-based fuel widely used by the U.S. military. The major advantage of the EERC’s renewable fuel is that the fuel can be designed to meet a wide variety of mission-specific requirements.

About 8 gallons of fuel was sent to the Flometrics research facilities, enough for two launches. The rocket used in the launch was originally built as a test rocket for the Discovery Channel series MythBusters. The rocket has previously been tested with standard Jet-A fuel and rocket propellant-1 (RP-1) kerosene, for which the rocket was originally designed.

“This is a unique opportunity for the EERC’s renewable fuel,” said EERC Director Gerald Groenewold. “Our fuel is already providing a pathway to energy security to the U.S. military and now is becoming an option for ground-to-air missiles and even space flight.” Groenewold added the fuel burns extremely clean, minimizing the environmental footprint and substantially reducing upper atmospheric particulate.

SpaceX’s Falcon 1 Successfully Delivers RazakSAT Satellite to Orbit

SpaceX announced the successful launch of Falcon 1 and delivery of Malaysia’s RazakSAT into the correct orbit.  “This marks another successful launch by the SpaceX team,” said Elon Musk, CEO and CTO of SpaceX. “We are pleased to announce that Malaysia’s RazakSAT, aboard Falcon 1, has achieved the intended orbit.”

Falcon 1, a two-stage, liquid oxygen/rocket-grade kerosene vehicle designed and manufactured by SpaceX, lifted off Monday, July 13, at 8:35 pm (PDT). Lift off occurred from the Reagan Test Site (RTS) on Omelek Island at the U.S. Army Kwajalein Atoll (USAKA) in the Pacific Ocean, approximately 2,500 miles southwest of Hawaii.

RazakSAT was designed and built by Astronautic Technology (M) Sdn Bhd (ATSB), a pioneer and leader in the design and manufacture of satellites in Malaysia.

“Our ground systems were able to pick up communication from RazakSAT on its first pass,” said Norhizam Hamzah, Senior Vice President / Chief Technical Officer, Space Systems Division, ATSB. “The satellite is communicating as expected and our team will continue to monitor the data closely.”

Preliminary data indicates that the RazakSAT, equipped with a high resolution Medium-Sized Aperture Camera (MAC), achieved the intended Near-Equatorial Low Earth Orbit (NEqO) at 685 km altitude and a 9 degree inclination. The payload is expected to provide high resolution images of Malaysia that can be applied to land management, resource development and conservation, forestry and fish migration.

Air Force Awards Trusted Computer Solutions $2.1 Million Cross Domain Services Contract

Trusted Computer Solutions (TCS) announced that the company’s Professional Services Team received a two year $2.1 million contract to support the Air Force’s Cryptologic Systems Group (CPSG), which provides highly-specialized security support for a wide-range of military and non-military agencies. Under the terms of the contract, TCS’ Professional Services Team will provide the following:

  • Establish and assist the CPSG’s efforts to start a government sponsored management office and provide the framework and processes to support cross domain solutions.
  • Create a lab environment to test and architect cross domain solutions.
  • Facilitate collaboration and processes to support the Community of Interest (COI) for cross domain solutions.

TCS’ SecureOffice Trusted Gateway (TGS) product and other cross domain solutions will be used to assist CPSG with the secure transfer of sensitive and classified information between various networks. The TCS Professional Services Team will assist the CPSG Management Office in implementing TGS and taking it through the certification and accreditation (C&A) process.

SecureOffice Trusted Gateway is a cross domain solution that provides a rapid, multi-directional transfer of data between various security levels – unclassified, secret, secret releasable, top secret and sensitive compartmental information (SCI) networks.

“This is a very strategic win for our Professional Services Team,” stated Ed Hammersla, Chief Operating Officer for TCS. “As the Management Office and government sponsor for our TGS product, the Air Force will be taking the lead in managing the C&A process. In addition, this win supports our strategy to pursue services offerings in the management consulting area, including management office establishment, process support and managed services.”

Bal Seal Springs Aid Astronauts in Hubble Repair

When astronauts embarked on the latest mission to repair the Hubble Space Telescope, Bal Seal Engineering’s canted-coil springs went along for the ride in a set of special tools designed to make the job easier and more efficient.

Bal Seal’s small, precision-engineered springs played an important role in several of the major repair operations conducted during “Servicing Mission 4,” NASA’s final voyage from the Kennedy Space Center in Cape Canaveral, Florida, to the famous orbiting telescope. Over the course of five history-making spacewalks, the crew of the STS-125 Atlantis relied on the simplicity and unique physical properties of the springs to help their tools work in an environment where failure definitely wasn’t an option.

One of the more important tools employing Bal Seal springs for grounding functions during repairs was a “fastener capture plate,” designed by engineers at Goddard Space Center for NASA. This plate, which was fitted precisely over a panel covering a failed electronics card, enabled astronauts to remove and retain 111 tiny screws without losing them or allowing them to float into the telescope where they could have caused serious and costly damage. Springs in the plate connection points grounded the unit to the Hubble.

Another critical piece of hardware on the Hubble repair mission was a Cardlok Manipulation Tool, or “CMT,” designed for Goddard and NASA by Alliant Techsystems (NYSE: ATK). Inside the CMT, a low-speed hand tool resembling a long Allen wrench, a beryllium-copper Bal Seal spring was used to provide electrical grounding and ensure smooth rotary motion.

Hans Raven, an ATK engineer who worked with a team to design the CMT and more than 100 other tools for the final Hubble repair mission, said he selected a Bal Seal spring after observing its use in other tool applications.

“I was looking for a way to allow the CMT to rotate while efficiently grounding the rotating portion to the shaft.” Raven said. “I didn’t want to overcomplicate things by using a ball bearing, and when I saw the [Bal Seal] spring, a light bulb went off. The multi-point coil contact provided exceptional grounding – zero resistance across the path. It was the ideal solution for this tool.”

Working on the orbiting Hubble in shifts lasting more than six hours each, Atlantis astronauts used their collection of specialized tools to repair the telescope’s existing Advance Camera for Surveys (ACS) and Space Telescope Imaging Spectrograph (STIS). They also installed two new instruments: the Cosmic Origins Spectrograph (COS) and the Wide Field Camera 3 (WFC3).

With repairs and upgrades complete, NASA expects the Hubble Space Telescope will be capable of taking pictures of the universe until at least 2014.

Microvision Receives $1M Contract Award from Lockheed Martin

Microvision announced today that it has been awarded a $1,000,000 subcontract by Lockheed Martin Corporation. This subcontract is part of DARPA’s Urban Leader Tactical Response, Awareness & Visualization (ULTRA-Vis) program, an advanced technology development initiative, whose objective it is to build a soldier-worn system that provides non-line-of-sight command and control in distributed urban operations for dismounted warfighters. Under the subcontract, Microvision will develop a daylight-readable, see-through, low-profile, ergonomic eyewear display.

DARPA has created the ULTRA-Vis program to bring real-time tactical see-through heads-up information to ground soldiers in order to increase their safety and situational awareness in urban environments. Although tactical information is available to ground soldiers today, existing head-mounted displays and legacy system architectures have prevented this information from being delivered in a low-profile, see-through iconic mode. When integrated to an advanced information management system, Microvision’s eyewear display could enable users to receive visual commands, view geo-registered iconic representations, and receive other full-color image content overlaid on their view.

“Microvision is very pleased to work with Lockheed Martin to advance the development of see-through eyewear displays in support of the DARPA ULTRA-Vis program,” said Ian Brown, Microvision’s Vice President of Sales and Marketing. “By designing Microvision’s ultra-miniature PicoP® Display Engine and our thin, clear Substrate Guided Relay (SGR) Optics into a wearable display, we have the potential to bring battery operable, low-profile, see-through, full-color eyewear displays to users. This eyewear display development could enable information content to be overlaid in the user’s field-of-view in operational environments, providing a critical information advantage. Additionally, this display could be used in other applications, where real-time content is needed to improve situational awareness, such as combat support and logistics.”

Evolution Robotics Wins U.S. Navy's Office of Naval Research Contract

Evolution Robotics announced today that it has won a federal contract from the U.S. Navy’s Office of Naval Research valued at nearly $1 million for research on scaling visual recognition for maritime domain awareness. Evolution Robotics is a recognized leader in object recognition and vision technologies and the military has consistently selected Evolution for their research and development expertise. In the past, the company has collaborated with the military on projects ranging from RPG detection to UAV autonomous navigation. The Navy’s most recent selection of Evolution Robotics is based on the company’s expertise in low-power embedded systems for visual recognition. Evolution will assist the Navy in developing real-time systems that can be deployed in the field for the purpose of recognizing objects such as boats, aircraft and road vehicles, regardless of potential distracters such as weather conditions, lighting, scale and viewpoint.

“We’re pleased to have the Navy select Evolution Robotics and we’re excited to work with them on their advanced research efforts,” said Dr. Paolo Pirjanian, CEO of Evolution Robotics. “The main challenge with vision is to develop algorithms that reliably and efficiently solve a problem in realistic settings, with limited computing power. Evolution Robotics is a recognized performer under military contracts and this award represents an extension of the previous work we have done to successfully transfer military grade technologies to the next generation of low-cost consumer products and solutions.”

Evolution Robotics focuses much of its R&D in the area of computer vision because of the potential it offers for current and future product developments. The company specializes in taking the advanced, military-grade technologies it develops and applying them to consumer level products – at consumer level prices – with the aim of making everyday products smarter. As an example of these technologies in the hands of consumers, NTT DoCoMo customers in Japan, using Evolution’s ER Search product, can use their camera phone to take pictures of movie posters, music CDs and even wine labels to order tickets, download ring tones and mp3’s and get product reviews, all with just one quick snap shot. (A video demonstration of Evolution Robotics’ visual search technology running on Apple’s iPhone can be seen at: http://www.youtube.com/user/EvolutionRobotics)

GE to Transform U.S. Military Base into Smart Grid Showcase

With the goals of increasing energy security, energy efficiency, and promoting cleaner, alternative energy at U.S. military bases, GE today announced it has been awarded $2 million in Federal stimulus funding from the U.S. Department of Defense (DOD) for a smart microgrid demonstration project at Twentynine Palms Base, California. The base is the world’s largest Marine Corps Base and it is the premier training facility in the world for Marine operations, drawing military personnel from all over the world for Combined Arms Exercises. GE and the Environmental Security Technology Certification Program (ESTCP) office at DOD are in the process of finalizing a contract for the project.

GE will design and demonstrate a smart energy management system that enables installations to more optimally manage on-site power generation and energy storage, while interacting with the regional electrical grid in a more intelligent and efficient way. Additionally, GE’s system will provide enhanced capabilities for installations to integrate renewable resources, such as solar energy, to help meet their electricity needs and reduce their carbon footprints.

According to the 2009 Defense Appropriations Act, U.S. military installations consumed 3.8 billion kilowatt-hours of electricity last year, enough electricity to power 350,000 households in the United States. In addition to high energy costs for these installations, critical defense facilities must operate seamlessly through a power outage or other infrastructure disturbance. These are two key challenges that a smarter, more intelligent grid management system will help to address.

“GE’s smart microgrid demonstration project will show how a more intelligent energy management system can help military bases further safeguard the operation of their power systems while also reducing overall energy costs,” said John Kern, Manager of GE’s Smart Grid Research Lab. “This project will serve as a model for other bases and it also will demonstrate how similar types of facilities, such as industrial complexes and universities, can take advantage of a smarter grid.”

U.S. military bases typically manage power in two ways: local power is generated on site for critical facility needs; and, the bases are connected to the larger U.S. electrical grid network. As part of the project, GE will provide an enhanced suite of microgrid control system technologies that will enable a military base to more effectively manage its local energy resources as well as the interaction with the larger electrical grid network.

To develop this new system, researchers at GE Global Research in Upstate New York will develop and incorporate advanced algorithms and computational decision engines into a microgrid controller built by GE Digital Energy. This microgrid controller will optimize the power generation and distribution within the microgrid. GE Fanuc Intelligent Platforms will also integrate many of these advanced technologies into a new supervisory control and software system that can span power generation and distribution as well as major power consumers within the microgrid.

GE has completed considerable research and development in microgrids in recent years for both the U.S. Department of Energy and the Canadian government. Because microgrids are essentially self-contained systems, they have great potential for enabling a higher penetration of clean, renewable power sources into the electrical distribution network. For contained complexes like a military base that can supplement their own power needs with power generation onsite, microgrids can be an attractive option for bringing more renewable power online.

NASA Ames Uses cPacket for 10 Gigabit Network Monitoring

cPacket disclosed today that the Emergent Network Technology Testbed group at NASA Ames Research Center is utilizing cPacket’s cTap “intelligent network taps” for wire-speed monitoring of NASA links up to 10 gigabits per second. cTaps provide the group with real-time situational awareness of network behavior and traffic, and a wide variety of troubleshooting and analysis capabilities not previously available at these data rates. cTaps support the agency’s High End Computing Capability (HECC) project, which includes Pleiades, the world’s third fastest supercomputer.

“Because of our tradition of delivering mission-critical applications that push all technical boundaries, we often rely heavily on network monitoring tools such as cTaps,” commented Dave Hartzell, CSC Network Engineer and member of the Emergent Network Technology Testbed group. “cPacket’s technology enables more effective network monitoring and analysis of our 10 gigabit WAN and LAN; we have greater visibility into our network links, providing us with in-depth, real-time information regarding traffic and performance metrics.”

NASA’s Pleiades supercomputer – which has 51,200 processor-cores and is capable of 609 trillion floating point calculations per second – is used for NASA projects such as combined ocean and atmosphere climate change modeling, large computational simulations of future space vehicle designs, and increasingly detailed models of dark matter and the evolution of galaxies.

cPacket is the inventor of “complete packet inspection”, a chip-based technology that is capable of inspecting every bit in every packet of high-speed network traffic – both header and data payload – and then selectively monitoring and controlling the traffic based upon these inspections. The cTap is a small network appliance that occupies one slot in an equipment rack and utilizes cPacket’s unique complete packet inspection chip. The cTap can transparently be “dropped in” to any 10 gigabit fiber network segment to begin its fine-grained monitoring and management functions. It also features packet filtering, mirroring, forwarding, and timestamps through dedicated 10G and 1G Ethernet ports.

The deployment of cTaps enables network traffic visibility and behavioral monitoring, selective drill-down, troubleshooting and debugging, packet loss and compliance to service level agreements (SLAs), and an overall centralized view of performance, capacity, and availability across multiple 10 gigabit links.

“HECC has a reputation as one of the most demanding computational and network environments in the world,” said Rony Kay, cPacket founder and CEO. “We are delighted to play a role in NASA’s mission to better understand our world and our universe.”