The secret weapon of successful business cases

The secret weapon
What helped increase the original Aeromexico purchase offer by more than 2.5 times? The answer: its customer base and brand loyalty. The buyers know this and are preparing to do what is takes to retain them.
In past months we have witnessed one of the most controversial chapters in the history of the Mexican business community: the process of acquiring the country's largest airline, Aeromexico. The players were Saba Group, a group of businessmen led by José Luis Barraza, and Grupo Mexicana.
The outcome was a public purchase conducted through, what many describe, as a process riddled with irregularities that left a bitter taste for the bidders and the public spectators--a very bad precedent for future bids.
There are many reasons why the sale of Aeromexico captured the interest of political and business communities in Mexico and around the world. One reason is that it affected the transportation and communication industries —which are key in the development and competitiveness of Mexico— but also threatened value and competitive strategies, and even national security. However, there was one point —a very critical point— in the deal that was overlooked by all: the airline’s customer base and brand loyalty.

The basis of it all
When you think of Aeromexico’s assets, you immediately think of its fleet of planes —which individually cost hundreds of millions of dollars, its airport and landing equipment, hangars, sales offices, and even its flagship Premier lounges. However, were these the assets that attracted the final $250 million for the acquisition of the airline?
The first offer made on August 22 by Mr. Saba —based on what they defined as a thorough valuation of the airline’s assets— didn’t even reach $100 million.
So what helped increase the original purchase offer by at least 250%? Without doubt it was its most important asset, both quantitatively and qualitatively: its strong customer base, which was forged almost 20 years ago through its Premier Club and Aeromexico-branded American Express card.
The Premier Club customer base is an important one because it represents a segment of people that travel more frequently than most. But most important, in theory at least, is that the airline has what I call the three basic rules to ensure customer loyalty:
a) Client information: Who are they, where do they travel, with whom and how much time does each spend on the road?
b) A process to exploit such information and thereby deduce patterns and significance of services and benefits for customers.
c) Professional and efficient communication with the client.
It is obvious that Aeromexico has executed the basics well and has reaped its rewards. This is clearly reflected in the number of members that benefit from Premier Club offers and services. So much so that today its customer base can be divided into two groups: Premier Club (CP)-only customers and those who are members of the club by virtue of Aeromexico-branded American Express card (CP/AE).
How much then is the Premier Club client base worth? It is very hard to say. It alone does not have much value, but with CP/AE it is very valuable. So much that Dario Celis reported that American Express was afraid that the airline would end up in the hands of the group backed by Banamex and lose its relationship with the clients.

The road starts here
Now that the airline is under the command of José Luis Barraza, will American Express’ fear materialize? Will the new management know how to approach and retain program customers and partners? How patient will the new administration be?
In the case that CP/AE clients are migrated to Banamex, will they be willing to change the method of payment recommended by Aeromexico? How many of them will end their relationship with the airline?
Only time will tell. Yet, we can be certain that Aeromexico, American Express and Banamex know what they can gain and lose in this new chapter and in the interesting battle in which the winner will not be defined by an opinion from the Federal Communications Commission, but by what they define as the continuous and recurring consumer preference. In other words, customer loyalty.

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