United has announced that it will used the United MileagePlus frequent flyer program to secure an additional $5 billion loan. This is in addition to $4.5 billion that they are expected to be able to access via the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) Loan Program. This will bring United to have $17 billion in liquidity by September 2020. This just goes to show how valuable these frequent flyer programs are for airlines.
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if they only buy back the miles at the price they sell, i will sell them. 50000 miles one way domestic coach and 200000 miles one way coach to asia most of the time and days of the year when cash fare is from $100 domestic and $500 asia one way? what a rip off! saveraward is a scam cos they rarely exist
I know of a few people who hold co-branded airline cards and either don’t redeem miles at all or spend them on items. One person I know has earned a ton of miles by putting expenses related to building a new house on her United card and got…a new TV with the points. I can definitely see how these cards can be a tremendous value to banks / airlines. Good number of people holding them would be better off with a no-AF 1% back card, let alone anything better.
I don’t understand. Are they putting up miles as collateral? How is a mileage program fetching so much money?
Aeroplan was spun off back in 2002 and reacquired by Air Canada back in 2018. I’d assume it’s their entire program that is the collateral, which likely has the exclusivity of being the only frequent flier program for United.
Here is a mind blowing fact about airlines. They make more money from milage programs than selling plane tickets and other fees. Basically these milage programs (which typically operates like a subsidiary of the airlines) sell billions of dollar worth of miles to mostly credit companies every year. The way they make tons of money is that a great percentage of miles they sold do not get redeemed.
To answer your question, they are putting up their MilagePlus business as collateral. MilagePlus is estimate to be worth more than 20 billion in market value alone.
you can think of the mileage program as its own separate business entity. Its revenues are selling miles to credit card companies and the airline itself. Its costs are securing seats on the airline on a redemption.
Sorry, but mileage programs are worth zero when the airline can devalue them at any time with zero notice. Hell, the airline can shitcan the whole program with no legal consequences.
So the program has a cash value, just not the miles?
Totally. They can add the program name to profit from deals. The name of United Airlines is quite, quite valuable as a trust component.
So… I don’t have to spend all my miles like every airline and hotel chain is going bankrupt this fall?