Redesigned loyalty program collateral

Featured News Subscribe to Trends. Connected Economy. B2B Payments. Grocery Innovation. Healthcare Payments. Mobile Wallets. Payments Innovation. Restaurant Tech. Small Business Innovation. According to Reuters , The US Treasury has now sent airlines eight questions they must answer about their collateral, with four specifically in relevance to loyalty program assets. The Treasury is strongly considering loyalty programs as collateral for any funds.

Yep, the loyalty programs may actually be more valuable than the airlines, the planes or flying people to places around the globe and the US Treasury is exploring the notion of these programs we engage with daily as collateral for the funds. Airlines are a vital part of the global economy and will be even more vital in a recovery, but allowing funds to be released without greater guarantees for job security, or at least a guarantee taxpayers will benefit is just foolish. Congrats to all around great guy, Gary Leff, and co-author Veronique De Rugy on this fantastic contribution to the process.

Should airlines put these programs up as collateral? Gilbert Ott is an ever curious traveler and one of the world's leading travel experts. His adventures take him all over the globe, often spanning over , miles a year and his travel exploits are regularly More by Gilbert Ott.

AAdvantage and MileagePlus, according to their projected enterprise values, are significantly more valuable than the respective airlines American and United as measured by their market capitalizations at the time. Why are we only seeing this now? The answer, of course, is pressure from the pandemic, which has cast a spotlight on a hitherto underused asset.

When the bottom fell out of air travel, loyalty programs stood out for their resilience. Although people had stopped flying, they continued to spend with program partners, specifically the co-branded credit cards. Accrual from non-air sources activities other than flying now account for more than half of all miles earned in major programs. This type of spending has proven to provide a natural hedge during downturns.

As the crisis sent passenger numbers plummeting, finding sources of liquidity became mission critical, said Bondar. Traditional sources of liquidity include pre-selling of miles to partners, and equity carve-outs of the loyalty program. United evaluated these traditional ways of leveraging the loyalty program.

In an innovative turn of events, United came up with a new structure that, whilst maintaining full ownership of its program, managed to unlock access to capital at favorable terms. The numbers are certainly impressive.