Airlines, hotels raise billions of dollars by selling points en masse
Cash-strapped airlines and hotels look to unlock significant amounts of money by tapping into one of their most valuable assets.
By David Flynn, May 12 2020
It's often said that loyalty programs are a license to print money, and airlines and hotels hit hard by the coronavirus pandemic are proving that to be very much the case.
The worldwide slump in travel means that few people are flying, and fewer still staying on hotels. The global business travel sector is expected to take a revenue hit of about $1.25 billion, according to industry body the Global Business Travel Association (GBTA).
To bolster their cash reserves to help weather out COVID-19, some airlines and hotel chains are now realising a vital stream of revenue by selling extraordinary amounts of points in their rewards programs to credit card partners,
JetBlue Airways last week sold enough of its TrueBlue loyalty points to Barclays to pocket US$150 million.
“It was a good opportunity for us to get a small amount of incremental liquidity at attractive terms,” JetBlue Chief Financial Officer Stephen Priest said on a conference call Thursday to discuss the airline's first-quarter financial results. Barclays, which issues JetBlue’s co-branded credit card, confirmed the sale.
Airlines disclose few financial details of their loyalty programs, including their primary source of revenue: selling miles to banks that then use them to reward credit card use by customers. JetBlue received US$475 million from such deals last year, Stifel analyst Joe DeNardi said in an April report.
According to The Wall Street Journal, Delta Air Lines and United Airlines have both approached their respective credit-card partners about purchasing large stocks of miles. Delta Air Lines reaped US$4 billion from mileage sales to American Express in 2019, DeNardi said, with Delta's SkyMiles credit cards accounting for 22% of AMEX balances worldwide and 8% of AmEx's total global business.
JetBlue’s sale of loyalty points echoes moves by Hilton and Marriott, which have together raised US$1.92 billion in recent weeks from similar transactions.
Hilton said it pre-sold US$1 billion worth of points in its Hilton Honors loyalty program to American Express. Hilton is one of AmEx’s largest co-brand partners, with the cards representing about 2% of spending on the firm's network.
Earlier this month, Marriott raised US$920 million in cash through deals with American Express and JPMorgan Chase.
Additional material by Bloomberg
David Flynn is the Editor-in-Chief of Executive Traveller and a bit of a travel tragic with a weakness for good coffee, shopping and lychee martinis.
Singapore Airlines - KrisFlyer
08 Jun 2018
Total posts 91
Just so long as you're sure the airline or hotel chain isn't going to go bust!! Loyalty schemes can be a licence to print money - on the basis that the underlying airline / hotel chain is still about. I think the next few weeks will perhaps provide a good case study as to what they are worth in the absence thereof.
13 May 2020
Total posts 827
does this mean, there will be more people chasing frequent flyer seats than ever ? Could be tricky, getting frequent flyer seats, when all airlines want is cash. With points, they have already been paid. So upgrades for points, might disappear or be harder to get, while upgrades for dollars easier.
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