RE:Loyalty Programs – As a source of cash From today’s Wall Street Journal
United Airlines Holdings Inc.
UAL -6.62% will mortgage its frequent-flier program to secure a $5 billion loan from three banks as it seeks to build a cash cushion to see it through the
coronavirus pandemic.
Loyalty programs are a rich vein for airlines to secure cash. Co-branded credit cards associated with the programs essentially allow carriers to book revenue from a slice of all customers’ spending. That comes in handy at times like this, as customers continue to use airline-branded cards for other purchases. United said its MileagePlus program generates over $5 billion in cash a year and is worth over $20 billion.
From United’s 8K filing today:
Multiplying MPH (United’s Loyalty Program) 2019 EBITDA by a factor of 12 equates to a MileagePlus
valuation of approximately $21.9 billion.
(United's current market cap is $11.518 billion (source: S&P Capital IQ)
Click on the following link for my January 2 post on Air Canada’s loyalty program.
https://stockhouse.com/companies/bullboard/t.ac/air-canada?postid=30509274