As the pandemic effects chip away at the world economies, many airlines are forced to find new ways to bolster liquidity. With no permission to fly and the majority of planes grounded, monetizing frequent-flyer programs appears to be a quick way of raising cash. Airlines in the United States have already started the ball rolling.
On May 8, 2020, the US low-cost carrier JetBlue Airways announced that it is selling miles to the credit-card partner Barclays. The deal will reportedly bring the airline $150 million, Bloomberg writes.
“It was a good opportunity for us to get a small amount of incremental liquidity at attractive terms,” Chief Financial Officer Stephen Priest explained the move while announcing the airline’s first-quarter financial results.
The carrier, headquartered in Long Island City, is one of the first airlines in the USA to start monetizing its mileage program amid pandemic. Delta and United were also reportedly looking to resell their miles to credit card partners.
Selling loyalty points to banks is a way of getting a large amount of money for airlines in a short time frame. However, it is a pricey source of maintaining liquidity, which often signals a dire financial situation.
“We view this as a very expensive source of liquidity and it would pain us to see airlines tap it as it carries an earnings burden, a negotiating leverage burden, and a valuation burden,” airline analyst Joseph DeNardi said, mulling over the topic.
On May 7, 2020, JetBlue Airways posted a $268 million of a quarterly loss. In the press-release, the airline also revealed plans to downsize Airbus order from 61 to 40 aircraft to save $1.1 billion in capital expenses through 2022.