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Why the Future of Delta and American Airlines May Depend on Frequent Flyer Miles

Byrne Hobart
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To remain solvent during the pandemic, airlines have raised cash by putting up for collateral typical aviation assets and surprisingly their loyalty programs.

Loyalty valuations

Loyalty program earning valuations are comfortably above_ _the market capitalization of the airlines themselves. - An airline without its highly profitable loyalty program is a company that faces high labor costs, volatile fuel prices, and a rapidly changing demand environment. - With loyalty programs, that’s offset by a high-margin, high-growth side business.

Economics don't work

But the economics of the loyalty program doesn’t work without a robust airline operation. - Ex. if airlines scale back their flights and routes, which loyalty members would want to spend their points on, the loyalty program could become worthless.

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