American's loyalty program is worth more than Airbnb

Airline loyalty programs are massive businesses in and of themselves. In some cases, they're more valuable than the rest of the airline's operations.

In American's case, the carrier plans to use the AAdvantage program as collateral for a federally subsidized CARES Act loan. And as part of that process, the carrier's had the loyalty program appraised. Just how much the program is worth? Between $18 and $30 billion, according to AA's CFO Derek Kerr.

For more TPG news delivered each morning to your inbox, sign up for our daily newsletter.

The Fort Worth-based carrier plans to pledge the AAdvantage program to the feds by the end of the second quarter. Interestingly, United also suggested that it could use its MileagePlus program as collateral for federal aid.

Throughout the coronavirus, we've seen hotel chains leverage these assets by pre-selling millions of dollars worth of points to credit card issuers in order to raise some much needed cash. American's two chief competitors — Delta and United — have reportedly been in talks with Amex and Chase, respectively, about doing just that.

Even if the loyalty program is given as collateral to the feds, Kerr stated that the airline could still work with Barclays and Citi on preselling miles or "other forms of liquidity."

Daily Newsletter

Reward your inbox with the TPG Daily newsletter

Join over 700,000 readers for breaking news, in-depth guides and exclusive deals from TPG’s experts

Email address

Sign up

By signing up, you will receive newsletters and promotional content and agree to our Terms of Use and acknowledge the data practices in our Privacy Policy. You may unsubscribe at any time.

Related: American Airlines 'not going away' because of the coronavirus crisis

This is the first time that the appraisal of the AAdvantage program has been disclosed publicly. At its current valuation, the program, which is widely considered America's first airline loyalty program, could be worth more than the airline itself.

Related: Maximizing redemptions with American Airlines AAdvantage

This hasn't stopped American from making changes to AAdvantage over the course of the past few weeks. It all started when the carrier extended elite status across the board. As part of the announcement, American revised its award change and redeposit fee structure, which was bad news for some members. Then on May 19, the carrier introduced the ability to use miles for seat assignment purchases. AA also removed its legacy award search tool too, in a sign that dynamic award pricing is here to stay.

Nonetheless, the AA loyalty program is still incredibly valuable, and enough to keep the carrier (partially) funded by the government for the foreseeable future.

All photos by the author.