American’s loyalty program is worth more than Airbnb
This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. Terms apply to the offers listed on this page. For an explanation of our Advertising Policy, visit this page.
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.”
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.
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.
Welcome to The Points Guy!
WELCOME OFFER: 60,000 Points
TPG'S BONUS VALUATION*: $1,200
CARD HIGHLIGHTS: 2X points on all travel and dining, points transferrable to over a dozen travel partners
*Bonus value is an estimated value calculated by TPG and not the card issuer. View our latest valuations here.
- Earn 60,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $750 when you redeem through Chase Ultimate Rewards®. Plus earn up to $50 in statement credits towards grocery store purchases.
- 2X points on dining at restaurants including eligible delivery services, takeout and dining out and travel & 1 point per dollar spent on all other purchases.
- Get 25% more value when you redeem for travel through Chase Ultimate Rewards®. For example, 60,000 points are worth $750 toward travel.
- With Pay Yourself Back℠, your points are worth 25% more during the current offer when you redeem them for statement credits against existing purchases in select, rotating categories.
- Get unlimited deliveries with a $0 delivery fee and reduced service fees on eligible orders over $12 for a minimum of one year with DashPass, DoorDash's subscription service. Activate by 12/31/21.
- Earn 2x total points on up to $1,000 in grocery store purchases per month from November 1, 2020 to April 30, 2021. Includes eligible pick-up and delivery services.