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United Airlines to mortgage MileagePlus for coronavirus funds, anticipates no impact to members

June 15, 2020
4 min read
United Airlines to mortgage MileagePlus for coronavirus funds, anticipates no impact to members
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United Airlines thinks it has the cash it needs to navigate the rest of the coronavirus pandemic without further impacts on customers with a new $5 billion mortgage of the MileagePlus loyalty program.

The deal coupled with an expected $4.5 billion loan from the federal government's CARES Act coronavirus aid package would give the Chicago-based carrier around $17 billion in liquidity — or cash — by the end of September, senior United executives said Monday. They believe funds would be enough navigate the crisis and a multi-year recovery that's expected before the industry returns to 2019 passenger numbers.

“It is quite a large war chest to get us through a second wave, or third wave of COVID if that happens," they said. "$17 billion should see us through until there’s a vaccine or demand has recovered.”

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The United executives emphasized that the transaction would "bring no changes" to how customers use MileagePlus. The airline also maintains control of the program, ceding none to lenders. The loan, in essence, leverages the loyalty program's nearly $22 billion value and $5.3 billion in annual revenue to raise liquidity to carry United through the crisis.

Other airlines have sold miles or points to credit card partners to raise funds. For example, JetBlue Airways raised $150 million through an advance sale of TrueBlue points to Barclays in March.

Others, like American Airlines' AAdvantage program, have said they plan to use their loyalty program as collateral for a potential CARES Act loan.

Related: United Airlines joins American in signaling that the summer may not be lost

Ample cash is seen as key for airlines to weather the COVID-19 crisis. Revenue all but disappeared during the early days of the pandemic as more people cancelled flights than bought new tickets. That has begun to reverse, but numbers remain low.

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Data from trade group Airlines for America (A4A) shows that U.S. air passenger bookings remained down 80% year-over-year during the week ending June 7.

All of the major airline bankruptcies that have occurred since the coronavirus outbreak have been attributed to the lack of revenue. Carriers have had to continue paying bills, for example on aircraft, even as revenue virtually disappeared and customers demanded refunds for cancelled flights. Restructurings including United partner Avianca as well as fellow South American carrier LATAM Airlines have occurred under such a scenario.

Related: State-by-state guide to coronavirus reopening

United continues to see monthly improvements. The number of travelers on flights continues to rise with the carrier expecting to fill around 55% of seats in July even as it plans a double-digit increase in the number of flights compared to June. During the month United plans to fly roughly 30% of what it flew in July 2019.

Most of the added flights are U.S. domestic ones with many going to destinations popular with leisure travelers, for example the Rocky Mountains in Colorado or beaches in Florida.

Returning travelers also means United is losing money at a slower pace. The carrier expects its cash burn -- or the amount it losses on a daily basis -- to drop to $40 million a day by the end of June and $30 million a day by the end of September.

Related: What aircraft could U.S. airlines send to the boneyard after the crisis?

Featured image by Getty Images

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Cons

  • The $395 annual fee might be expensive for some, but this card’s benefits provide much more value than that.
  • If you don’t travel frequently, this might not be the best card for you.
  • Earn 75,000 bonus miles when you spend $4,000 on purchases in the first 3 months from account opening, equal to $750 in travel
  • Receive up to $300 back annually as statement credits for bookings through Capital One Travel, where you'll get Capital One's best prices on thousands of options
  • Get 10,000 bonus miles (equal to $100 towards travel) every year, starting on your first anniversary
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  • Use your Venture X miles to easily cover travel expenses, including flights, hotels, rental cars and more—you can even transfer your miles to your choice of 15+ travel loyalty programs
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  • Earn 10 miles per dollar when you book on Turo, the world's largest car sharing marketplace, through May 16, 2023
Best card for premium perks while traveling
TPG Editor‘s Rating
Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
4 / 5
Go to review

Rewards Rate

10XEarn unlimited 10X miles on hotels and rental cars booked through Capital One Travel
5X5X miles on flights booked through Capital One Travel.
2X2 Miles per dollar on every purchase, every day
  • Intro Offer
    Earn 75,000 bonus miles when you spend $4,000 on purchases in the first 3 months from account opening, equal to $750 in travel

    75,000 bonus miles
  • Annual Fee

    $395
  • Recommended Credit
    Credit ranges are a variation of FICO© Score 8, one of many types of credit scores lenders may use when considering your credit card application.

    740-850
    Excellent

Why We Chose It

The Capital One Venture X card is one of the best all-round travel credit cards ever launched. Not only is it offering a tremendous welcome bonus, but cardholders can earn tons of miles on everyday spending and receive a 10,000-mile anniversary bonus to boot. Its annual fee is $395, but cardholders can count on up to $300 in statement credits toward travel booked through Capital One Travel each year and other valuable benefits like access to Priority Pass lounges and Capital One’s own growing family of airport lounges.

Pros

  • Excellent welcome offer worth 75,000 miles after you spend $4,000 on purchases in the first three months.
  • Up to $300 in annual travel statement credits toward bookings make through Capital One Travel.
  • 10,000 bonus miles (worth $100 toward travel) each account anniversary.

Cons

  • The $395 annual fee might be expensive for some, but this card’s benefits provide much more value than that.
  • If you don’t travel frequently, this might not be the best card for you.
  • Earn 75,000 bonus miles when you spend $4,000 on purchases in the first 3 months from account opening, equal to $750 in travel
  • Receive up to $300 back annually as statement credits for bookings through Capital One Travel, where you'll get Capital One's best prices on thousands of options
  • Get 10,000 bonus miles (equal to $100 towards travel) every year, starting on your first anniversary
  • Earn unlimited 10X miles on hotels and rental cars booked through Capital One Travel and 5X miles on flights booked through Capital One Travel
  • Earn unlimited 2X miles on all other purchases
  • Unlimited complimentary access for you and two guests to 1,400+ lounges, including Capital One Lounges and our Partner Lounge Network
  • Receive up to a $100 credit for Global Entry or TSA PreCheck®
  • Use your Venture X miles to easily cover travel expenses, including flights, hotels, rental cars and more—you can even transfer your miles to your choice of 15+ travel loyalty programs
  • Named editors' choice for "Best New Credit Card of 2021" by The Points Guy
  • Earn 10 miles per dollar when you book on Turo, the world's largest car sharing marketplace, through May 16, 2023