| Airline Sky Miles |
| By Credit Federal |
Published
08/1/2008
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Rewards Credit Card
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Airlines Advance Sell Sky Miles
To boost revenues while the financial crisis continues, airlines are taking advantage of quick cash by selling frequent flier programs miles.
Both United and Continental airlines have already made deals of $600 million and $235 million respectively, for airline sky miles to be awarded in the future to travel miles card users issued by JPMorgan Chase.
The downside, is that these advanced sales could cause a loss of value, since all the extra miles will be hitting the market as airlines begin shrinking capacity dramatically.
Delta, United and US Airways have all presold sky miles in the past, so the practice is not new. What is new is the pace as near record fuel prices and a weak economy threaten to bare the cash reserves of airlines. Even other U.S. airlines; such as Delta, US Airways and American, have indicated interest in doing the same.
Richard Anderson, Delta's new CEO, says he's "pretty excited about the opportunity" to do another forward sale of miles to generate cash, but he wants to wait until Delta's merger with Northwest is completed.
Delta's affinity card is issued by American Express; Northwest's by U.S. Bank. They and other banks are likely to bid to issue the affinity card of what would be the world's largest airline because it would give them access to many big spenders.
According to Randy Petersen, publisher of Inside Flyer magazine: "The average spend of a normal customer with a Visa or MasterCard is around $4,000 to $6,000 a year. But the average spend for a customer using an airline affinity card is around $37,000 to $39,000."
Petersen says that once a credit card issuer makes a big investment in a carrier's frequent flier miles, it has a strong incentive to quickly put those miles to work by offering mileage bonuses. That puts more miles into the accounts of more travelers who, in theory, will be able to claim more awards; mostly free trips, faster, but airlines are sharply reducing capacity.
"No doubt consumers will see a plethora of offers for bonus miles," says analyst Henry Harteveldt at Forrester Research. "The question is, will they be able to cash in miles when they want, for flights where they want?"
Browse and apply online for a travel credit card, airline miles credit card, or other rewards cards.
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