✒ United Airlines raised $6.8bn by putting up its customer loyalty scheme as collateral. The MileagePlus programme earned an EBITDA of $1.8bn with a margin of 34%, and accounted for about a quarter of the company’s profit.
With a valuation of about $22bn disclosed in the bond documents, the value of United’s MilesagePlus exceeded the airline’s market capitalisation of just $11bn, implying that the business of flying passengers has a value of less than zero.
The paradox is that a loyalty scheme is valuable only when there is an airline flying its planes to provide reward to those who want to use the miles. When an airline ceases operation/goes bankrupt, its loyalty programme usually disappears, rarely does it manage to survive the airline as a standalone business (such as how Delta bought Pan Am’s programme in 1991).