Delta to Use Frequent-Flier Program to Raise $6.5 Billion
Airlines in a move that should surprise exactly nobody said the date needs to borrow $6.5 billion, an airline executives said the other day, the company is losing $27 million a day. The interesting slash surprising part of this deal is the asset. The Delta is putting up his collateral, its frequent flyer program marketplaces, Justin Hose, going to explain exactly how that's gonna work. Frequent flier miles aren't only meant to build customer loyalty there. Also a product that airlines cell Samuel Angle a senior vice president with a consulting firm, I C F. He says The buyers are credit card companies and the quite a card companies in turn, give those miles to consumers as a reward for using their credit cards. Angle says Miles are a money making machine for airlines. At the beginning of this year, the programs of the four largest U. S. Airlines together had been valued at $77 billion if they were Stand alone Businesses airlines, Khun Tap these programs to raise cash. One common method is to pre sell miles the banks to get cash upfront. Henry Harteveldt is president of Atmosphere Research group, he says an airline can also spin off the entire program is their candidate did in 2005 no airline, though, until recently has leveraged its frequent flyer program. As collateral against a loan earlier this year United put up its loyalty program is collateral for a government loan. Harteveldt says. It's a creative way to raise cash at a time when air travel demand, especially by their more profitable business fliers has fallen off the cliff. Airlines have other creative ways to raise money. Scott Hamilton with the aviation consultant Seeley him, company says it's common for airlines to pledge their planes as collateral for loans, even their headquarters and airport gates. But the frequent flyer program is to me the most creative and the most visible sign of the desperation that the airlines urine the risk for airlines, Hamilton says is taking on too much debt. That could make it harder for them to recover from the current slump.