How Is United Airlines’ Loyalty Program Worth $22 Billion?
Photo Credit: United Airlines says its frequent flyer program is worth nearly $22 billion. Pictured are United economy class seats. United Airlines
Skift Take
United opened some of the books for its MileagePlus program. It's a highly lucrative operation, based mainly on sales of miles to third parties, including credit card companies.
Analysts long sought information about the economics of U.S. airline loyalty programs, believing they might be as worth as much as the airlines themselves. Executives repeatedly would parry questions, offering limited data on their crown jewels.
But United Airlines is in a cash crunch, and on Monday it said it would secure a $5 billion loan against the value of its loyalty program, MileagePlus Holdings. In doing so, United shared data about its scheme, spilling one of the industry's worst-kept secrets: These programs are extremely valuable.
In some ways, the data shows what you might expect. United loyalists spend more money with the airline than others, including during bad times, and may prop it up in an eventual recovery. What's less known is how much revenue other activities produce, especially sales of miles to partners, including credit card companies, which buy miles from airlines and use them to reward their customers.
First, some
