Airlines Selling Air Miles to Banks: A Benefit for Credit Card Holders?

Credit-card holders could ultimately benefit if airlines decide to sell off air miles to banks to generate funding. The air travel industry has been adversely affected by the COVID-19 pandemic, prompting airlines to seek new avenues to generate income.

Many airlines have established co-branded credit cards with banks, which are instrumental in generating revenue by selling miles from their frequent-flyer programs. The banks subsequently issue these miles as rewards to cardholders for their spending. For instance, Delta’s co-branded credit cards are issued by American Express, while United and Southwest’s cards are handled by JPMorgan Chase. According to a report by the Wall Street Journal, certain airlines have initiated discussions with their credit-card partners to explore the option of selling substantial amounts of air miles in advance.

Struggling airlines could gain a much-needed financial boost by selling air miles at discounted rates to credit card companies. This arrangement benefits banks as well; they could acquire miles at a lower cost and use them strategically to attract new customers. However, it remains uncertain whether airlines will follow through with selling their air miles, especially while traditional income streams have been significantly impacted.

Some airlines have taken drastic measures to secure loans. For instance, Richard Branson offered his private island as collateral for a loan with Virgin Atlantic. Delta also used some of its planes as collateral to access funds from banks, and other airlines have similarly secured loans with their aircraft or parts. Consequently, when travel resumes, customers may benefit from bonus earning opportunities on credit cards as banks take advantage of these lower-cost air miles.

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