How Airlines Are Quietly Becoming Banks

While airlines are experiencing cash flow difficulties; Giants like United Airlines, in order to stay afloat They sought loans worth billions of dollars.

But getting a loan required a mortgage, and United’s most valuable asset was, surprisingly, The loyalty program was MileagePlus.

Loyalty programs reaching high valuations have redefined their role and economic power in the airline industry.

In the first wave of Covid-19 For companies like United, cash had become the key to survival. In order to continue its operations, the company Requested a loan of $5 billion But the collateral required for the loan required something more than the value of the company.

At this point, United’s most valuable trump card is MileagePlus loyalty program has been activated. A detail in the documents submitted to the SEC revealed that the program had a tremendous valuation of $ 21.9 billion.

This situation, Like Delta and American Airlines It revealed that other major airlines have loyalty programs with similarly high valuations.

The incident marks a paradigm shift in the airline industry.

According to Wall Street analysis, the market values ​​of airline companies are below the financial value of loyalty programs staying.

In fact, loyalty programs, airlines has become their most valuable asset. and even shows that they have more value than the companies themselves.

In other words, airline companies Most of the market values ​​are It actually comes from loyalty programs.

The programs aimed to build loyalty by encouraging passengers to fly repeatedly with a particular airline.

At first just earn miles on flight ticket purchases programs; Over time, it has allowed you to earn miles in different areas such as credit card usage, hotel reservations and car rentals.

Expansion of airline companies create their own virtual currencies and allowed them to control the supply of their currency.

Frequent flyer programs, It’s actually a kind of financial miracle. Airlines act like their own central banks, creating and managing their own currencies.

Developments show that airline companies are no longer just transportation providers.

So the airline industry; from a business model based solely on flight ticket sales, customer loyalty and Turning brand loyalty into financial advantage It evolved into a much more complex structure.

So, what do you think about this strategy of the airlines?

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