Passengers could benefit if airlines sell off air miles to banks

Credit-card holders could ultimately benefit if airlines decide to sell off air miles to banks to generate funding, given that air travel has been adversely affected by the COVID-19 pandemic and airlines need to generate income.

Many airlines have co-branded credit cards with banks and they raise revenue by selling miles from their frequent-flyer programs to them. The banks then issue the miles to cardholders as rewards for spending or signing up. Delta's co-branded credit cards are issued by American Express, for example, while United' and Southwest's cards are issued by JPMorgan Chase, American's by both Citi and Barclays and JetBlue's by Barclays. According to a report by the Wall Street Journal, some of these airlines have approached their credit-card partners to negotiate selling large stocks of air miles in advance.

The benefit of this arrangement would be that struggling airlines could potentially receive an injection of much-needed cash in exchange for offering air miles to the credit card companies at discounted prices. The reciprocal benefit for the banks that issue their credit cards is that they would be able to acquire the miles they give to customers at a cheaper price and entice new customers to sign up for the cards. While it hasn't been confirmed if any of the airlines will pursue the option of selling their air miles in advance, it is certainly an option while their income streams have been so greatly reduced.

Some have had to resort to strong measures to secure loans, with Richard Branson offering his private island as collateral against a loan for Virgin Atlantic, for example. Delta put up some of its planes as collateral for a credit line from banks, and other airlines secured loans by using airplanes and parts. It could ultimately be advantageous to customers when travel resumes, as banks could use the cheaper air miles to offer bonus earning opportunities to existing cardholders to encourage additional usage of the cards.

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