Airlines Looking to Sell Discounted Miles
The airline industry has been hit the hardest by the coronavirus outbreak. Travel in the United States has plummeted to numbers not seen in over 50 years. So airlines are hurting for cash. Airlines are already trying to hold on to cash that they should refund for canceled flights.
Now United and Delta are considering selling miles at a discount in order to raise much needed cash during the coronaviurs pandemic. This latest option to raise cash by selling miles was talked about with the respective card issuers Chase and American Express, as per Wall Street Journal. The companies have talked about selling miles ahead of schedule and for less than normal. People familiar with the matter acknowledged the talks but added that the discussions might not result in any deals.
Banks buy miles from airlines to reward consumers for welcome bonuses and spending on their co-branded credit cards. But based on these discussions, banks would buy more miles in bulk, instead of buying them gradually as needed for customers spending.
U.S. airlines have mortgaged gates, flight paths and just about any asset in order to secure billions needed. Airlines are also waiting to get billions from the government, but even that amount could be lower than expected. A $25 billion in cash grants was approved in the relief package, but it will actually be only $17.5 billion. The other $7.5 billion will now be loans airlines will be required to re-pay.
Final Thoughts
If airlines do sell discounted miles in bulk to card issuers, customers could see bigger welcome bonuses and spending offers. That is if issuers choose to pass the saving along to cardholders.
We could also see more deals directly from airlines, where travelers can buy miles. Buying miles is normally not a great deal. You rarely get a price lower than what miles are normally valued. And especially now with the risk of airlines going under, it makes even less sense to buy miles.
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One thing that surprises me is how Turkish Airways is offering to refund tickets in miles at one cent per point but the US airlines haven’t considered doing the same.