Amid airline cuts, loyalty programs are getting a lift
With all the cuts in the airline industry, one thing seems safe from the turmoil: the highly-profitable loyalty programs run by the airlines. Consider Chase and United Airlines, which yesterday announced the renewal of their United Airlines co-branded credit card program which, the airline claims, offers various products that “provide exceptional travel benefits” to cardmembers.
What’s in it for Chase? The program is indeed popular, as many Americans have gotten addicted to getting frequent flier miles for everything from groceries to doctor’s visits to college tuition.
What’s in it for United? A lot of money. Here are a couple lines from a memo that Jake Brace, United’s executive vice president and CFO, sent to travel agencies today about the renewed program:
This is one of the many steps we are taking to improve our liquidity and increase the amount of cash we have on hand to strengthen our business for all our stakeholders in this volatile fuel environment.
Under the terms of the agreement, United has received an additional $600 million from Chase in consideration for the advance purchase of frequent flier miles and for extending the agreement.
These credit cards offering frequent flier miles have been around since the 1980s, but they have become increasingly popular for airlines and consumers.
And why not? In a time of fluctuating fuel prices, and an uncertain economy, selling miles to Chase provides a source of income to United without actually having to fly passengers. And of course, it offers the public a chance to earn miles without actually flying.
At some point in the future, people presumably will want to redeem all those miles. But in the famous words of Scarlett O’Hara, “tomorrow is another day.”
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Nice post. I always wondered how those cards worked.
Quick note for all you AAdvantage people…they are changing their rules as of October 1. You will need more miles to earn a free ticket and there are charges associated with the changes they’ll be making. Either read my post about it or see American Airlines’ website.
Just another way American Airlines is looking out for their most loyal customers.