American Airlines borrows $7.5 billion against its frequent flyer programme

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American Airlines has followed in the footsteps of United and Delta and mortgaged the assets and future cashflows of its frequent flyer programme, AAdvantage. It has raised $7.5 billion.

Despite this huge sum, there is still a lot of nonsense talked about how ‘frequent flyer schemes are more valuable that the airlines that own them’.

American Airlines has mortgaged the assets and future cashflows of its frequent flyer programme, AAdvantage

Nothing could be further from the truth, because this logic assumes that the scheme has a life independent of the airline. It ignore the fact that the airline is not only a significant issuer of miles but the primary redemption route. Even people who end up redeeming elsewhere will only have signed up originally due to the lure of a free flight.

It is also very easy to manipulate the value of a frequent flyer programme. Two of the biggest revenue flows – cash from the airline to buy miles, and cash from the programme to buy reward seats – are intra-group and not necessarily at free market values.

If you work in the loyalty industry, or simply have an interest in the business model behind the programmes, you will find this PDF slide presentation worth downloading. SEC regulations in the US have forced AA to be more open about the programme that it has been in the past.

How to earn American Airlines miles from UK credit cards (December 2021)

American Airlines no longer has its own UK credit card.

There is, however, still a way to earn American Airlines miles from a UK credit card.

The route is via Marriott Bonvoy. Marriott Bonvoy hotel loyalty points convert to American Airlines miles at the rate of 3:1. You receive an additional 5,000 miles bonus if you convert 60,000 Marriott Bonvoy points at once.

The best way to earn Marriott Bonvoy points is via the official Marriott Bonvoy American Express card. It comes with 20,000 points for signing up and 2 points for every £1 you spend.

At 2 Bonvoy points per £1, you are earning (at 3:1) 0.66 American Airlines miles per £1 spent on the card. This will increase to 0.83 AA miles per £1 if you convert Bonvoy points in chunks of 60,000 points.

You can apply here.