LOYALTY MYTHBUSTERS: DON’T WORRY ABOUT POINTS LIABILITY

At the end of 2015, members of the American Airlines AAdvantage program had over 853 BILLION frequent flyer miles outstanding.

Those miles represented a total liability of around $2.45 billion.

Many folks see this “debt” as a threat to the viability of the airline and the frequent flyer program itself.

Even airline Chief Financial Officers are often fearful of members “cashing out” their miles too quickly.

U.S. based airlines typically don’t like to disclose the finances of their frequent flyer programs (FFP), often hiding behind the excuse that their credit-card and bank partners don’t want the details released. Other airlines operate their FFPs as separate entities and report more openly on the performance of their programs, to varying degrees.

This lack of disclosure makes it difficult to dispel myths about loyalty program liability.

Thanks to analysis by Catchit Loyalty, we can take a closer look at American Airlines and use the AAdvantage program as an example to illustrate - that far from being a “threat” to the airline - this program liability is actually a healthy sign of a highly successful cash-generative business unit.