When United Airlines went through bankruptcy 20 years ago, it was commonly said that they needed to continue flying to preserve the underlying co-brand credit card business. Even then the loyalty program was the profitable tail that wagged the dog.

During the Great Recession, when airlines needed to access cash, they went to their co-brand credit card issuing banks to pre-sell up to a billion dollars in miles. They offered a good deal on the miles, and banks came up with the cash (in some cases this was structured as a loan).

So that’s the playbook that the airlines were expected to go to during Covid, and in some cases that’s what they did. That’s what Southwest Airlines did in late 2020. But programs had grown in value, and the realization of how valuable the programs are became more widespread. United, Delta and American each raised $6.5 to $10 billion apiece in debt backed by their loyalty program revenue.

The pandemic is over, and airlines are racing to delever – to pay down debt with interest rates so much higher today. But Air France KLM is just now looking to borrow against its Flying Blue program as Brian Sumers notes in his recap of their earnings call.

• Air France KLM is engaged with Apollo Global Management for $1.65 billion in debt (this is the firm co-founded by Leon Black, whose ties to Jeffrey Epstein are currently making news, Air France has separately already raised over a billion dollars in two separate deals with Apollo).

• This entails creating a separate business entity for the loyalty program, which other major airlines already have.

Air France KLM isn’t nearly as lucrative as major U.S. frequency programs. Their co-brand deals aren’t as rich because of interchange caps in Europe. My several years-old understanding of their deal with American Express in France involved sharing interest paid by consumers on borrowing rather than a more traditional miles-purchase agreement.

Air France KLM insists Flying Blue won’t be spun off. CEO Ben Smith was President of Air Canada when their relationship with Aimia which ran the spun-off Aeroplan program went south, and the carrier laid out plans to bring the loyalty program back in house. While some analysts see spinning off loyalty programs as a way of ‘unlocking value’ in fact spinoffs create frictions which destroy value.

The Flying Blue program partners with U.S. credit card transferable points schemes in order to gain a slice of U.S. interchange revenue. U.S. card revenue is actually a motivation for the current quality of the program.