A month ago I wrote that frequent flyer programs would save the airlines because they offer rich sources of value and cash. However while United and Delta are reportedly in talks to sell large chunks of miles at a discount to their credit card partner banks, it’s actually Hilton that’s first out of the gate with this.

Hilton shared with the SEC that they’ve pre-sold $1 billion worth of points to American Express. That probably somewhere around half a trillion Honors points.

In April 2020, we pre-sold Hilton Honors points to American Express for $1.0 billion in cash. American Express and their respective designees may use the points in connection with the Hilton Honors co-branded credit cards and for promotions, rewards and incentive programs or certain other activities as they may establish or engage in from time to time. We will use the proceeds from the Hilton Honors points sale for working capital, general corporate and other purposes.

One Mile at a Time says this could encourage Hilton to devalue points – since they’re getting less revenue per point – but that he doesn’t think that’ll be the result. I agree, but only in part.

• With rooms empty, Hilton is going to need to use the loyalty program to incentivize stays. I expect they’ll be printing lots of points going forward, and not devaluing right away. In the near-term points will be easier to come by and easier to use.

• At lower cost per point, American Express can be more generous with points. Even if each point becomes worth less we may be earning more from them too. That’s what happened during the Great Recession when banks purchased large blocks of points at a discount to provide cashflow to their travel partners. We saw bigger up front bonuses and more bonusing of spend categories, versus the more common ‘one point per dollar’ earnings that preceded that time period.

• American Express probably did demand some protections that the points they’re buying can’t just be inflated away.

At the same time, I do expect that if travel demand picks back up, the printing of points will be something that loyalty programs try to get a handle on and there’ll be a drive to reduce costs by devaluation once rooms are again full. Is it possible to devalue Honors even further?

Hilton of course was the only major loyalty program to actually devalue during the Great Recession, and IHG’s marketing chief at the time called it the biggest devaluation he’d seen in 17 years. I trust that Amex is savvy enough to have built in protections against that.