During the American Airlines earnings call the airline revealed they had the AAdvantage program appraised and hinted at a $30 billion value, something CEO Doug Parker had previous scoffed at.
It turns out that appraisals provided a range for the loyalty program, and during the Wolfe Research conference this morning American confirmed that $30 billion was the top end of that range.
Airline CFO Derek Kerr offered that the appraised value of the program is between $18 and $30 billion. And he confirmed that the program is expected to be used as collateral for a federally subsidized CARES Act loan. The “deal is not done yet with the government, [but we] fully expect it to be [by the] end of the second quarter.”
However that will still leave the airline with the ability “to do other things” whether “prepaid miles or other forms of liquidity” in a deal with co-brand credit card issuers Citibank and Barclays who have been “willing to help us as we go forward.”
Asked by analyst Hunter Keay how lending against the program works given that “if American goes away what do you have with the loyalty program other than a list of names?” the airline responded that the airline isn’t going away and the list of names alone is “massively valuable” and that no matter way “this program survives in anything you do it’s the biggest asset we have in the company.”
American’s “number one priority is to get the government loan done [because it is] the most efficient financing out there today.” That is expected to mean pledging AAdvantage to the federal government, which the Department of the Treasury laid out as a possibility in early April.
Cross-talk at the end of the question and answer session turned to American executives realizing that they hadn’t previously disclosed details about the appraisal of the AAdvantage program.