I’ve written here in the past about the importance of frequent flyer miles to airline bottom lines, and in particular the importance of co-branded credit cards which are the single largest source of non-flight miles.
When United entered bankruptcy, BankOne (since acquired by JP Morgan Chase) provided $500 million in debtor-in-possession financing. The bank needed the airline to survive because their most profitable credit card product is the United Visa. Now the bank is talking about loosening restrictions on loan covenants in order to allow the airline room to operate.
American Express pre-paid the purchase of $500 million worth of Skymiles in order to keep Delta out of bankruptcy. Again, an airline is kept afloat because it’s needed to sustain a credit card business.
Credit card miles are big business, and not just for the nation’s largest carriers.
The Alaska Airlines Visa from Bank of America will be good for $225 million in annual revenue to the airline in 2005. It’s growing at 28% a year. That’s an incredible figure for an airline that lost $15.3 million in 2004 and made $13.5 million in 2003. The sale of Mileage Plan miles to Bank of America dwarf both figures.
It’s no wonder that Alaska encourages its employees to push the card with contests. In my personal experience they’re more aggressive than any other carrier in encouraging passengers to apply onboard — but they’re far from the only carrier aggressively pushing their co-branded credit card. You can hardly move a hundred feet in Airtran’s Atlanta terminal without passing by a table promoting their Visa issued by Juniper bank.
