Liquidity Boosted By Loyalty: Creative Collateral

2020 was a crippling year for the aviation industry. With daily cash burn running into the tens of millions of dollars for many airlines, access to liquidity has been critical as treasury teams and fleet managers juggle expenses with decimated revenue. Many governments pledged state aid but what has been delivered to date has simply not been enough.

The 'Golden Goose'

Frequent flier programmes ("FFPs") have long played a central role in airlines' marketing strategies with many people assuming them to be balance sheet liabilities but, conversely, they are profit centres in their own right. FFPs generate significant revenue from the sale of frequent flyer miles to programme partners and passengers and revenue from the sale of the miles, minus the cost of actually flying passengers paying with redeemed miles, still creates a significant positive margin for the airline. Revenue from the sale of miles has remained stable even at times when demand for flights has