United Airlines is pledging its MileagePlus loyalty program as collateral for a loan of $5 billion.
Once the deal is complete United hopes to have a liquidity war chest of about $17 billion.
The airline reckons this is enough to see it through the current crisis as it expects to see its current cash burn of $40 million shrink to $30 million in the third quarter.
It should also have a $4.5 billion federal loan under the CARES Act by then, which will be secured on its airport slots and gates.
United’s MileagePlus program has more than 100 million members, and over 100 program partners.
It has generated stable revenue for the airline over the years, and airline loyalty programs are increasingly being used as a valuable asset to underwrite loans.
MileagePlus awards accounted for 7.2% of United’s total revenue passenger miles last year.
United is seeing an uptick in travel demand but that is still down by about 70% compared to last year.
It said in a filing that ‘furloughs or other measures’ may still be required to cut costs.
