Airlines Sell Frequent-Flier Miles For Fast Cash

July 31, 2008— -- Airlines searching for extra cash to survive their deepening financial crisis are finding out just how valuable their frequent-flier programs really are.

Travelers, however, could see the value of their frequent-flier miles eroded by such deals, especially since all those extra miles will be hitting the market as airlines begin shrinking capacity dramatically.

Richard Anderson, Delta's new CEO, says he's "pretty excited about the opportunity" to do another forward sale of miles to generate cash. He wants to wait until Delta's merger with Northwest is completed, presumably late this year.

"There is a very substantial opportunity there," Anderson told analysts and reporters in a mid-July conference call. "When you think about the size of what this (combined) frequent-flier program will be," Delta's program should have a "substantially larger" value in a cash-out deal than Continental's OnePass program.

Delta's affinity card is issued by American Express; Northwest's by U.S. Bank. They and other banks are likely to bid to issue the affinity card of what would be the world's largest airline because it would give them access to many big spenders.

"The average spend of a normal customer with a Visa or MasterCard is around $4,000 to $6,000 a year," says Randy Petersen, publisher of Inside Flyer magazine and several related websites. "But the average spend for a customer using an airline affinity card is around $37,000 to $39,000."