/Airlines frequent flyer programs prove a lifeline even as travelers stay home in pandemic – CNBC

Airlines frequent flyer programs prove a lifeline even as travelers stay home in pandemic – CNBC


Seats in the economy class cabin on board an American Airlines Boeing Co. 777-300ER aircraft.

Brent Lewin | Bloomberg | Getty Images

You know things are bad for airlines when Delta loses more than $5 billion and it’s an improvement from the prior quarter.

By now it’s no secret that the pandemic has devastated demand for air travel. A web of travel restrictions, limited tourism attractions, endless Zoom calls and worries about the virus itself are keeping a lid on bookings.

Demand has climbed from the 1950s depths hit in April, but not enough. The Transportation Security Administration screened 64 million people at U.S. airports in the third quarter, which coincides with the peak summer travel season. A year ago they screened more than 220 million, a 71% decline.

The six biggest U.S. airlines lost more than $10 billion in the second quarter. Executives say the pandemic will have longer-lasting financial scars than the Sept. 11 attacks and the Great Recession. A recovery could take years, with once-lucrative business and international travel expected to bounce back last. 

This time around though, airlines have a special weapon: their frequent-flyer programs.

These loyalty programs, which started in the 1980s, have proved a lifeline for airlines. For one, loyalty revenue has dropped less than ticket sales. More important: airlines are leveraging these programs like never before. Delta, United, American and Spirit used loyalty platforms to back more than $20 billion in debt this year to weather the crisis.

Their strategy came with disclosures that are illuminating this once opaque business. Investors should pay close attention.

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