Can air miles points be securitised?

Before there were ICOs, there were frequent flyer programmes. The associated points may have started off as a way for airlines to reward loyal customers — but today they have become a core profit driver helping to keep the aviation industry afloat. Airlines sell loyalty points to banks, retailers and credit card companies, whose customers accumulate them through spending and can then redeem them, often on flights that might otherwise struggle to fill capacity. In 2017, Delta made $3b, or 7% of its total revenue, from its frequent flyer programme, according to research organisation IdeaWorksCompany. American Airlines made $3.1b and United $2.3b. Christopher Barnard, co-founder and president of Points, which has created a digital “loyalty wallet” that travellers can keep their rewards in, said frequent flyer miles “are a key economic asset . . . and in some cases, some people argue they're the most important economic asset an airline has”. Atanas Christov, CE of Affinity Capital Exchange (ACE), says loyalty points have gone from “funny money” issued by airlines to placate customers at no cost to “a significant percentage of the revenue that airlines generate”. Which is why Christov’s company, Affinity Capital Exchange, is attempting to create an institutional market with “points-backed securities” by getting airlines to use portfolios of points as collateral to lower the cost of loans. Banks or credit card companies could then buy instruments based on these collateral pools and trade them on primary and secondary markets for profit. Story has more details.<br/>