Spirit Airlines taps loyalty program to back at least $500m in new debt
Spirit Airlines plans to raise several hundred million dollars in new debt backed by its loyalty programs, in the latest confirmation that loyalty assets are some of the most lucrative on airlines’ balance sheets. The $500m private deal is backed by the assets and intellectual property of the Miramar, Florida-based carrier’s Free Spirit and Spirit Saver$ Club programs, Spirit said in a securities filing Wednesday. The three-year debt would carry an interest rate of 8 percent with proceeds used to repay $155m in outstanding debt, and to boost liquidity ahead of an uncertain 2023 outlook. The deal follows $850m in loyalty-backed debt that Spirit borrowed in September 2020. Spirit’s latest transaction confirms the high value of loyalty programs to airlines. In fact, the value of the assets and intellectual property of budget airline’s Free Spirit and Spirit Saver$ Club programs, at $4.2b, is more than Spirit’s market capitalization of roughly $2.3b on Wednesday. The value of loyalty programs is about more than just driving repeat business from customers, it’s also big bucks given the low-cost revenues carriers’ reap from co-branded credit card deals. Delta, for example, generated $4.1b in cash sales from such agreements during the first nine months of 2022, or 11% of its total revenues. And that’s why during the past few years, airlines ranging from Aeromexico to Air Canada have spent millions of dollars to take full control of their loyalty programs. Prior to the pandemic, US carriers did not leverage their loyalty programs to raise capital. That changed when, in crisis mode, they were desperate to bulwark their balance sheets with cash to weather the travel slowdown. <br/>
https://portal.staralliance.com/cms/news/hot-topics/2022-11-10/general/spirit-airlines-taps-loyalty-program-to-back-at-least-500m-in-new-debt
https://portal.staralliance.com/cms/logo.png
Spirit Airlines taps loyalty program to back at least $500m in new debt
Spirit Airlines plans to raise several hundred million dollars in new debt backed by its loyalty programs, in the latest confirmation that loyalty assets are some of the most lucrative on airlines’ balance sheets. The $500m private deal is backed by the assets and intellectual property of the Miramar, Florida-based carrier’s Free Spirit and Spirit Saver$ Club programs, Spirit said in a securities filing Wednesday. The three-year debt would carry an interest rate of 8 percent with proceeds used to repay $155m in outstanding debt, and to boost liquidity ahead of an uncertain 2023 outlook. The deal follows $850m in loyalty-backed debt that Spirit borrowed in September 2020. Spirit’s latest transaction confirms the high value of loyalty programs to airlines. In fact, the value of the assets and intellectual property of budget airline’s Free Spirit and Spirit Saver$ Club programs, at $4.2b, is more than Spirit’s market capitalization of roughly $2.3b on Wednesday. The value of loyalty programs is about more than just driving repeat business from customers, it’s also big bucks given the low-cost revenues carriers’ reap from co-branded credit card deals. Delta, for example, generated $4.1b in cash sales from such agreements during the first nine months of 2022, or 11% of its total revenues. And that’s why during the past few years, airlines ranging from Aeromexico to Air Canada have spent millions of dollars to take full control of their loyalty programs. Prior to the pandemic, US carriers did not leverage their loyalty programs to raise capital. That changed when, in crisis mode, they were desperate to bulwark their balance sheets with cash to weather the travel slowdown. <br/>
