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Fighting to stay afloat during the decline in air travel during the coronavirus epidemic, Delta Airlines is turning to its popular frequent flyer program to tap into financial options.
Essentially, Atlanta-based airline Sk plans to mortgage its Sky Miles loyalty program to 6. 6.5 billion. Uninterrupted flyer programs are a lucrative asset for airlines that make billions each year by repeatedly selling flyer miles to those who offer miles to credit-card partners as a reward for expenses. American Express, for example, paid Delta 4. 1.41 billion for miles in 2019, according to a filing with the Securities and Exchange Commission.
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Private financing deal The Atlanta-based carrier has lost about 27 27 million in cash in a single day amid unprecedented declines in air travel due to COVID-19. The amount will be used to bolster 15.7 billion in cash and short-term investments made at the end of June.
In a press release, Delta said it was building a new company called New Skymiles IP Ltd, which will be located in the Cayman Islands to facilitate new financing. As a result of this new action, Delta will pass a new loan from the federal government’s CARES Act, the Atlanta Journal-Constitution reports.
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The move would provide immediate and much relief as airlines burn through million 27 million in cash every day as travel demand remains weak due to the coronavirus epidemic.
In Monday’s filing, Delta reported a 78% decline in miles in the first half of the year, resulting in a 0% drop in passenger revenue. However, frequent flyers continued to use their Delta Sky Miles credit card, and the cash sold to American Express fell only 5% year-over-year to 1. 1.9 billion.
| Ticker | Security | The last | Change | Change% |
|---|---|---|---|---|
| DAL | Delta Air Lines INC. | Is 34.57 | +1.06 | + 3.16% |
| AXP | American Express Company | 105.98 | -0.70 | -0.66% |
According to investor representations, Delta will frequently buy miles from a new Skymiles subsidiary to issue flyers, and will buy seats from subsidiary Delta when frequent flyers use miles to book their seats. Meanwhile, American Express and other Skymiles partners will buy Miles from a subsidiary to issue credit card holders.
Delta received. 4.4 billion through the Cares Act payroll support program, which was repaid in installments through July. The airline also signed a letter of intent, offering the option of an additional રની 6.6 billion through the federal assistance program.
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Delta is not alone in tapping into its frequent flyer program. In June, United Airlines raised up to $ 5 billion with a mortgage on its Mileage Plus program.
While this move should encourage Delta, it will not affect the release of Sky Miles members or mileage for flights.
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