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Spirit Airlines does not have the richest frequent flyer programs for customers or investors, but it is nonetheless trying to use its loyalty schemes to raise $600 million from private markets amid the worst economic disaster in commercial aviation history.
Spirit’s proposal is far from as lucrative as one United Airlines announced in June. United said it could tap its mammoth program, MileagePlus, for roughly $6.8 billion in new money. But Spirit’s rationale is similar, with the airline betting its loyalty programs are among most valuable assets, perhaps more enticing than the usual assets airlines use to secure new money, such as airplanes, gates, routes and airport slots.
Spirit has two loyalty programs, a subscription service called the $9 Fare Club, and a traditional points program called Free Spirit. The two have been appraised at $1.9 billion, including the value of the company’s deals with credit card issuers. In addition, for this deal, Spirit is pledging its intellectual brand assets, appraised at approximately $1 billion.
At $1.9 billion, Spirit’s loyalty platforms are far less valuable than those of large global carriers. For its recent offering, United valued MileagePlus at about $22 billion, while American Airlines has said its program, which is being used as collateral on a federal government loan, is worth a similar price. News reports indicate Delta Air Lines may pledge its SkyMiles program as collateral for new money, and it is likely worth a similar sum, but few details about its plans have become public.
Peek Behind Loyalty Curtain
Until this year, most airlines disclosed little about loyalty economics, believing them to be a trade secret. But airlines need money, so they’re divulging more information.
Unlike most airlines, which focus on points programs, Spirit has placed more emphasis on the $9 Fare Club. After paying an upfront fee of $59.95 for the first year and $69.95 for subsequent years, members can buy cheap, unpublished fares. They also receive discounts on bag fees, and with hotel and rental car providers.
The company said it made $63.7 million last year through the program. Between 2015 and 2019, Spirit said, the $9 Fare Club had a compound annual growth rate of 9 percent.
The Free Spirit program is the airline’s traditional loyalty arm, in which customers earn and burn points. At Spirit, as at most airlines, these programs make most of their revenue through credit card partnerships. Card companies bought nearly $50 million in points last year, Spirit reported, using them to reward people who spent money on a co-branded credit card.