Liabilities tied to the five most valuable airline-loyalty programs in the U.S. soared almost 12% to $27.5 billion last year, according to new analysis by LendingTree Inc.’s consumer-finance website ValuePenguin. Airlines looking to shore up their balance sheets could reduce the value of those rewards or reinstate policies that allow miles or points to expire, the firm warned.

“Especially in a time where airlines have gone through such financial issues, it would be easy to see that they would look at some sort of devaluation of the miles and points as a way to make up a little bit of financial ground,” Matt Schulz, LendingTree’s chief credit analyst, said in an interview. “I would suspect we would see something like that going forward.”

Airlines are typically secretive about the earnings tied to their loyalty programs. For some, the sale of miles—mostly to the large banks that issue their co-brand credit cards—is a higher-earning activity than their traditional business of flying people from place to place.

The five most valuable airline loyalty programs are Delta Air Lines Inc.’s SkyMiles, American Airlines Group Inc.’s AAdvantage, United Airlines Holdings Inc.’s MileagePlus, Southwest Airlines Co.’s Rapid Rewards and JetBlue Airways Corp.’s TrueBlue, according to the analysis.

At the height of the Covid-19 pandemic, Delta, American and United pledged their loyalty programs as collateral for bonds as the virus and resulting government restrictions sapped demand for travel. Such deals could prevent any material changes to the programs, said Joe DeNardi, an analyst with Stifel Financial Corp., who follows airline loyalty programs closely.

United, for its part, doesn’t see currency devaluation as a very useful tool to lower that accounting liability, said Michael Covey, managing director of the loyalty program at the airline.

“I don’t want to go there because I think there’s a better way to do this,” Covey said in an April 16 interview. “I want to see miles get redeemed. Loyalty is a two-way street,” he said, adding that customers “have been incredibly loyal to United.”

Instead, United is devising incentives to persuade people to use more miles, including a March 14 promotion to celebrate “Pi Day” for math enthusiasts, when it priced some domestic award tickets at 3,140 miles or $31.40. “The creativity juices are flowing,” Covey said.

Given the travel restrictions and shelter-in-place orders that have existed over much of the past year, the percentage of earned miles that consumers redeemed dropped to just 11.3% for the five airlines in 2020, compared with 30.5% a year earlier, according to ValuePenguin.

Southwest Reduction

Still, other airlines haven’t avoided devaluing their programs. Southwest, for instance, reduced the value of its Rapid Rewards program in April by requiring all redemptions to use 6% more points.

Southwest saw the value of liabilities tied to its rewards program swell more than 30% in 2020, the biggest jump among the five largest programs ValuePenguin tracked.

DeNardi said it’s unlikely that more carriers will become as aggressive about devaluations as they might have been in the past because many have already better aligned their cash and mileage pricing in recent years. Delta, he said, is agnostic about whether travelers pay with money or SkyMiles.

“The focus is on getting people back to flying and getting them comfortable, because then they’ll fly again,” DeNardi said. “If they devalue that currency then, at some point, demand to earn that currency will go down and the value of that program will go down.”

–With assistance from Mary Schlangenstein.