Investors Could Soon Trade Frequent Flyer Miles

Surprised it took this long given how many types of ABS from car loans to credit card debt.

This is either click bait or very misinformed.

The investors would not be "trading frequent flyer points" they would be trading what is essentially an asset backed security with the underlying collateral being the loyalty points but this is fundamentally a debt instrument. JPM and this ACE company would collect all the various parts of the loyalty program and sell shares of it for the investors but investors would not be looking to buy this because of the underlying asset but rather the interest terms on the loans. The only way this ends bad for consumers would be if the underlying company defaulted on the loan.

Next up: Taxing miles as income when flying for work.

They should have thrown in some hype-words such as crypto, blockchain, ...

@Max - Blockchain is definitely going to be part of it, it's the best solution for a multi-party consortium like this. Isn't Asia Miles already using a Blockchain platform and Avianca launching it soon?

Lucky,

This is relevant to miles. Have you tried the Free Now app yet?

You can also add your Miles&More number and then also earn Lufthansa Miles on rides in Germany. A bit like Lyft and Delta SkyMiles were in America, last year at least.

Not many are usually earned in a single journey, but I also find it a good way to keep the accounts active while not flying as often.

@JG
Fantastic, where can I buy airline miles credit default swaps?
It is bad for consumers, for a very simple reason: if I'm the CEO or the CFO or sit in the board of a company, my only incentive is the price of stock, given that my bonus (pretty much all the millions o make a year) are tied to the share performance of the company I work for. The higher the gains, the higher my bonus. It will be very tempting to print money by creating miles CDOs and trading them, using this money not to invest in the airline structure to secure a future, but to make the share prices go up, by buying back stock. If American airlines can issue bonds to do that, why can't Delta issue points collateralization to do the same? At the end, everyone wins, except the little guy that has to lose his job and suck it up while the fat cats made millions destroying companies for their own profit.

@Bob unfortunately that's a thing in many countries

I think @Bob is correct. This will undoubtedly happen because future US governments will have to raise all manner of taxes to overcome the massive deficits incurred over the last three years, and taxing frequent flyer miles earned through business travel will strike policymakers as a relatively painless way to increase revenues.

@Bitzer

Sure that is fair, but they can do that with any sort of loan they want so if you want to make the argument that it gives them more access to loans and therefore makes them more likely to act irresponsibly that is fair.

What I was saying is not true is that this product is not unique in that regard. This is no worse for consumers and FFP participants than it is if an airline or hotel take a loan out against any of their other assets. Just because the FFP is collateral does not have any impact on the actual program itself because investors would not be owning the program any more than they do now. What is written here is fear based and lacks an understanding of financial instruments was all I am saying.

I miss the days when you flew a mile, got a mile and redeemed a mile. I no longer understand any of this.

@JG exactly