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Explore how United Airlines drives record growth with insights from its 110+ million MileagePlus members.
You can listen to this conversations below, or it is available to watch on Loyalty TV.
Listen To The United Airlines’ MileagePlus Episode Here
About MileagePlus Episode
United Airlines COO Reveals MileagePlus Success Strategies | (Archive Episode)
Experience key insights from Luc Bondar, COO and President of MileagePlus at United Airlines – the world’s largest airline with 244.4B revenue passenger miles in 2023. Following United’s record Q4 2024 profits, this timeless interview explores how the airline drives exceptional value for its 110+ million loyalty members.
Show Notes:
Meet our guest
Our guest today is…
Luc Bondar, COO and President of MileagePlus
Luc Bondar shares how the world’s largest airline drives success for 110+ million loyalty members. This evergreen episode, featuring insights from the airline’s record-breaking period, debuts on Loyalty TV after its initial YouTube release.
You can connect with Luc here:
Audio Transcript
Paula: Hello, and welcome to Let’s Talk Loyalty and Loyalty TV, a show for loyalty marketing professionals.
Paula: I’m Paula Thomas, the founder and CEO of Let’s Talk Loyalty and Loyalty TV, where we feature insightful conversations with loyalty professionals from the world’s leading brands.
Paula: If you work in loyalty marketing, join us every week to hear the latest ideas and insights for loyalty marketing specialists around the world.
Paula: Before you listen to this episode, I wanted to mention that this recording is a re-release from our archive, as our planned episode for today was unfortunately delayed for reasons beyond our control.
Paula: United Airlines remains the largest airline in the world.
Paula: With over 200 billion revenue passenger miles flown each year.
Paula: So their loyalty insights, even though recorded in November 2023, are evergreen.
Paula: This re-release has also given us a chance to republish this episode on our dedicated loyalty.tv website, as well as all our usual podcast channels.
Paula: It comes as United Airlines last week announced record fourth quarter profits for Q4 of 2024.
Paula: And when we spoke, our guest Luc Bondar, Chief Operating Officer and
President of MileagePlus, shared how they were achieving such superb results for their more than 110 million members.
Paula: I hope you enjoy this archive episode.
Paula: So, Luc Bondar, welcome to Let’s Talk Loyalty and Loyalty TV.
Luc: Thanks Paul, it’s great to be here.
Paula: I tell you, it’s been a long time coming, Luc.
Paula: I first became aware of the extraordinary achievements, I think, of MileagePlus back in 2020, which I know is probably quite a traumatic time for you, but certainly one to look back on with incredible admiration.
Paula: So, we’re here to talk about that along with a lot of other exciting things that you’re doing in United, specifically, of course, leading MileagePlus.
Paula: So, yeah, as you know, we’ve got a global audience of loyalty marketing professionals who really love to hear, I suppose, first and foremost, what do you admire as a loyalty industry professional?
Paula: What program would you showcase and put on a pedestal as one we can look to for inspiration?
Luc: Well, I’ll start by saying, Paula, thanks for having me on today.
Luc: It’s an honor to be on here.
Luc: And I think what you’re doing is terrific.
Luc: And it’s great to create this forum and platform for professionals in our space.
Luc: So thanks for that.
Luc: Personally, I am a huge advocate of Marriott Bonvoy.
Luc: I think that is just, obviously, I have an affiliation with the travel space broadly and have throughout my career.
Luc: But Bonvoy, I think, is particularly interesting because it represents sort of a modern transformation of a much more traditional model, obviously, when Marriott Rewards and Starwood came together.
Luc: Yeah.
Luc: Yeah, there was a lot of noise about what would the result be.
Luc: You had this sort of program in Starwood that had this insane fan base.
Luc: I thought of it as being hugely innovative and interesting at the time when it first came to be.
Luc: And then you had this more mainstay traditional program with the old Marriott Rewards program.
Luc: Bonvoy, I think, brings together the best of everything that each party brought to it.
Luc: But perhaps what I think is most powerful about that program would decide its design and I think the way they’ve structured it and the way it operates on a day-to-day basis.
Luc: I think it’s become a central pillar for the Marriott brand, it’s become a glue that sort of connects the dots between all the brands in their portfolio.
Luc: It’s the glue that connects the customer experience across all of those different brands.
Luc: And the organization has reshaped how they go to market around Bonvoy as the center of their customer experience.
Luc: And that, I think, just creates tons of opportunity and upside in terms of ways that value can be both understood and then delivered in the business.
Luc: And so, for all those reasons, I think the team at Bonvoy does a tremendous job.
Luc: I think it’s a great program and I think they’re leading the way in many respects.
Luc: It would be remiss of me not to highlight as well, as someone who has worked in and around the loyalty space throughout my career, that I have a ton of respect and interest as well in what Amazon have done with the Prime.
Luc: That’s another very different subscription-based, and it’s a program that they’ve just layered different benefits and services on in order to create this amazing differentiated experience from a guest to an Amazon customer to a Prime customer, and it makes it a no-brainer to be a member of that program, and that program in turn gives Amazon insane value in terms of the data that they’re generating through that program and that business.
Luc: So really, really interested in that as well.
Luc: But Bondvoy is my number one outside of MileagePlus, of course.
Paula: Of course, of course.
Paula: Well, we’re going to absolutely celebrate MileagePlus today.
Paula: But first of all, Marriott Bondvoy, of course, something that we, of course, also have on a pedestal.
Paula: We’re hoping to have them on Loyalty TV, and Let’s Talk Loyalty at some stage in the near future.
Paula: So of course, open invitation to make sure that we get to share their story as we’re about to share yours.
Paula: And I guess the piece I love about Amazon Prime as well, Luke, you’re absolutely right.
Paula: It’s the one that I think they used the word, I think when they developed that proposition, you probably heard it yourself, where they wanted to build a proposition that was so powerful that it would be irresponsible not to join.
Paula: So I just think when you start with that end in mind and that level of ambition, that’s something that I think consumers find utterly compelling and it’s one I have absolutely seen changing my behavior.
Paula: You know, I mean, I’m starting to buy groceries on Amazon.
Paula: There’s water coming to me.
Paula: Every time I think of something I need, I just instantly buy it on Amazon.
Paula: So totally drinking the Kool-Aid on that one.
Luc: I think if I could react to that comment, Paula, because I agree 100 percent.
Luc: And I think a lot of the time, we have a similar dialogue inside United and MileagePlus, to really think about the experience that we can deliver and the value that we can create for our customers, for our program members.
Luc: Sort of framing the best way to experience United, and also I’d say the best way to experience some of our partners, is as a MileagePlus member.
Luc: And so creating, to your point, an irresponsible rationale for joining the program, well, not irresponsible rationale, an irresponsible act if you’re not joining the program, because there is such clarity around the value and the experience as a member, which I think is a job for communications, but it’s also a huge job for design, to make sure that it flows right through the experience.
Paula: Mm-hmm, yeah, yeah.
Paula: I always like to pick up on the words people use, Luc, so thank you for that.
Paula: And I think clarity is something that, as loyalty professionals, we perhaps lose sight of as we continue to build and innovate, so I think it’s an important principle to make sure that there is that level of attention to almost simplicity, because consumers at the end of the day are busy people, and for our program to become compelling to them, they’ve got to understand it, and I know that’s a key part of what you’re doing with MileagePlus.
Paula: So let’s get into how we got to today.
Paula: First and foremost, I know you’ve got a background both on the agency side and on the technology side, Luc.
Paula: So tell us a bit about your loyalty career to date.
Luc: So I’ve, you know, loyalty’s been central to my career for, I think, almost 27 years now.
Luc: You know, while I was going through university, I was working in sporting goods retail in Australia, and I recall kind of the CMO of that business approaching me and asking me what I knew about relationship marketing at the time.
Luc: This is pre-loyalty as sort of a standard naming convention.
Luc: And, you know, I sort of, in the spirit of faking it till you make it, I said, well, you know, give me 24 hours and I’ll come back to you.
Luc: And the next day we sat down and we talked about kind of how loyalty programs were evolving in retail.
Luc: You know, this is going back into sort of the, into the 80s and early 90s.
Luc: And so it was a really interesting time, obviously, that these programs were just emerging.
Luc: Fast forward, you know, I ended up working with a company for many years called Carlson Marketing.
Luc: I worked for them first in the UK for a couple of years, and then in Australia and then in the US.
Luc: You know, and that business spanned a range of different industries that are provided sort of full scale, soup to nuts, loyalty services for, from strategy through to every aspect of execution.
Luc: And throughout that career path that I had, which was working sort of on accounts and then account development and then strategy and corporate development.
Luc: It was, there were always these central threads of retail, travel and banking and payments.
Paula: Okay, yeah.
Luc: And so all industries that have scale, all industries predicated on sort of understanding customers and how to deliver a different product and experience to different customers based on their value.
Luc: And so loyalty was a very obvious fit for all three of those.
Luc: And so I had the good fortune of getting to learn a lot about this space and this industry and really how to think about loyalty as a commercial model, not just as a marketing platform or program.
Luc: And that’s always been, I think, a central thread to sort of my operating thesis.
Luc: It’s like, how does this program, this platform, this business create value?
Luc: How does it create value for the customer?
Luc: How does it create value for the brand?
Luc: How does it create value for partners?
Luc: And so that’s always been sort of this central thread.
Luc: So, through marketing and services, a little bit of time in advertising for a few years, and then coming back into it, when United eventually, when I got the call from United to say, yeah, are you interested in joining?
Luc: It felt like it had been sort of everything leading up to the point of this opportunity to come in and lead one of the world’s largest and I think best loyalty programs and loyalty businesses that set us up to do all the things we’ve done over the last six years as well.
Paula: Incredible, yeah.
Paula: It’s a wonderful context and I think for any marketeer actually to end up brand side and to have the opportunity to put into place the kind of things that I know from my side working sometimes externally.
Paula: You really know and feel and instinctively have a sense of what you want to do with the loyalty program.
Paula: And from what we’ve talked about before, I really do think that it sounds like you’ve brought in first and foremost a mindset about loyalty.
Paula: And that whole idea that absolutely I think you alluded to with Marriott Bonvoy is that loyalty can lead an organization and as you said, create value on all sides.
Paula: So a wonderful experience to get in and lead a program, which I know it’s published, has over 100 million members.
Paula: I believe one of the top three loyalty programs in the world.
Paula: So again, for us, it’s super exciting.
Paula: To be hearing about what you’re doing, what you have done.
Paula: So tell us what did you do when you started, Luc?
Paula: You know, you come in, you’ve got this extraordinary opportunity.
Paula: Like where do you start with so much opportunity?
Luc: So I think I mentioned before this sort of mindset about thinking about these programs as a business.
Luc: And so really one of the first steps was to understand kind of performance and how had this business been tracking?
Luc: Where was it growing?
Luc: Where was it creating the most value?
Luc: And where were there opportunities to really expand that?
Luc: And one of the areas that emerged pretty quickly was this focus, this concentration on our premier population.
Paula: Okay.
Luc: And as you know, sort of Pareto principle, top 20%, et cetera.
Luc: And so there was a huge amount of emphasis on that group.
Paula: Okay.
Luc: To the detriment of how we thought about the broader program population.
Luc: And you mentioned before, you know, we have well over 100 million members in the program.
Luc: And so we have this huge base.
Luc: And yet the vast majority of energy and attention was going into the top group, the top group in terms of their flying frequency.
Luc: Of course.
Luc: And it wasn’t necessarily paying the right level of attention to how to think about value and how value is created.
Luc: So when we step back to look at the breadth of the program, a couple of things emerged from that.
Luc: One was that we had a huge opportunity to better engage the wider audience, the wider population inside our program.
Luc: And there was some fundamental steps that we identified as being sort of mission critical to achieve that outcome.
Luc: Two was that we saw, and I’ll talk to that in a minute, two was that we saw an opportunity to better align the value that we were providing to our customers with the value that we were getting.
Luc: And the mechanisms that we had in place to help understand and assess that, and then design the program and the experience to deliver value to our customers was out of sync with reality.
Luc: So we had a premier program that wasn’t structured to accurately reflect the value that we were receiving from customers.
Luc: And so we weren’t necessarily giving the right value back to the right customers in the right way.
Luc: So we, they were sort of two key areas that we took a hard look at.
Luc: And then I’d say that the third, and this was sort of mission critical for us was to look at all of our partnerships.
Luc: These programs are obviously critically important for the parent organization, in our case, United Airlines.
Luc: And we think of United as our single biggest partner and the most important partner that we have.
Luc: And obviously we wouldn’t exist without United.
Luc: And so we have to have a really strong relationship there, but we also have these other super important partnerships.
Luc: Partnerships in travel, partnerships in payment, partnerships in retail, that create a deeper level of engagement with our members as they go about travel and as they go about their day-to-day activity.
Luc: And so really understanding which of those partnerships were working well, which of those had an opportunity to improve, was also sort of the other area of critical focus.
Luc: So what do we do to broaden the scale and appeal of the program?
Luc: How do we better align value with the right members in the right way?
Luc: And then what were we doing to ensure that our partnerships were all optimized, both for our partners, for our members, and ultimately for the program overall?
Luc: So that were the three areas in all of those.
Luc: We can go in any of those directions.
Luc: In all of those areas, we made some really pointed decisions and changes to the program that have had some pretty profound effects.
Paula: Wow.
Paula: We love profound effects.
Paula: So what are you most proud of, Luc?
Paula: Tell us some of the, I suppose, decisions and changes that you did put into practice.
Paula: Because I think what I’ve learned from talking with people like you, with so much opportunity, part of the challenge is knowing what not to do.
Paula: Because the wish list of what you can do is so long, and so varied, and so exciting.
Paula: So tell us of all the breadth of possibilities, what did you put in place?
Luc: So some big changes that we made in the first couple of years, when I came in, may be one of the largest and most profound in terms of the impact that it’s had with member enrollment, member growth, kind of engagement right across our program population.
Luc: It’s something that sounds relatively simple, but it’s really interesting.
Luc: Having made that change, I’ve had Loyalty program practitioners around the world come up to me at events and conferences.
Luc: When I’m out in the world to ask the question, how did you get that done?
Luc: Like, how did you convince your CFO?
Luc: And that was to go from a program where we expired miles after 18 months of inactivity with our members to making our miles evergreen.
Luc: And when we made that change, we came out with a very strong statement to say, your miles will now last forever.
Luc: And that was a huge shift.
Luc: And it was born a little bit out of a personal experience.
Luc: I had had an experience with a program that I had been a member of for many, many years.
Luc: And I’d moved countries, and I had fallen into that inactivity status, and I had lost a huge balance with the program.
Luc: And I’d had that very personal experience, so I knew what it was like firsthand.
Luc: But then we spent time surveying and engaging right across our member base to sort of understand which aspects of the program were most powerful, which were sort of the most frustrating.
Luc: And the number one pain point for our members at large was miles of expiry.
Luc: And so we sat down as a team.
Luc: And obviously, if I go back to my past life, pre-United, there was almost a sort of a market practice to build around breakage management, and breakage optimization.
Luc: And the notion that we were giving out value to members and planning that there will be members not using them and optimizing against that, seemed counterintuitive to the spirit of what we’re trying to achieve.
Luc: That we’re building a program with values to go into the member, and we want the member to redeem that value.
Luc: We want to see them.
Luc: So we spent a lot of time with our finance organization, finance leadership.
Luc: In fact, we went all the way to our then president, now CEO, Scott Kirby, to have sort of a really robust discussion around what would happen to breakage, what were the expected effects of this, and how would it change our program?
Luc: And the net was that it was a business case decision at the end of the day.
Luc: And it was when we mapped it out, and we forecast what we would see in terms of member engagement, member participation, the subsequent impact on lifetime value, the subsequent impact on enterprise value that’s generated, it became a really easy choice.
Luc: It was the right thing to do.
Luc: And I think that’s the spirit of what we try to do at United and at MileagePlus.
Luc: That’s just what’s the right thing to do for our customers, because if we do the right thing for our customers, inevitably it’s going to be the right thing for our business.
Luc: And so we took the time to thoughtfully build that business case, convinced the CFO and ultimately now our CEO that this was the right thing to do.
Luc: We made that call, we went out with a pretty bold statement around it.
Luc: And what we’ve seen is that played out in enrollment, engagement, participation, activity amongst the broad population.
Luc: So for our general members, that’s really helped give them the opportunity to engage and stay active and in the program, sort of on the long kind of look forward.
Luc: We’ve done a lot around redemption, and I’m sure we’re going to talk about that a little bit later.
Luc: So to make every mile that’s being earned more valuable for every member.
Luc: So we’ll tap into that in a bit.
Luc: The second thing I want to talk to that I’m proud of is what we did for our premier program.
Luc: We were the first major US carrier to move away from a distance-based program for premier status.
Luc: And I’m sure there are many listeners today or viewers who have done a mileage run somewhere in their life.
Luc: I’ve certainly flown from country A to country B to get a pizza and turn around and come home.
Luc: In order to hit that level of status in the prior year.
Luc: And for two reasons, I think that’s challenging.
Luc: One, distance used to be a good proxy for value when sort of in the early days of these programs, as premier and elite status was introduced.
Luc: But with the rise of low-cost carriers, with the rise of increasing segmentation in the cabin, it meant that customers could fly a long way and relatively cheap fares, get into those top levels of status and get sort of a lot of value back, putting minimal value in.
Luc: And that imbalance creates all kinds of other knock-on effects and challenges for the program.
Luc: So again, in the spirit of thinking about this as a P&L and as a business and optimizing kind of the balance of value that we have, we made the decision to shift to a revenue-based elite qualification model or premier qualification model in the case of MileagePlus.
Luc: And that’s been a pretty fundamental shift.
Luc: Now, we announced that in 2019.
Luc: With the program taking effect in 2020, and then obviously 2020, 2021, 2022, very different years.
Luc: So this is the first year that we’re back at those same published threshold levels for spend.
Luc: Now, we still require flying, so we still have a minimum of four flight segments to get into any level of status.
Luc: But we have different levels of spend depending on the level of flying that a customer does.
Luc: So a minimum of four flights and a higher volume of spend versus a lot more flights and a lower level of spend will get into the same levels of status.
Luc: And so what we’ve seen, though, is that that helps us build a very commercially balanced relationship with United, with the airline as well.
Luc: So because our interests are very aligned.
Luc: Yeah, so that’s probably the second area.
Luc: And then the third that I’m really proud of, some of those early stage changes that we made.
Luc: I mentioned before my favorite program, we have a tremendous strategic partnership with Marriott, and we work worldwide to really elevate the customer journey.
Luc: We have a joint relationship between our loyalty programs that creates tremendous reciprocal opportunity and benefit for members in both programs to connect their accounts.
Luc: And we also do a lot outside of that to find ways to elevate the customer experience for customers that fly United and stay Marriott.
Luc: So excited for everything we’ve done with that partnership.
Luc: And then in the US, we have very important relationships in the credit card space.
Luc: MileagePlus has credit card relationships around the world, in over 20 different markets.
Luc: But in the US, our card partnerships are front and center.
Luc: They’re mission critical for our business.
Luc: And we completely restructured the relationship that we have with JP Morgan Chase, which has led to a whole new series of card products.
Luc: We have a family of cards, one for every type of traveler, depending on whether from fee free all the way to a more expensive annual fee that comes with club access, and all associated different benefits.
Luc: The full spectrum of cards for all of our different customer segments, and a very different way of thinking about how we bring those cards out into market, and put them to our customers in ways that drive their customer’s interests and acquisition results up significantly.
Luc: And so for us, that’s been just a tremendous growth story and great success.
Luc: So really proud of everything we’ve done across all of those series.
Paula: Amazing.
Paula: I guess the one I want to pick up on was the first one that you mentioned actually there, Luke.
Paula: You know, this whole idea of eliminating expiry dates and, you know, creating a business case is, you know, first of all, a complex endeavor given the amount of assumptions, obviously, that you would have had to put in that.
Paula: And without a precedent and without anyone to look to, I think with anyone who’s listening today, at least they can say, well, look, United’s done it, you know, if MileagePlus is still at it.
Paula: They don’t even need to see the business case necessarily, front and center, but at least to know that the decision made sense for you.
Paula: So I just, I suppose, want to applaud the bravery of the senior leadership team to trust, you know, the expectations that were set.
Paula: Because as I said, they’re all literally at that stage if you’re creating something so innovative and clearly, you know, so directly related to the pain points.
Paula: Like, I think that’s wonderful that you, I suppose, had that added perspective from the customer to say it’s, you know, it’s the thing that’s upsetting people.
Paula: And if you’ve lost a huge balance yourself, I mean, I’ve never had that experience, but you know, that’s the kind of thing that creates disloyalty.
Paula: And of course, you know, people go out and they talk on social media.
Paula: So what you did was incredible.
Paula: And of course, something you couldn’t take back.
Paula: You can’t announce something like that and then change your mind.
Luc: And so it’s a big one.
Luc: Yeah, for sure.
Luc: We were very intentional with the language that we used when we announced it.
Luc: We, forever was an important word in the press release and all the media that we published around this, the messaging to customers, to make it very clear that this wasn’t a, well, let’s just try this and see what happens approach, but rather this was a commitment to customers that we were making.
Luc: And I think that that last point is really key.
Luc: And this is central to the business case then, it holds now and it informs everything that we do as we look forward.
Luc: And that is to have clarity around the value of customer relationships, to really understand what that looks like, not just through the lens of sort of, well, what’s the incrementality that we’re going to generate through this program and the lift we’re going to see, but to understand what does it mean for us to have a relationship where the customer has a brand relationship with us, has a higher net promoter score, has a relationship where they’re willing to share more and new data with us as it emerges, whether that’s contact information or they’re sharing transaction data with us.
Luc: In the world we’re living in today, especially the value of first-party data assets, brands building direct relationship with customers where the customer is willingly and opted in and with clarity around how that data is going to be used, sharing that information, that creates all kinds of new growth opportunities for businesses today.
Luc: And so I’d say for anyone thinking about how they frame that business case and that value story, don’t just focus on the immediate and direct effect of the incrementality case, but also think about the lifetime value impact and new lifetime value, not just through the transactional lens, but also through that broader affiliated or adjacent sources of value that come with data and with permission and with consent and with a deep relationship, because there’s value against all of those.
Luc: And increasingly, there are opportunities to explicitly demonstrate that.
Paula: A hundred percent, yeah.
Paula: And again, there’s so much in that, Luc, but there’s so much I want to get through in all of the different topics in terms of what you’ve done.
Paula: The one, as I said at the very outset, that impressed me the most was, I guess, at perhaps some of the darkest times for the whole airline industry, as we all know.
Paula: 2020 brought existential crisis, dare I say, for all airlines.
Paula: And I know United innovated in terms of, I suppose, looking to MileagePlus to identify ways to support the airline in a way that had never been done before.
Paula: And it’s our mutual friend, Everdeen D’Avore, who, you know, explained to me, you know, in simple language, I suppose, the financial instrument that United created.
Paula: And there’s just some numbers I saw published at the time, which I’ll quote for anyone in the audience who hasn’t heard.
Paula: And I’ll ask you to explain it, Luc, because you’ll obviously explain it much better, having led that particular innovation.
Paula: I think you described it offline as the best 16 weeks of work you’ve ever done, in terms of the return on investment.
Paula: But yes, I know MileagePlus was identified as a powerful, you know, way of recurring revenue for the airline that previously had been perhaps underappreciated certainly externally, perhaps not internally.
Paula: But the power and value of the MileagePlus program to unite it as an airline was something that allowed you to raise capital at a time when nothing else, I guess, would have been affordable for you.
Luc: Yeah.
Luc: Yeah.
Luc: And I look absolutely poor and I’m happy to talk about it.
Luc: And yeah, of all the things that we’ve done over the last six years, you know, I think we’ve delivered great value to customers and we’ve innovated in a whole lot of different areas of the program.
Luc: But in terms of the impact of kind of any single thing, this was transformational for us at a time when we were under just incredible duress.
Luc: So if I can rewind everyone to mid-February 2020.
Luc: So this is prior to borders closing, you know, like we were monitoring, you know, right from January kind of everything going on.
Luc: We were looking at what was happening in China.
Luc: We were looking at emergency in Italy.
Luc: And sort of as the cases were taking shape and, you know, COVID was emerging kind of as a new word in everyone’s lexicon.
Luc: I sat down with our CEO to have a discussion around our current cash position as an airline.
Luc: And without going into all the detail, we were burning a, just by the time we hit March, we were burning a huge number daily in terms of cash burn, measured in sort of, you know, many, many, many tens of millions every day.
Luc: And we were also in a position where demand was falling off the cliff, and we were still flying, and certainly these markets, we had to fuel them, we had to staff them, and we had to pay at airports, et cetera.
Luc: So we had all this cash going out, we had no cash coming in, and customers were seeking refunds, and we were sitting on X cash.
Luc: We had a call from customers for refunds that was roughly the same.
Luc: And so we were, and we were not unique as an airline in this case.
Luc: We were all facing a liquidity crunch that essentially was, it had every major airline around the world asking the question, can I continue to operate?
Paula: Correct, yeah.
Luc: Do we have to close the doors?
Luc: And that would be, I mean, as horrible and as awful and as traumatic as everything related to COVID was, airlines keep the world moving.
Luc: And so for airlines to cease operations is really, it’s essentially not an option.
Luc: And so you have to find a way through that.
Luc: And so I sat down with Scott and we talked about what those options were.
Luc: And historically, the approach for airlines to use the loyalty business to rapidly raise funds is a sort of a pre-sale, a pre-purchase of miles, often with a credit card partner.
Luc: Yeah.
Luc: And there are plenty of examples previously of airlines, you know, essentially pre-selling a billion dollars worth of miles.
Paula: Yeah.
Luc: So their credit card partners or their other partners, and bringing the cash in now, and then obviously, you know, sort of foregoing that cash flow in the future as a result.
Luc: But and that generally comes with a new set of commercial terms, and it may not be as attractive for the business.
Luc: And that had been the historic model.
Luc: And so that was available to us as an option.
Luc: But it wasn’t one that I was excited about because it was going to trash my P&L for a long time.
Luc: Yeah.
Luc: And not only that, it was also, it just didn’t feel like the right approach at the time.
Luc: So I sat down with, there’s another guy I work with at United who now runs United Ventures.
Luc: He was leading IR and Co-op Dev at the time.
Luc: And we spent about a week every night brainstorming ideas and thoughts, and what could we do, and trying and testing different concepts.
Luc: And through all of this was this nagging, and I thought this sort of consideration, that we sit today on this incredibly stable and resilient cash flow in the business, and that’s through the form of all of our partnerships.
Luc: MileagePlus is essentially a diversified business.
Luc: We have all of the cash flows that come through our airline partnerships, and our travel partnerships, and they are more cyclical in nature.
Luc: You know, as the economy is moving up and down, they move up and down.
Luc: And then we have all of the cash flows associated with our financial partnerships, our credit card relationships, both here in the US and around the world, and our retail partnerships, and our everyday spend partnerships, which look more like day-to-day consumer spending.
Luc: So travel and consumer spending.
Luc: And the consumer spending portion of our business, while it certainly moves, as the economic cycle moves, it moves less than the travel cycle moves.
Luc: And we were able to look back at history and analyze and assess what had happened in this diversified business in the face of major economic impacts that had hit travel and hit aviation and hit sort of consumer spending writ large, global financial crisis, 9-11.
Luc: Sort of all these had huge impact.
Luc: And we’re able to understand what happened to this cash flow, what happened to this cash flow, and what that revealed was the resilience and stability of the consumer spending side of our business.
Luc: So that was sort of insight number one.
Luc: Two was could we then structure and package this in a way that would allow us to collateralize the cash flows so that we could lend against them.
Luc: And to your point, that’s essentially what we did.
Luc: We spent 16 weeks.
Luc: I’m actually in my home office as I come to you, and I’m sitting in the same chair that I didn’t leave for about 18 hours a day for 16 weeks straight.
Luc: We worked with some bank partners who were tremendous, a whole lot of lawyers and a number of internal team members to put together an offering that essentially packaged all of the operation of MileagePlus and the intellectual property of MileagePlus as a bankruptcy remote separate business wholly owned by the airline, that even in the event of an airline, extreme pressure financially on the airline, would operators are going concern, would be protected in the event of any bankruptcy, such that the cash flows associated with that business would also be protected and they would be available to fund any financing and any loans that we made.
Luc: So short story is we packaged it up, we took it to market, it was sort of a two week road show, and we raised $7 billion off the back of it.
Luc: And so that then became the find and replace deck that was used by many of our competitors in the market.
Luc: We have the same business model, so let’s replace brand, you know, united with our brand and their numbers with our numbers, package it, take it to market.
Luc: And because we’d sort of broken ground, the market was already now familiar with the model, they were able to raise, you know, increasingly more value against the same offering because we’d already sort of sold and educated the market on the premise.
Luc: And so those bonds that are still out there today, they’re performing well, that’s become a really valuable source of sort of financing for us, a line of credit.
Luc: And at the time, that was pre any government lending.
Paula: Yes.
Luc: You know, it raised $7 billion cash at the time we needed it the most.
Paula: Correct.
Luc: And it sort of got us over that hurdle.
Luc: And then we were able to sort of get some government financing and we were able to then package up some other aspects of the business, all of which saw us through the pandemic and bring us out the other side.
Luc: Yeah.
Luc: But I think what that did first and foremost is it highlighted to the world the premise that had been made for a long time.
Luc: And that is that these airline loyalty programs in particular or travel loyalty programs have tremendous intrinsic value.
Luc: But how we expose them to the market in a way that the market can understand and can invest in, while the airline can still maintain control of the program as a principal asset.
Luc: I think this is why Everett, I think, is so interested in the approach.
Luc: It was the first time that this had really been done at scale and in a way that was tremendous for the investor, tremendous for the parent or the owner of the program, and tremendous for the program.
Luc: Like everyone won in that model and in all the other models where there’s tried to be separation and there have been other challenges around that.
Luc: And typically there’s winners and losers.
Luc: And in this model, there were no losers.
Luc: We all, it was a rising tide that sort of everyone was able to benefit from.
Paula: Thank you, Luc, for sharing that story.
Paula: Truly world class, you know.
Paula: I have the figures again, just looking back in terms of, I know there was a Harvard Business Review article written exactly about this innovation.
Paula: And I think I said to you last time we met, this show is all about innovation.
Paula: And, you know, God forbid we ever need, you know, such extreme measures in the future.
Paula: But nonetheless, as you’ve said, you’ve broken your ground, you’ve created a model, a new product, and just the figures I came across again, because it did, as you say, expose externally the value of loyalty programs that certainly people outside of the industry, I guess, hadn’t appreciated.
Paula: So I saw figures from July 2020 saying that MileagePlus, as a business, was worth $22 billion, valued at, and United as an airline at the time, again, extreme circumstances, was valued at 10 billion.
Paula: So I think when the loyalty programs started to be visibly more valuable than their parents, parent companies, it definitely changed, I suppose, the level of respect that our industry and our discipline absolutely has.
Paula: So super exciting to hear all of that, Luc.
Paula: There are so many other things.
Luc: Can I make one point there, Paul?
Luc: Because I think that you’re right on, and it was very, it was valuable for our industry to get that credit and that recognition.
Luc: But I think there’s always been this underlying thread in this space around, like, what’s the true value of the loyalty business relative to the value of the parent, and you get metrics like that where you have this perceived inversion.
Luc: And I think the truth is, the loyalty business is what it is because of its relationship with the parent.
Luc: It’s a symbiotic relationship.
Luc: And so this idea that you can separate and spin out and create this completely independent value is challenging.
Luc: So finding ways to create separation and segmentation while still having ownership and control in a way that allows the market to understand and appreciate and invest in this value, while ensuring that the sort of symbiosis between program and parent is maintained is I think is the art, and I think it’s one of the aspects of the financial that we created that achieves those outcomes.
Luc: And I think that’s why it’s so interesting, because it sort of delivers on the promise while keeping all of the pieces intact.
Paula: Totally, totally.
Paula: Well, listen, we’re coming up on time, Luc.
Paula: So I guess, you know, open final question to you.
Paula: You know, what does the future hold for MileagePlus?
Paula: Where are you excited?
Paula: What are you looking to do?
Paula: What can you share?
Luc: So it’s made this has gone quickly, for sure.
Luc: So I look, I’m I think the future is incredibly bright for the loyalty industry as a whole.
Luc: And I think something I mentioned before that goes to the core of that is the value of the data assets that we all sit on top of.
Luc: You know, for MileagePlus, we have a level of insight around our travelers that reaches sort of far beyond what sort of many businesses know about their own customers.
Luc: And we’re able to take that and use that in really interesting ways.
Luc: That is, that I think goes beyond just delivering a better experience to customers when they’re traveling or delivering more value to them when they’re interacting with our various program partners.
Luc: We are one of the world’s largest programs, as you pointed out.
Luc: We have sort of ubiquity of earn.
Luc: You can earn miles in thousands, across thousands of retailers.
Luc: You can earn miles in real time, across sort of a myriad of applications.
Luc: And in terms of redemption, the same.
Luc: Anywhere you can sort of use mile, anywhere you can pay with cash at United, you can now use miles.
Luc: We have real time redemption in retail, in dining, in sort of travel, and a broad array of areas.
Luc: And that’s where historically a lot of loyalty, attention and innovation has gone.
Luc: We’re now shifting to say, we sit on this amazing first-party data asset, what more can we do with that?
Luc: How can we use that to be better marketers, to drive more value to each of our program partners, to drive efficiency and effectiveness across everything we do in the marketing space?
Luc: So I think that’s where, in the program itself, you’ll see kind of more ubiquity of the earn, more utility of our currencies.
Luc: You’ll see kind of more involvement across different aspects of the travel journey, not just sort of in the planning and the day of travel, but also right across the journey itself through different partnerships.
Luc: But where I think, as a business, this gets really interesting is the opportunity to build on these data assets and to use these great new sources of value.
Luc: So more to come there.
Luc: I’m excited for everything that’s ahead of us on that front.
Paula: Well, all I can say is I hope we can stay in touch, Luke, because there are some extraordinary things I know that are going on there.
Paula: And I want to stay up to date and keep our audience up to date on everything you’re doing with MileagePlus.
Paula: It’s a credit to you.
Paula: Super innovative and exciting.
Paula: And I want to thank you for your time today.
Paula: Is there anything else you wanted to mention from your side before we wrap up?
Luc: I just say, you know, I’m, firstly, thank you for having me on the show today.
Luc: It’s a real pleasure to be here.
Luc: And I am a big fan of the notion of paying it forward.
Luc: I’ve learned a lot throughout my career from some amazing people along the way.
Luc: And so it’s a real honor to get an opportunity to come on here and sort of share some of my stories and what we’ve lived through and where we’re going, because I think there are certainly lessons there that are really helpful for everyone across the board.
Luc: Maybe it would be remiss of me not to say, and just as a plug, I’m super proud of everything that we’re doing at United.
Luc: We’re the largest carrier across the Atlantic, we’re the largest carrier now across the Pacific, we’re the biggest airline flying US to Australia, which makes me particularly proud.
Paula: Amazing.
Luc: And as we build sort of an amazing network and as Star Alliance continues to grow, and as we build out kind of the United network and therefore kind of the MileagePlus program grows, I’m both humbled and proud of everything that we’re able to achieve and deliver for our customers.
Luc: And also excited for everything that we’re able to do as a business and the value that we’re able to generate for all of our partners.
Luc: Cause I just think we’re in that sort of rare area where we’re big enough and we have the scale and we have all the foundational pieces that we can test and try new things.
Luc: And through doing that, I think we break ground for others along the way.
Luc: So we’re going to continue to push to do the right thing for our customers, do the right thing for our partners, and continue to build a great program that we’re very proud of.
Luc: So thanks again for having us on and appreciate the opportunity.
Paula: Wonderful.
Paula: Super inspiring, I have to say.
Paula: I can’t wait to see what you guys continue to do.
Paula: So Luc Bondar, President of MileagePlus, thank you so much from Let’s Talk Loyalty and Loyalty TV.
Paula: Thank you so much for listening to this episode of Let’s Talk Loyalty.
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