Originally Posted by
APCbot
I've wondered this myself. How are people's free trips worth collateral?
Because they get to sell the miles for more than they pay.
Its currency, if American Express pays .5 cent for a mile and sells to their customers for .1 cent they make money.
Customers don't view themselves as buying miles when they shop and use a card, but they are.
I think it's one of the reasons TWA went out of business.
A guy running it sold future seats to a bunch of travel agency company's, including some he owned, cheap, for money right now.
Then later the airline barley owned any inventory to sell because so many seats had been presold, but booking company's made a killing because the seats were theirs to charge and markup for.
I am sure American Express would have some legal clause in BK court for miles they have in their possession. Once they "sell" them to credit card users I doubt they care if the airline folds and the consumers currency is worthless.
The miles work well because probably no one has stoped using their airline credit card for fear of the currency devaluation down to 0.