Is American Airlines' Loyalty Program Really Worth $31.5B?
After finalizing terms for $5.8 billion of CARES Act payroll support grants two months ago, American Airlines (NASDAQ: AAL) turned its attention to lining up a secured loan under the same program. The $4.75 billion loan it is potentially eligible for represents the crux of the airline's plan to boost liquidity to more than $11 billion by the end of June.
Last Friday, American Airlines told investors that it plans to pledge the AAdvantage loyalty program as collateral for the loan. The company said that third-party appraisals have pegged the program's value at anywhere between $19.5 billion and an eye-popping $31.5 billion.
Considering that American Airlines' market cap is less than $10 billion, these estimates might seem to suggest that investors are undervaluing the company as a whole. However, it's more likely that the appraisals are wildly overvaluing the AAdvantage program.
Source Fool.com
