Frequent-Flier/Loan Tie-Ins Hit Some Turbulence
Coulton, Antoinette, American Banker
They sped down the runway with high hopes, but frequent-flier programs tied to mortgages have failed to take wing.
In 1995, when American Airlines aligned itself with five mortgage companies to distribute frequent-flier miles, the programs were expected to be as popular as credit cards that offered travel incentives. But several programs have fallen by the wayside, and others are finding tepid consumer interest.
Analysts said that consumers view frequent-flier points as minor compared to buying a home or getting a mortgage. The programs award one air mile for every dollar of interest over the length of a loan-a nice frill, perhaps, but not a decision-clinching one.
Another complication has been the cost of the program to lenders.
Each bank in the American Airlines program paid more than $100,000 to participate. Nonetheless, as many as 15 lenders were expected to enroll when the program was unveiled.
Today American's partners have been whittled to three, and the airline has no plans to expand the enterprise.
Kenneth Kurtz, a partner in San Diego-based consulting firm Mileage Mortgage and one of the program's creators, said it was a good sign that only a handful of mortgage firms were offering frequent-flier points.
"The program was designed to help lenders gain a competitive advantage and differentiate themselves in the marketplace," Mr. Kurtz said. "If just anybody can do it, then you lose that competitive advantage. …