✈️ What’s up with airline loyalty programs?

How lucrative are airline loyalty programs?

One thesis floated by The Wall Street Journal says that they are more valuable than the actual airline operations.

As an example: When airline stock values plummeted last March, the estimated value of United Airlines’ program was $29B… which means the actual business of flying planes was being valued by the stock market at negative $5B.

What makes loyalty programs so valuable?

Their building block is a branded credit card (e.g., the Delta SkyMiles American Express card) that allows cardholders to collect points whenever they spend.

These points can then be redeemed for flights and perks.

Credit card-issuing banks happily pay airlines big bucks to access this spendy demographic. In addition to the money they receive from banks, airlines benefit because loyalty program members are:

• Bigger spenders (dropping a 5% to 6% premium on tickets)
• A reliable way to fill empty flight seats

This was all pre-COVID, though

With nowhere to travel to, many customers aren’t hitting the miles they need to qualify for the best loyalty perks.

Fearful of losing these relationships, airlines are updating their plans as reported in another WSJ piece:

• United Airlines reduced qualification requirements by ~25%
• American Airlines is rolling over points earned from Q4 last year and waiving some spending requirements
• Delta Air Lines is offering bonus goods for premium ticket purchases

Helping members keep status is important…

… but it will all be moot if air travel doesn’t eventually return — what’s the point of having points if you can’t use them?

There are signs of a turnaround: Last Sunday, ~1.7m passengers were screened at American airports, the highest such figure since March 12, 2020.

While this is down 35% from 2019, here’s one bullish sign for the fate of loyalty programs: Delta just became the last airline to unblock middle seats.

• RIP: Yale University’s chief investment officer David Swensen died from cancer at the age of 67. He pioneered the “Yale Model” whereby endowments allocate more money to alternative investments (e.g., hedge funds, PE, VC). When he started in 1985, Yale’s endowment had $1B…today, it has $31B.
• Media madness: The Athletic paused merger talks with Axios. The sports media brand is now eyeing a tie-up with The New York Times.
• Bubble bursts? The US Fed warned that the recent climb in asset prices could potentially lead to “significant declines” if risk appetite cools.

There are groups where you can snag Ikea furniture, broken blenders, and gift wrap — all for free.

It’s called the Buy Nothing Project: a collection of 6k+ affiliated Facebook groups that allow ~4m members to gift or lend practically anything.

Protocol recently caught up with the co-founders of the Buy Nothing movement, Rebecca Rockefeller and Liesl Clark.

The ‘gifting economy’ on Facebook

The project started around 2008 after the 2 co-founders’ less-than-ideal experience using Freecycle — a kind of Craigslist exclusively for free stuff.

The 2 then experimented with their own gifting group at local farmers markets, where members gifted everything from oysters to fresh pasta. “Gifting” is the practice of offering goods freely with no expectation of repayment — where the Burners at?

In 2013, Rockefeller and Clark moved the community to a Facebook group. There — fueled by the FB algo — the movement exploded, spawning lookalikes across the nation and 44 countries. Eventually, they created a website that formalized the Buy Nothing ethos.

But giving for the good of the people…

… is not really Facebook’s vibe.

Since the fallout of the 2016 election, the Buy Nothing Project has been looking for ways to get off of Facebook, citing data and privacy concerns.

Rockefeller and Clark have teamed up with members of the Buy Nothing community to develop an app that allows users to connect with others in their area, no Zuckin’ FB profile required.

Even so, Buy Nothing leadership has assured worried members that their beloved FB groups will remain post-app launch later this month.

Get your gifts ready.

Don’t have a private pool to float around in this summer? Join the club.

Thanks to Swimply, that reality is quickly becoming a thing of the past — the company is basically Airbnb for private pools.

And it’s growing like there’s no tomorrow

Founded in 2018, Swimply booked just ~400 reservations that year but raised $1.2m from friends and family. In 2020, Swimply made an appearance on Shark Tank but left without a deal.

In the best kind of Shark Tank revenge, Swimply grew revenue 4,000% that year.

Today, Swimply sees 15k-20k reservations per month averaging $45/hour. The startup’s employee count has grown from 2 to 20+ (with plans to double to 40).

Next up, Swimply plans to launch Joyspace — basically Airbnb for things like basketball courts and home theaters.

Swimply is a classic case of ‘see a problem, build a solution’

CEO Bunim Laskin was the oldest of 12 children. As entertainer-in-chief, he asked his neighbor if his family could use their often empty pool, and offered to cover some of the costs. That’s when the lightbulb turned on.

Laskin used Google Earth to find his first customers, identifying houses with pools and doing some old-school door-knocking sales pitches.

Today, Swimply operates in 125 US markets, 2 in Canada, and 5 in Australia.

Some pool owners have made up to $10k a month on Swimply. Unfortunately for them, 40% of American adults have urinated in a pool.

Here’s why Balaji Srinivasan isn’t human

“He’s the highest IQ person I’ve ever had a conversation with” is how Sam defines talking to the founder, investor, and futurist.

Balaji joins Sam and Shaan on episode #178 to talk:

• How new countries will be created
• Why journalists are being replaced and what will replace them
• Exactly what he would do today if he was 21

Assets of all types have exploded in 2021. There’ve been NFTs, trading cards, and crypto.

The latest rage: commodity prices.

We tapped one of finance Twitter’s most popular accounts (@ParikPatelCFA, who writes at Bullish Studios) to explain what’s happening:

• Lumber: The pencil is mightier than the sword… because it’s made of wood. The price per thousand board feet of lumber recently hit an all-time high of ~$1.4k (up 280% since the start of the pandemic).The price is being spurred on by strong housing demand met with tightening supply and rising input costs.
• Oil: If you ever think that you can’t recover from something, remember that West Texas Intermediate crude bounced back from negative $37.63 to ~$66 in just over a year.After tumbling to negative prices in April of last year due to a Saudi-Russia price war and the COVID-19 pandemic, crude has made quite the comeback and is expected to rise to $77 a barrel in just 6 months.If you’re looking to buy some, I have 17 barrels still sitting in my backyard from April. Don’t ask.
• Palladium: You know how everyone says that cars are a depreciating asset… Well, there’s one part of your car that’s actually appreciated in value.

The catalytic converter. Found attached to your vehicle’s tailpipe, it contains a precious metal called palladium that has soared to a record high due to expected supply constraints and rebounding demand from automakers.