Spirit Airlines' New Loyalty Program Is a Long-Term Earnings Tailwind

Last week, Spirit Airlines (NYSE: SAVE) unveiled long-expected changes to its Free Spirit loyalty program and co-branded credit cards. The redesigned offerings -- set to launch in early 2021 -- are designed to increase customer engagement. If Spirit succeeds, rising cash flow from its loyalty and credit card programs could become an important driver of long-term earnings growth for Spirit Airlines. Let's take a look.

Spirit Airlines executives have been talking about the need to update the carrier's loyalty and credit card programs for about two years. During Spirit's Q3 2018 earnings call, chief commercial officer Matt Klein noted that the credit card was underperforming on a year-over-year basis despite the airline's growth (which should make a co-branded credit card more attractive).

This stands in stark contrast to larger U.S. airlines, which have profited from rapid growth in credit card revenue over the past decade. For example, Delta Air Lines reported that revenue from its partnership with American Express reached $4.1 billion last year, up from $1.2 billion in 2009.

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Source Fool.com