December 14, 2021
Summary
Most publicly-traded airlines in the United States have a Data Monetization Index (DMI) between 11 to 12 percent. A higher DMI is generally preferable across companies and industries. By way of reference, internet companies have a higher DMI because most of their enterprise value is derived from data. For example, Google’s DMI is 93 percent as we will discuss in a later blog.Several airlines pledged their loyalty programs as collateral to raise cash during the 2020 COVID-19 shutdowns. For example, United Airlines raised $5 billion by pledging its MileagePlus loyalty program at an implied valuation of $21.6 billion. Industry insiders estimate that customer data is worth 20 to 40 percent of the value of an airline loyalty program. The value of loyalty data was a significant portion of the enterprise value of many airlines during the height of COVID-19 in March 2020.
Summary
Most publicly-traded airlines in the United States have a Data Monetization Index (DMI) between 11 to 12 percent. A higher DMI is generally preferable across companies and industries. By way of reference, internet companies have a higher DMI because most of their enterprise value is derived from data. For example, Google’s DMI is 93 percent as we will discuss in a later blog.Several airlines pledged their loyalty programs as collateral to raise cash during the 2020 COVID-19 shutdowns. For example, United Airlines raised $5 billion by pledging its MileagePlus loyalty program at an implied valuation of $21.6 billion. Industry insiders estimate that customer data is worth 20 to 40 percent of the value of an airline loyalty program. The value of loyalty data was a significant portion of the enterprise value of many airlines during the height of COVID-19 in March 2020.
Definitions
- Data Monetization Index (DMI) = Data Valuation / Enterprise Value
- Data Valuation = Loyalty Data Valuation + Equipment Data Valuation + Employee Data Valuation + Other Asset Valuation (this exercise uses Customer Data Valuation exclusively)
- Enterprise Value = Equity Value + Long Term Debt - Cash, a key metric used in the investment community
Methodology
The YDC team recently published a DMI for key airlines in the United States. Here is an example for United Airlines along with a benchmark for other airlines.The data valuation is based on loyalty data only and relies exclusively on publicly-available data sources such as SEC filings and loyalty membership from October 2021. The total value of data will likely be higher once additional datasets relating to equipment, financials, real estate and employees are included in the coverage. Going forward, we will be working to make the data valuation more real-time.
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