New York CNN Business  — 

United Airlines is mortgaging its Mileage Plus frequent flyer program, its latest effort to raise the cash it needs to weather the Covid-19 crisis.

The term loan will come from Goldman Sachs (GS), Barclays (BCS) and Morgan Stanley (MS), and it will take seven years to repay. The interest rate was not disclosed. United says between this and an additional $4.5 billion in federal loans for which it expects to be eligible, it estimates it will have $17 billion in cash on hand by the end of September, roughly three times the normal cash it carries.

US air travel is down about 80% compared with a year ago in the most recent estimates, but that indicates some modest rebound in demand for air travel from earlier this spring, when United and other carriers reported air travel demand was “virtually zero.”

Demand bottomed out on April 14, when only 87,500 people passed through TSA checkpoints at US airports. By comparison, that number topped more than 500,000 a day this past Thursday, Friday and Sunday — levels not seen since late March

United (UAL) estimates the value of its Mileage Plus program as a standalone business at $20 billion. It gets revenue from partners who pay the airline to award miles to their own customers, such as credit card issues and hotels. It had sales of $5.3 billion last year, about 12% of United (UAL)’s overall revenue.

While those sales are down during the current crisis with overall drop in travel and consumer spending, they have held up better than the airline’s passenger revenue – which has nearly evaporated.

United said the loan should not have any effect on its 100 million Mileage Plus members, nor will it reduce the airline’s control over the terms of the program.

Modest improvement in demand

Meanwhile, United is still planning for only a modest improvement in demand for air travel with its July flight schedule down 75% from a year ago. That’s an improvement from the airline’s 85% reduction in June – but it’s a much lighter schedule than that of rival American Airlines (AAL), which expects to fly 55% of its year-ago capacity in July.

United plans to resume more than 140 routes it had suspended this spring. And it is filling about 60% of the available seats on domestic flights with paying passengers in June, up from 39% in May and only 13% in April.

Filling that many more seats makes it more difficult to have the empty seats needed for social distancing. United said it will notify passengers when it expects a flight to be more than 70% full and will allow those passengers to rebook. But its executives admit it needs to do more to give passengers assurances that it is safe to fly.

United has a touchless check-in procedure. Flight attendants pass out sanitizing wipes, and passengers, who are requested to wear masks, board from the rear of the plane to the front to limit contact among them.

There’s more behind the scenes. Employees are checked for fevers when they start a shift. Common surfaces like seats and tray tables are wiped down. The entire aircraft is sprayed to disinfect it — a process that takes about 10 minutes for a 787 jet.

“We’re trying to do everything we can to instill confidence in the travel experience,” the manager of United’s Dulles hub, Omar Idrism, said.

But even with 60% of the seats filled, it’s far below what is needed for the airline to be profitable. Last year, United filled 84% of the seats with paying passengers throughout the course of the year.

Because of cheaper fares and fewer seats sold, United expects passenger revenue will be down even more in July – off between 82% and 88%. But that too is an improvement from the second quarter so far. United began the current period with a 98% drop in revenue in April and expects June’s decline to be 90%.

Frequent flyer loan is the first of its kind

While this isn’t the first time an airline has monetized the value of its frequent flyer program, the details of this United deal are different, the airline’s executives told journalists on a conference call.

Previous frequent flyer-linked deals involved less favorable terms – like airlines giving up some measure of control over their operations, or discounting prepaid miles purchases which raised billions but limited the cash flow for the airline in the future. What makes this loan unique is that neither was the case this time.

“We expect many of our competitors to imitate it,” said a United senior executive on the call, who spoke on the condition of not being identified by name. “There are many examples of United to be first to take aggressive steps [to deal with the crisis], and this is another example of that.”

In the early days of the pandemic cases in the United States, United was the first US airline to pull back its domestic schedule because of the drop in demand. It was also the first airline to raise additional cash through the sale of additional shares of stock, a move that rivals made soon after.

United said it believes these kinds of loans could become a common way for airlines to raise cash from its frequent flyer programs in the future, even beyond the current crisis.

“Even in the best of times this is a facility we’ll have some interest in using,” said the United executive.

– CNN’s Pete Muntean contributed to this report