Frequent flyer programs: The most profitable part of the airline industry | CNN
Next time you swipe your card to pay for groceries or gas, you might be helping airlines more than you think—perhaps even more than if you’d bought a plane ticket. Frequent flyer programs, originally designed to reward loyal travelers, have become a goldmine for airlines, thanks to banks and credit card companies buying up bulk miles to offer as rewards. Some airlines make billions from these programs, relying on them heavily to stay in the sky.
Delta Air Lines made a staggering $6.8 billion from its co-branded Delta Amex card alone in 2023, while American Airlines brought in $5.2 billion and United raked in $3.2 billion through similar deals. This revenue far outweighs the profit they get from actual flights! Why? When credit card companies buy miles, it’s a massive win for airlines because even though they’ll eventually provide flights in return, the profit margin on those flights is a healthy 50%.
It’s no wonder frequent flyer programs have caught the attention of regulators. The Department of Transportation is investigating whether these programs treat consumers fairly, given how integral miles have become part of many Americans’ budgets—some even view their reward points as savings accounts! But there’s a catch: airlines can change the value of these miles whenever they want, leaving consumers in the lurch.
But what if those lucrative programs were threatened? United CEO Scott Kirby worries about that as Congress mulls over legislation that could cap the fees credit card companies charge merchants. If passed, this could limit how much credit card companies pay airlines for miles, and Kirby warns this could spell the end of rewards programs altogether. Despite the uncertainty, millions of travelers still find value in these programs—so long as they pay off their cards and avoid those sky-high interest rates………
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Rising Dough
How do frequent flyer programs impact the relationship between airlines, consumers, and the banking industry, and could potential legislative changes alter that balance unexpectedly?
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