How do airline loyalty programs make money

how do airline loyalty programs make money

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How Frequent Flyer / Credit Card Miles Work

This site does not include all credit card companies or all available credit card offers. Please view our advertising policy page for more information. Skip to content. Maximize your travel. Advertiser Disclosure. Julian Mark Kheel.

Branded (Traditional) Rewards Programs

Kanchan Sharma Financial. Airlines are looking to move away from traditional distance and RBD-based programs to ones that reward customers based on their spending. The shift has been warranted by two factors: the desire to reward high-value customers and the need to reduce accounting liability. In this post, we discuss the implications revenue-based loyalty programs have on airline finance. When frequent flyer programs were first introduced, fares were simply a function of distance flown. Fares have since become increasingly complex and are now a function of factors like demand, competition, and others. These factors have made it imperative for airlines to reward miles based on the portion of fare directly attributed to revenue a. These programs work by having miles accrue based on the amount spent by an FFP member. Different factors can play into this, including first-class seating, date of purchase, and other premium features. In other words, these programs reward high spenders with the most miles.

how do airline loyalty programs make money

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If you travel by plane at all, you’ve probably thought about getting a frequent flyer card so you can earn miles for free travel. Or, you may already have an assortment of frequent flyer cards riding around in your wallet. Today’s frequent flyer FF programs offer benefits above and beyond free air travel. And, you can earn miles without even traveling anywhere.

Maximize your travel. Hi Lucky, Thanks for all of the useful information over the last several years. Any advice for someone located in Singapore? Shockingly, the part of the equation where airlines make their money from frequent flyer programs—and they do make a great deal of money from them —has to do with neither flying nor flyer loyalty, but the direct sale of frequent flyer miles, both to travelers and to the private companies that manage and partner with their frequent flyer programs. This is brilliant, in that in many cases it costs them nothing.

Carriers are expanding rewards offers to generate steady revenue from banks as fuel costs rise

There are a lot of Credit Card programs here…. The best deal that I can get from Delta is advertised formiles. Best regards!! While you used to earn miles according to the distance you flew, meaning that you could earn as much as one kake roundtrip moneh for every three or four you paid, you now earn only according to what you spend. Terms apply to the offers listed on this page. The banks and credit card companies purchase billions of miles from the airlines, and offer those miles to their customers as a rebate on their purchases.

How Frequent Flyer / Credit Card Miles Work

Do you have a punchcard for your local coffee shop? Participate in the rewards program at your nearby supermarket? Receive coupons via email? We offer our loyalty and consistent patronage to a business, and in exchange they reward us with better prices, discounts, special offers, and other things that make us feel like a valued customer.

They might even be willing to spend more on a ticket in order to fly with the airline they perceive to offer the best hpw. With that premise as the foundation, airline loyalty programs have expanded dramatically over the years. Because airline loyalty programs are essentially their own businesses — and what they are selling, ultimately, is a promise.

Progarms is brilliant, in that in many cases it costs them. Nowadays you can earn miles for almost anything, from spending money on a credit card, to joining a mileage dining program, to getting a hair loss consultation or car insurance quote, to taking out a mortgage.

There are literally trillions of unredeemed airline miles, and while they ultimately become a liability on zirline airline accounts, the day-to-day cost is negligible. Furthermore, the economic realities in the United States, especially, have created a landscape where airlines and financial institutions have partnered in a way that can be obscenely lucrative for the savvy consumer. The banks and credit card companies purchase billions of miles from the airlines, and offer those miles to their customers as a rebate on their purchases.

Some cards offer airline miles right away, others offer points in a currency that can be transferred to airline miles in future. The bank profits as well, because they receive a fee from the merchant every time their credit card is swiped.

And you, as the consumer, receive a rebate on all your purchases loyaltyy one that can be incredibly rewarding if you know the right tricks. Amazing products like Lufthansa First Class are not only available with miles, but realistic. At present and this will no doubt change over timemkae most lucrative way to accrue airline miles is through specific, leveraged, spend on the right credit cards. Next: Aieline Cards and Credit Scores.

Hey Ben. Looking through this super guide. Is there any advice for UK based people? Julian — Thanks! Matthew Owen — Try searching direct routes?

Any advice for Canada? Hey How do airline loyalty programs make money, a new and loyal follower. Anyone have any information on which cards to look at here in Australia that will start me off in the right direction? Thanks and happy flying Drew. Hi just found your blog.

You are doing an amazing job. Have been trying to get info from Qantas and Malaysian Airlines without any success…. Usingqantas points andMalaysian and want to fly business class will pay difference. Kind regards Vivienne. Hello Lucky, Im from Santiago, Chile, South america, i need know if i can use this methods in my country.

Best regards!! I am living in HK, is purchasing miles the only way to accumulate miles other than HK credit card spends? Will I be able to make use of US credit card offers? There are a lot of Credit Card programs here…. Alex — Are you open to business class, and an extra connection?

How do I leverage Amex rewards for hotels in London seems like a lot of rewards for a room from july 17th to july 22nd. Is it worth asking United to give me 1K status for a year on Mileage Plus before I earn it to get me to switch back to using them? I am a million miler on UA. Thank you for this information! I recently purchased airline tickets from Expedia without receiving any points for them at least to my knowledge. Wirline Lucky, Thanks for all of the useful information over the last several years.

I have a co-branded Delta american express card that I use for saving miles. I have been saving miles for the last 4 years and haveI would like to go to Australia business class for a vacation in early Prograns best deal that I can get from Delta is advertised formiles. I am not even close to that number. Any ideas on how to achieve my goal quicker? Hi Lucky, from Unlucky, whats your take on this? You see her further flight, to Marquette was monfy, and she had a 4, and half hour wait.

Your email address will not be published. Save my name, email, and website in this browser for the next time I comment. For the airlines, at least in the US, their ideal customer is the business traveler. Everyone wins. Why does that matter? Any advice for someone located in Singapore? Appreciate your time! Hi Lucky, Any recommendations on good apps to manage all of these CC and miles balances? Hi Lucky, Can you also advise what be the best way for people here in Singapore to utilized this?

Hi Lucky, also interested about the situation in Singapore. There are a lot of Credit Card programs here… Thanks a lot! Greets HP. How do I leverage Amex rewards for hotels in London seems like a lot of rewards for a room from july 17th to july 22nd Also am booking business class Delta doing the dame thing again seems like a lot of points. Leave a Reply Cancel reply Your email address will not be published.

Playing the points game: Airmiles explained


From the traveler’s perspective, the glory days of frequent flyer programs have passed. While you used to earn miles according to the distance you flew, meaning that you could earn as much as one free roundtrip ticket for every three or four you paid, you now earn only according to what you spend. Award redemption also used to be a lot cheaper: A one-way economy class ticket to Southeast Asia on Delta Air Lines costs 40, miles todaybut cost 32, miles just over a year ago.

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The list goes on. As bad as it’s gotten for travelers, they often don’t consider the other side of the equation—for better or for worse. Here’s some of that, including the cost to an airline for a frequent flyer program. On the surface, it might appear that airlines are getting the short end of the stick when it comes to frequent flyer programs. Throughout the year, for example, United Airlines offers targeted promotions for certain users to receive tens of thousands of bonus MileagePlus miles when they open a MileagePlus Explorer Visa account and spend a certain amount within the first few months. Keeping in mind that this card earns 1 mile per dollar spent in general, a customer who took advantage of this promotion would have 73, miles to redeem. If «Saver»-level awards are available, this would be enough for a one-way flight to Japan in business class on United—or any of its partners, including Skytrax five-star airline All Nippon Airways. Of course, most frequent flyers don’t earn points this way, but from actually flying. And while this method is much less lucrative today, in the era of revenue-based mileage earningit still seems to offer the airlines little more than passenger loyalty, which is less of a commodity these days anyway thanks to industry consolidation. Shockingly, the part of the equation where airlines make their money from frequent flyer programs—and they do make a great deal of money from them —has to do with neither flying nor flyer loyalty, but the direct sale of frequent flyer miles, both to travelers and to the private companies that manage and partner with their frequent flyer programs. For the credit card example above and credit card partners are one of the main reasons airlines earn so much money from frequent flyer programslet’s assume United charges Chase, who actually issues the miles, 1.

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