Airlines Credit Cards Frequent Flyer Programmes

How Do Frequent Flyer Programmes Generate Revenue?

Frequent flyer programmes are one of the most important assets any given airline owns. It’s often overlooked how important they truly are and how they can generate a huge portion of an airline’s revenue and profit. Just as their importance is overlooked also how they work for the carriers is also for many somewhat obscure.

How Do Airlines Drive Revenue From Their Frequent Flyer Programmes?

Those who use credit cards to build up their frequent flyer miles accounts see these points as a free extra granted for using the specific card. Same goes when getting granted miles with any of the airline’s partners.

Those miles though, that we receive at no extra cost, aren’t cost free to the credi card company or other intermediaries. Frequent flyer programs generate money, revenue and profit for airlines by simply selling miles to other companies.

This is generally what happens with all airline frequent flyer programme:

  • Airlines issue frequent flyer miles.
  • Miles are sold to partners or intermediary companies.
  • The miles are then offered to users as an incentive for using a specific credit card or service.

Airline frequent flyer miles are therefore a sort of credit the carrier issues. Only when a traveller books a flight does he airline incur in the cost of providing the service. So airlines get paid in advance for a service that that will be redeemed generally quite far into the future. Generally there is a marginality applied to miles to avoid losing money when providing the traveller their award flight.

How Do Frequent Flyer Programmes Generate Revenue?

How Much is a Frequent Flyer Programme Worth?

It’s difficult to put a price tag on an airline’s frequent flyer programme. It varies greatly, depending on the number of members and the airline’s size and many other factors. In many cases it is almost impossibile to know how much a frequent flyer programme is worth.

However during the pandemic we had some kind of an insight into the value of American Airlines‘ programme value. The airline, in order to access a 5 billion dollar loan put up as collateral it AAdvantage programme. The value it was put up for was 31 billion dollars. That is a huge amount of money if you consider that the airline is “only” valued 8 billion dollars.

About the author

Alex Achille

Ex Cabin Crew with Emirates, I've always loved travelling and other cultures. In this website I'll be sharing my experiences along with my reviews of the latest Korean Dramas and TV Series I've watched.

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