Why Are Airlines Making More Money Selling Airline Miles?

Are you using an airline branded credit card? If that’s the case then your daily Starbucks run, iTunes picks, and eating out habits plays an integral role in keeping America’s airline industry thriving and happy. Frequent flyer programs are heaven sent for airline carriers such as American Airlines which has partnered with Citigroup Inc. or Delta which is associated with American Express. With every airline mile major (and smaller) airlines earn 1.5 to 2.5 cents. The big banks know the high demand of airline miles so they buy these miles by the billions, literally rolling them out to cardholders each month with different offers. Why are airlines making more money selling miles? Read on to find out.

1. How Do Banks Benefit From Airline Miles?

Banks benefit from airlines because there are people out there who are willing to pay a large sum as an annual fee. These cardholders usually have high earning income and they are happy to spend more on their cards, which generates money for the bank. Cardholders in this category tend to maintain their high credit scores, which basically mean that they pay their credit card bills on time. Having such people as card holders, banks experience fewer defaults.

2. Frequent Flyer Programs Have Become A High Margin Enterprise

Frequent flyer miles, which were formerly called the Airline Loyalty Programs, have now catapulted into a high margin industry that has increased in both size and value in the midst of airline consolidation. Airlines are looking into expanding credit card rolls and seeing frequent flyer members spend even more. Alaska Airline started something new when it began tying a small percentage of its 20,000 employees performance pay to the growth of its card with Bank of America Corp.

3. Airlines Miles Are Important For Market Growth

Airline carriers earn a massive amount through frequent flyer miles when they partner up with big banks. Frequent flyer miles have played a major role in not only helping airline companies stay afloat but also earn large profits as well when the market experienced a slump. There are times when airlines don’t earn as much from airline tickets than they do from selling airline miles to frequent flyers and banks alike. Now airlines are generating upwards of 50 percent of income by selling airline miles to credit card companies, which airlines believe is a great business to be part of.

4. Airline Miles Are In Demand In Good Times And The Bad

Frequent flyer points are in demand whether the economy is in a good state or experiencing a slump. They’re still in demand even when certain airlines aren’t selling as many airline tickets in a particular season. During a recession, when banks see a fall in business, airline miles provide an excellent cushion for the airline. It seems that frequent flyer deals are immune to the economic cycle. The reason behind their stable demand is the addictive nature of the miles. This is one commodity that Americans want in their lives regardless of what is going on in the world.