Educational Posts on Loyalty Programs

The airline industry is ever evolving in the United States. Things have changed massively since the time when the first commercial flight was flown. Costs have increased, consumer trends have evolved, and loyalty programs have become much more than a way of earning and redeeming points.

We are also seeing a divide in the industry – some airlines are as profitable as ever, while others can no longer compete. One of the recent examples is Spirit Airlines, the pioneering discount airline, which ceased all operations and went out of business because of financial problems.

But why do some airlines stay profitable and others struggle to stay aloft? That’s because the profitable airlines are not actually making their money from selling tickets. Instead, they are earning their profits from their loyalty programs.

In recent years, frequent-flyer programs in America have grown ever larger and more lucrative. They’ve become more profitable than airlines themselves, and, in fact, airlines would lose a lot of money without loyalty programs.

There is an excellent analysis in Visual Approach Analytics that shows the state of US airline industry economics and the extent of profits that are driven by loyalty programs in comparison with airline ticket sales.

The analysis shows the 2025 operating profits of the six most profitable US airlines and compares their reported operating profits to what their operating profits would have been without loyalty revenues.

Here are the numbers at a glance:

• Delta Air Lines had a 9.7% operating margin, but without loyalty revenue, it would’ve had a -3.9% margin
• United Airlines had an 8% operating margin, but without loyalty revenue, it would’ve had a -3.9% margin;
• Allegiant Air had a 1.5% operating margin, but without loyalty revenue, it would’ve had a -4.1% margin;
• American Airlines had a 2.7% operating margin, but without loyalty revenue, it would’ve had a -12.9% margin;
• Alaska Airlines had a 2.1% operating margin, but without loyalty revenue, it would’ve had a -16.6% margin;
• Southwest Airlines had a 1.5% operating margin, but without loyalty revenue, it would’ve had a -25.1% margin.

How does loyalty revenue work?

The model is simple: airlines sell miles to card issuers; cardholders earn miles by spending; and those miles are eventually redeemed for travel. Each party benefits. Banks and other financial firms gain loyal customers, travelers enjoy flights and perks, and airlines secure a steady stream of profits.

If we dig more into accounting, here’s how it works:

• When points are awarded for a flight, that gets booked as air traffic liability on the balance sheet, and then when those points are redeemed, the liability goes away, and the value of points gets booked as passenger revenue.
• When money is spent on a co-branded credit card, the money the credit card company gives the airline is split — roughly half goes onto the balance sheet as air traffic liability, and roughly the other half gets booked as marketing revenue; when the points are used, the air traffic liability gets booked as passenger revenue.
• When cardmembers or members of loyal programs forget about their points (or when they expire), the airline can release the liability in a breakage process, and removing the liability results in revenue.

Why are airline credit card partnerships so important?

Co-branded credit cards, and then travel credit cards like Chase’s Sapphire Reserve and American Express’ Platinum cards, have become a significant source of revenue, as well as useful tools of corporate finance. Airlines sell miles to issuers to receive much-needed cash upfront to keep things running and deliver the services later. Since carriers control the redemption rules, they can steer passengers towards off-peak flights and unsold seats.

The expansion of frequent-flyer programs also resulted in a growing number of co-branded credit cards. Delta and American Express now offer seven co-branded cards. These cards earn SkyMiles for every dollar spent, and premium versions come with such travel perks as lounge access, free checked bags, and complimentary upgrades. Even non-branded credit cards, like Chase’s Sapphire or Citi’s Strata cards, can grant access to exclusive lounges and allow cardholders to convert their points into airline miles with a range of carriers.

Over the years major US airlines significantly increased the revenue they earn from selling miles to card issuers. For example, Delta and American Airlines more than doubled their revenue over the past eight years, and United has seen growth of around 70%.

Many airlines have switched from awarding loyalty status based on miles flown to awarding loyalty status based on how much customers spend. For example, with American Airlines, you can reach the top loyalty tier without ever having stepped on one of its planes. So, you can simply have an airline credit card, spend heavily on it, and earn status points.

Bottom line

Co-branded and travel credit cards were making a lot of money for financial firms too. Annual fees are one source of revenue. American Express has hiked the annual fee for its Platinum card to a whopping $895 a year, and Chase is currently charging a $795 annual fee for its upgraded Sapphire Reserve® credit card. But the real money comes from the interchange (swipe) fees collected on transactions. U.S. banks earned tens of billions in interchange fees in 2025.

The US airline industry has evolved massively in recent years, both better and worse. The loyalty programs have become a new funnel for booking tickets and generating revenue. In other words, they’ve become another currency that airlines accept.

The US airline industry transformed to the point that it cannot exist in its current form without loyalty revenue. However, for carriers, it’s not that bad because they can compete with other airlines. It’s also good for consumers, as their tickets are essentially subsidized by credit card companies.

However, for smaller airlines, it’s hard to compete with bigger players who have robust loyalty programs. The recent example of Spirit Airlines, which eventually stopped its operations, clearly shows it.

Quick summary

• Major credit card issuers offer credit cards with transferable rewards.
• Transferable points offer flexibility, allowing users to choose the best partner for their desired itinerary.
• Transferable credit card rewards offer the highest value for travelers, allowing them to get better redemption options.
• Transferable rewards do not expire while you keep your credit card account active and in good standing.

Transferable points are probably the most valuable points to earn with a credit card. They give more flexibility when you redeem them for travel: unlike airline or hotel points, which can only be used with a specific airline or hotel, transferable points can be transferred to multiple airline or hotel loyalty programs. Plus, points transfer is given in addition to other standard redemption options, including booking travel directly through the issuer without transferring points to loyalty programs.

Organizing a vacation has become significantly simpler, largely due to the internet. Nowadays, securing a hotel, flight, or dinner reservation is merely a quick search on Google away. However, traveling affordably is still often challenging.

By looking a bit further, you can uncover options ranging from economical flights to budget-friendly accommodation choices. Here are ways to enjoy a budget-friendly trip without compromising the vacation experience.

If you’ve been in the mortgage sector for some time, you’ve developed a network of potential lenders and borrowers. You’re likely savvy enough to know numerous loan options like the back of your hand — which helps advance your career or establish your own business.

Navigating the complex world of homeownership can be both rewarding and challenging, especially when it comes to managing monthly mortgage expenses. With the ever-fluctuating economy and varying interest rates, finding ways to reduce these costs has become a priority for many homeowners.

Searching the web for international flights and accommodations is thrilling — until you reach the checkout and see the final price.

Exorbitant travel costs can’t be avoided, but many people are unaware that with a simple cybersecurity tool, these costs can be greatly reduced.

When you want to save money on flights or travel, using services like Google Flights can help you find great deals on flights or craft the perfect itinerary. Being a part of Google Travel, Google Flights has become a powerful flights search engine. You don’t have to be a genius to use it and you are not forced to book with it either. You simply search for available options and if you find flights you like, you simply book it directly with the airline or via a third-party online travel agency.

While Google Flights is easy to use, still you could use some tips and Google Flight features to find a great deal and save money.

Baggage fees have been a nuisance to flyers for several years already. These days, checked baggage is almost never free and some low-cost carriers even charge for carry-on bags now. As a result, baggage fees can really add to the total cost of your flight.

Have you ever had a situation when you had to choose to travel alone or not travel at all because your partner or family were not able to take the same time off work, changed their plans at the last minute, or didn’t want to travel to the destination you’ve always dreamt of? Bet that was frustrating, discouraging and disillusioning. But don’t let the lack of a travel companion lock you at home and out of amazing adventures.

Recent data shows that U.S. homeowners spent an estimated $567 billion on home improvements and repairs in 2022, an increase of 15% from the previous year. That number is expected to continue to grow this year. Moreover, the top priority for homeowners this year will remain home improvement projects rather than moving into another property, largely because of persistently high mortgage interest rates.

Starting a business can be an exciting adventure rife with challenges. And to cushion any potential business problems, most entrepreneurs register their business as a Limited Liability Company (LLC).

The insurance industry is stable and secure globally, particularly in Australia. It’s well-developed and backed by fair regulations, making insurance a good deal for insurers and policyholders. And with a growing population and new aspects of life and businesses that companies can insure, insurers can expect to go through life working in a very lucrative industry.

Emergencies can strike at any time, and it’s always a good idea to be prepared, but if you’re in the middle of a financial crisis and don’t have savings or other cushion to rely on, don’t panic. Here are seven simple money fixes that can help you get out of the pinch.

Travel expenses are one of the expenses businesses must prepare and include in their budget planning. For instance, there may be seminars, conferences, in-person meetings to meet new clients or close deals, site visits, or networking events and expos in another state or country.

The decision to open a business bank account is a big one. It’s one of the things that can prove that you’re a legitimate small-business owner and that your company’s finances are distinct from your money. 

There are many business bank accounts, each serving a different purpose. Ensure you put your money into the correct account type for your financial goals so you can access good spending and saving tools. Managing your money in this manner will allow you to maximize your bank’s return, minimize fees and the hassle of managing it.  

When you need money, a loan can be a great option. However, it’s important to take the time to consider all of your options before applying for a loan. There are many different types of loans available, and each one has its own set of terms and conditions. In this blog post, we will discuss six tips that will help you make the best decision possible when it comes to borrowing money!

Southwest Airlines, one of the major US airlines and the world’s largest low-cost carrier, is making some changes to its Rapid Rewards® program and Companion Pass. The changes will go into effect starting January 1, 2023.

If you are a Rapid Rewards member, you may have already received an email from Southwest informing of these changes. If not, here is everything you need to know about the upcoming update in the Rapid Rewards program.

It’s easy to come up with great business ideas. But turning that idea into a reality is a different story. There are countless challenges and obstacles you’ll face along the way, from raising money and building a team to creating a market for your product or service.

But don’t let that scare you off. With enough determination and hard work, you can overcome any obstacle and bring your business idea to life. Even though there’s no one-size-fits-all formula, there are a few key steps you can take to make sure your idea has the best chance of success. Here are the most important ones to follow:

Do you dream to get scholarships to travel and study abroad? Are you discouraged by the total price to study abroad? If you answered yes to any of these questions this is the right article for you.

There are plenty of abroad scholarships that provides travel grants for students. Those grants to travel abroad will minimize or reduce the price to zero with the studies related travel.