Frequent Flyer Programs Bring in Record Profits for Airlines
Jennifer Billock August 14, 2018
Full length of young businesswoman using digital tablet at airport lobby
Airlines in the United States are making record high revenue from frequent flyer programs, analysts say, even though most major airlines won’t release the mechanics behind just how those loyalty programs earn them marketing gains, and exactly how those gains translate into profit for each of the airlines.
In a new report, Joseph DeNardi, an analyst with Stifel, studied seven major airlines’ quarterly numbers to determine how much they’re making from loyalty programs—and it turns out they’re making quite a bit. In fact, the revenue from loyalty programs appears to be accounting for much of each airline’s overall profit.
American Airlines appears to have earned the most in the last six months, bringing in $1.15 billion in marketing revenue from its loyalty program in just the first half of 2018. That’s a year-over-year increase of 10 percent.
Other airlines, though, had larger year-over-year increases. Hawaiian Airlines hit the top, reporting a year-over-year gain of 52 percent. JetBlue saw an increase of 23 percent, though that may partially be thanks to a deal with Barclays bank cards.
Most of the thriving airlines, in fact, are seeing marketing revenue increase because of these bank partnerships. The banks buy miles from the airline and then pass them on to customers through points and other earning opportunities. With a touchy financial past in the air industry, those partnerships were one of the main reasons airlines were able to crawl back to profit.
“As recently as 2011, the underlying airline business was bankrupt so they used these partnerships for financing,” DeNardi told Skift.
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