Guess Which Airline Earned The Most From Rewards Programs
Jennifer Billock August 20, 2018
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.
[Image Source: Pexel]
"Earn" doesn't mean the same thing as "revenue". So your headline does not accurately describe the article. Just because AA has the most loyalty program revenue does not necessarily mean that they earned the most from it. And it is not at all surprising that AA had the most revenue, since they are the largest airline by most metrics. What would be more meaningful would be looking at normalized revenue. One way to do this would be to divide the revenue numbers of each airline by their passenger count, or by the number of frequent flyer program members that they have.