Money, money, money.

When an airline has the legal ability to sell funny money in exchange for lots of real money by operating a Ponzi-type scheme where the airline pays out to its participants only when and how the airline wishes to pay out, an airline giving such a game up is not such an easy thing for the airline to do -- especially in circumstances where the airline uses the mileage program as a way to generate real cash to subsidize its primary operation and postpone paying the ultimate price for a primary operation that has significantly lower profit margins and is even an overall cash drain and income hit in a way that mileage programs are generally not.

Having trouble raising cash in the capital markets on very good terms, some airlines even try to raise money from financial institutions by selling financial institutions miles for real cash (at even larger than usual discounts to quickly raise millions of dollars) or even selling the FFP to investors. The airlines might not know it or admit it publicly but they are walking a tight-rope -- they cannot afford to kill the goose that gives them the fool's gold eggs that they sell for real gold while the market still buys it and holds it, but they also are pushing the goose to the limit.

The FFPs being a differentiating item that prevents the full commoditization of the industry is true, but the airlines seem to mostly have forgotten that FFPs are one of the few things that prevent even further commoditization in the industry than is already the case. [I am not sure the airlines really care that much as they mostly act as if physical product is enough, especially when there are service issues; in other words, the airlines have largely acted as if most all customers are replaceable and that retention through customer service efforts is generally not worth it to them since product and price is what they are selling. Consequently (in this regard but others too) the airlines are reaping what they sowed -- namely, a more commoditized marketplace.] I don't think the airlines in the US really care about commoditization much at all, so that concern is not the primary reason they are keeping FFPs still.