Originally Posted by
redshift27
By diversifying the ways and means that miles can be gained, the airlines have moved away from the original purpose of such programs, which was to encourage brand loyalty amongst their most valuable customers.
It sounds to me like you are defining "most valuable customers" as those customers who fly an airline the most. From a profit standpoint, this is not necessarilly true. The absolute most profitable customers for an airline are those members of their frequent flyer program who earn miles through partners and never fly the airline.
Originally Posted by
mahasamatman
I think it''s closer to ¼¢-½¢ per mile to entities like credit card companies.
I doubt it. Delta Airlines carries a liability of $.0054 per mile on their balance sheet, if they sold miles for anything less than that they'd lose money on ever mile they sold. I don't think Delta is losing money on every mile they sell to AMEX.
If true, it would explain how banks can afford to offer 25k miles for getting a credit card. Do you have any data on this, or maybe a quote from Randy or another source?
I'm not sure we have any way to know that the credit card companies bear the full cost of sign-up bonuses on their own. In general, it is not uncommon for bonuses to be jointly funded by the airline and the partner, I don't see any reason to believe that does not occur with credit card bonuses too.