<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by Rut Dog:
The company being relieved of a future obligation (miles) pays the company assuming the obligation.
If I fly X and earn on Y, X pays Y for assuming the obligation.
If I redeem X miles for a Y flight, X pays Y for the ticket.</font>
Yes, this would make sense. I'm also wondering if the airlines actually pay each other cash according to a pre-determined cost per mile, or if this is done via accounting entries.
For instance, if airlines A and B owe each other the same amount at the end of each accounting period, do they just compare and cancel out both sides of the 'inventory'? Or if cash actually changes hand on a, say, monthly basis.