Originally Posted by
swag
Yes, but that is revenue. You need to look at profit. The $10K from the credit card company (if that is the number) is almost all profit, at least with current US airline accounting methods.
The profit from the 100K mile passenger, as others have pointed out, will vary greatly, but it may be a vary small number, or even a negative one.
That is not entirely true. Lets take for example a customer who spends 1M $ per year on the card. The
revenue to the airline is approximately 12K, based on an average selling price of 1.2 cents per mile (these are numbers based on Aeroplan in Canada, so don't hold me to it when it comes to American FF programs). Now the
profit will be the actual margin, the difference between the amount received for that mile, versus the actual
cost to the program when someone decides to redeem it. Obviously, the higher the breakage (miles expiring for example) the better for the program, as that is pure profit. Some numbers for Aeroplan, here in Canada :
Average price Aeroplan sells a mile to its customers (Amex, Cibc, Esso etc) :
1.2 cents
Average cost of redemption per mile :
0.98 cents
Profit (aka Margin) :
0.22 cents per mile
Breakage (conservative estimate) : 17%
So while yes, a 1M spend on your CC would bring in around 12k revenue, the actual profit (before expenses) is around 2200$. (unless of course the miles never get redeemed)
A top tier member can easily generate that much profit with one full fare business class ticket.
Of course, as I said, these numbers are based on the numbers at Aeroplan, in canada to YMMV.
Cheers