I'm sure this has been discussed before but it still stumps me.

I use my Starwood AMEX and get a point per mile. I imagine that means that AMEX purchases those points for somewhere under a penny a point.

Then you call Starwood and redeem them for airline miles. So Starwood has to pay for those miles, off-setting it with the fact that they received income when they sold them.

Then you call the airline to acquire an award with one of their alliance partners, so they have to purchase a ticket for you.

So I moved 140,000 Starwood points to US Air last summer when they had a 50% transfer bonus over and above the normal 25% bonus. Got me a total of 262,500 miles. Used them for two First Class tickets, NY to Europe, on Swiss - seats that sell retail for about $13,000.

What do you think Starwood paid US Air for my miles? $1,000-1,200?

What do you think US Air paid Swiss for those seats? The same?

I'm very grateful but in some ways, it seems too good to be true!