Originally Posted by Andy2

I think the devaluations will continue, but honestly I think your analysis is a bit too accounting oriented instead of economics oriented.

The frequent flier programs started when there were too many airlines with too many open seats. The airlines were losing money, and if they continued to sell too many low-priced seats to last minute purchasers, it just made things worse.

So a few airlines started this cheesy fly six times and your next one is free program, and it worked. A customer was relatively more likely to fly American than its competitors as a result of the frequent flier program. Then the rest of the airlines started the same program, and the competitive advantage was lost.

Then when the Great Recession happened, and the airlines needed every dollar they could get, they sold massive quantities of miles to credit card companies who gave them out for free. And when they weren't free from a sign-up bonus, techniques such as The Mint and Manufactured Spending at least make them very low cost.

But some very interesting things happened between 9/11/01 and the end of the Great Recession. The airline mergers made them Too Big To Fail and eliminated excess capacity. Now the decline in the price of oil raises the possibility of huge airline profitability from selling every seat for cash and the increase in the value of the dollar compared to other currencies will stimulate demand for international travel from the U.S., including demand for the enhanced premium cabin travel.

If I were advising an airline, I would tell them to massively devalue their miles. Sell those seats for cash instead of giving them away! The airline already has their cash from transferring the miles for cash. If the mileage holders are angry, what can they do? The few other airlines existing in this new oligopoly are devaluing at the same time.

Tell me why, from an economics perspective, they should not massively devalue?