Originally Posted by
GUWonder
Reported segments flown tied back to reported flight ticket coupons, as financial settlement mechanisms existed for the airlines even before Carter approved airline deregulation spurred FFPs into what they became. But process limitations, including those related to technology and costs, indeed made tracking customers business simpler on some lines than other lines. But miles rather than money was for a market where point-to-point service wasn’t as much of a competitive concern for the deregulated airlines as competition against other one/multi-stop connecting service providers.
The airlines had excess capacity, and retail consumer-oriented FFPs allowing for customer use of that excess capacity on the basis of prior business was like giving funny money as a rebate instead of giving real cash back as a rebate. The tax consequences upon customers didn’t seem to be a major factor at the start as the airlines have been giving USD-denominated rebate commissions back to “loyal customers” for even longer than there have been retail customer FFPs; and other loyalty programs giving USD-denominated rebates limited to a funny money market place has been going on for as long as we’ve had an IRS.
There actually was a brief attempt at a "buy x, get one free" approach. In the early '80s, just as airlines were searching for incentives in the newly deregulated marketplace, Piedmont Airlines, which served my home airport and a number of cities across the Southeast where I needed to fly in those days (and before they became a regional airline in the modern sense of the word), started a promotion that required flying four or five flights within a certain period of time (might have been six months or a year) to get a voucher for one free roundtrip flight. That approach didn't last long because literally within the span of several months, the FF mile model became the standard, and Piedmont joined in. But since they had already started the other promotion, they ended up allowing "double dipping" for those already registered for the promo while also awarding FF miles under their new program--mine eventually became part of the Dividend Miles program when Piedmont joined USAir in the late '80s. I used my free flight for a last minute trip to Florida to join my extended family for spring break when a major trial I had scheduled resolved, leaving me free to take the trip I had thought I couldn't make. No restrictions on the voucher either--I was able to get a roundtrip ticket within hours of departure, undoubtedly saving me hundreds of dollars.