FlyerTalk Forums - View Single Post - AA potentially closing accounts due to credit card churning/churn
Old Jan 6, 2020, 9:59 am
  #789  
percysmith
Ambassador, Hong Kong and Macau
 
Join Date: May 2009
Location: HKG
Programs: Non-top tier Asia Miles member
Posts: 19,800
Originally Posted by Global321
Revenue ticket - paid with cash
Award ticket - paid with miles
Non-Revenue ticket - airline employee ticket
Correct from a trade POV

Incorrect from a financial statement or SEC POV

For mileage credits earned through travel, we apply a relative selling price approach whereby the total amount collected from each passenger ticket sale is allocated between the air transportation and the mileage credits earned. The portion of each passenger ticket sale attributable to mileage credits earned is initially deferred and then recognized in passenger revenue when mileage credits are redeemed and transportation is provided.

Correct from ASC606/GAAP perspective

Real economic/non-GAAP perspective may look like this:

Originally Posted by d00t
A typical scenario may look like this: Let's pretend Amex paid $0.01/mile.

$0.006 - considered a marketing and branding component, and is banked instantly as revenue.

$0.004 is deferred revenue, essentially placed as incremental cost liability (calculated using a variety of factors based on historical performance, breakage and future forecasts), and amortized as passenger revenue by the airline being redeemed on and represents the cost of transport.

In the cases of many loyalty programs - the marketing component is greater than the estimated future cost of transportation.
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