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.