Originally Posted by
duyibest
This makes think why airlines invented this “mile” currency to begin with. They could just instead give you a cash back for flying more.
I guess these programs may actually make more money from you.
Originally Posted by
beachmouse
If memory serves, the frequent flyer programs came from an era where 75-80% load factors were the norm and award tickets were literally the seats the airlines were not going to sell for cash anyways so they figured they’d get more in terms of goodwill from frequent flyers than it would cost to do the catering for the ‘free’ tickets.
In the CARB era, all airlines charged the same price for the same city-pairs, so they competed on service. In the post-deregulation era (when airlines could price flights competitively instead of having to price at government-set rates), it was a differentiator to try and earn loyalty. The reason it wasn't set up as a straight cash-back program was a concern from corporate clients that it would incentivize employees to pick the most expensive flights so they could maximize their return, and it would incentivize employers to either charge employees for the value of the cash back they would receive or seize the cash back themselves to cover future travel, removing the loyalty incentive from the employee. There was also a concern that the IRS would tax employees for cash back based on employer-paid business travel.
Mileage earning was distance based, and redemption charts based on country/area instead of ticket price, to eliminate these pressures.
It's funny though, because we seem to be getting there in the end. The employee price incentive has been dealt with by corporate travel policies. I wonder how the other problems will be solved?