That's really not true. As I've noted above, a continued partnership with an airline is crucial to the FFP's success. You can't make money from the CC deals if you don't fly. Just like people sometimes say all of Costco's profit comes from selling memberships not from selling goods, which is nonsense, because without screaming deals on big-screen TVs and Kirkland vodka or whatever, no one would pay the membership fees.

In any business with thin margins, it's easy to cherry-pick one line item and say that bit of revenue is responsible for more than 100% of the profits, but it's just not accurate.

I'm not saying loyalty programs, and the CC partnerships that drive them, aren't profitable. But it has been way overblown in recent years. AC discloses next to nothing about how it derives revenue from Aeroplan and the CC partnerships. The US3's financials have a few interesting tidbits, but not one of them treats the loyalty program as a separate business segment with its own P&L. This makes it very easy to hype up the revenues derived from these programs, which are somewhat visible, without talking about the costs. It's easy to point to DL generating $7.1 billion from its Amex partnership last year, but the costs of that go well beyond the miles awarded for CC spending. There's also some portion of running the lounge network, the cost of baggage fee waivers, and so on. None of those costs get broken out anywhere.

That means that when airline executives talk to investors, analysts, the press, etc, it's very easy for them to talk up how great the loyalty programs are. And maybe they'll even cobble together some managerial accounting that estimates the actual profits, but it's not subject to normal accounting regulations, and even if it were, there's a fair amount of leeway in some of the internal estimates that would go in to this stuff. For example, if there's an obligation to provide advertising for the co-branded CC on the IFE, some of the revenue needs to get allocated to that, which would be the flying part of the airline, rather than the loyalty program. Let's say AC usually charges $x per passenger-minute of ads. If I want to maximize the profitability of the loyalty program, I allocate a very low figure to these ads - maybe we usually sell the ads on 3-month campaigns in a somewhat geographically targeted fashion where people buy y volume. But because the CC program will be committed to ads across the airline for 5 years, they might be buying 50y passenger-minutes of ads. So I might "charge" them only 0.25x per passenger-minute of ads - classic bulk discount. On the other hand, if I wanted to reduce the apparent profitability of the loyalty program, I would "charge" it the same rate as the other ads. Heck, by guaranteeing them first position of every ad roll, maybe I could even charge it a premium - 1.1x, 1.2x, I don't know. At a certain point, the auditors would reign me in, but there's always a lot of latitude in these things.

The same is true of the way they account for the cost of existing points redemptions, by the way, which affects both CC partnerships and miles that are earned and burned purely through flying. There are rules and guidelines and the auditors will look at these things - and you can't change the methodology every quarter to suit your purposes - but are estimates and ranges and so on and so forth that let the airline shade things in whichever direction it wants to go.

Anyway, yes, I expect the program to continue to shift qualification and benefits somewhat towards CC holders/spenders, but let's not get carried away with these notions of the loyalty tail wagging the airline dog.