But most people would take those flights anyway. I seriously doubt that lifetime status can boost revenue in any significant way. It is something people may chase if they're already close to the target but virtually no one adjusts their travel patterns for 10 years just to earn lifetime status.

When you offer benefits to someone who is an active traveller, you are providing them with an incentive to keep booking with you because you make their journey better and possibly cheaper. Since they're an active traveller, this means a lot of money coming your way and even if some individual trips (or even individual travellers) create a loss, the system as a whole should remain profitable. This is not the case when you keep throwing those benefits at people who book few leisure trips per year whenever and wherever they find a cheap fare.

This armchair CEO would never approve introducing lifetime status at his airline. There's no way in hell it can generate more revenue than cost in the long term. Investing that money into better benefits for active members should be far more profitable.