Originally Posted by mnredfox
Technically speaking (from an accounting point of view that is) I would say no - as in NWA must keep on its books all FF miles as unearned revenue and can only count it as revenue when they are used. Thus, there is an incentive to have folks burn through their miles.
But, I would think that they carry miles as less value than true cash revenue - so in that sense I would agree with you.
I don't believe what you are saying is correct. NW must carry the value of the frequent flyer miles as a Liability and when they do that, this increases their expenses. When passengers burn through their miles, this reduces the liability thus reduces their "expense", not increase their revenue. I guess the net result to their bottom line is the same but when passengers use miles it is not considered revenue for the airline. It is considered a lowering of their liability and thus their expenses. Probably a technicality but I guess that is why I am an accountant
John