Originally Posted by
kkirksea
4) It still can be profitable. If you owned a business would you like to make a sell at Cost+$50 or no sale at all? Most mileage runners wouldn't be buying the product at all if it weren't for the mileage run. As long as the airline can properly control the cost/rewards such that they make a profit over the long haul... it's goodness?
Cost + $x is not an appropriate analogy for an airline. The product perishes once the door closes, so even if they sell a seat for $50, it's $50 more than they would have had, had they not sold that ticket.
The key in maximizing revenue is trying to sell the seats on the plane for the highest possible total revenue. The plane is flying anyway, so the cost to fly each seat is irrelevant. The question is how much money they can get out of each flight.