In every business there are at least 2 classes of customers. The occasional one and the regular one. If you are a regular at a restaurant, you will always receive shorter waits for a table, a better table and often times free drinks or other goodies on the house. In the manufacturing business, you always give better prices to your major customers.

The airline business is no different. So when you ask "Why reward customers' loyalty at all?" My answer is, that this is how the airlines make money and stay in business.