Seems like that shouldn't be a huge problem...when I redeem a coupon at the grocery store, it's not taxable income. And within the travel industry, the hotels are already tying their rewards programs closely to dollars spent (granted, with bonus promotions on the earning side and hotel categories on the redemption side that keep it *slightly* detached from a straight percent-off discount). Even if my client is paying for the hotel room and I'm receiving the points, it's not a legal/tax issue.

To me, the downside to the simple rebate approach is that the program isn't as exciting. The marketing sizzle isn't there. I simply think "Gee, shouldn't my flights simply be 20% (or whatever) cheaper?" To me, the lure to fly Virgin America is the eventual ability to fly Upper Deck to Europe. If they tie too closely to revenue on the redemption side (which they'll have to if they are serious about no capacity controls), that award will be out of reach.