I have seen a number of posts on he price airlines charge for selling miles to partner programs, like credit card issuers. However, what do the airlines pay to buy back miles from companies like the Miles for Magazines program (exchange miles for free magazine subscriptions) and MilePoint (exchange miles for discounts off retail from selected merchants)?

1 - How does this model work? I assume the airlines buy those miles back at a certain agreed price per mile. In other words, the airlines are willing partners.

2 - If so, what is the buy back price for those miles? This would set the absolute floor in the value of a mile.

3 - What financial incentive do the airlines have for reducing their outstanding miles? Do they recognize miles outstanding as a liability in their financials? Does reducing outstanding miles improve their balance sheet?

4 - What other non-travel related companies, other than the two I mentioned above, have a business model that allows the consumer to use miles to partially or fully pay for good and services?

I am intrigued by this business model and what to learn more about it.


MTP