BA Amex who's paying for the avios?
Jun 18, 2019, 6:25 am
#31
Join Date: Oct 2011
Location: Everywhere and Nowhere
Programs: Global Mercenary
Posts: 193
You misread the article. I cannot read the source in Bloomberg, because I don't have a subscription to it, but you've clearly fallen victim to a sensationalist headline. "Selling Miles Can Be Bigger Business for Airlines Than Selling Seats" is total bollocks, if you interpret that as they get more revenue from selling miles than from selling seats. When they say "earnings" they mean "profit", not revenue. Delta expects to earn $ 4 billion in revenue from their Amex partnership in 2021. Their 2018 revenues were $ 44.4 billion. So that's 10%.
Delta pre tax income was $ 5.1 billion. Depending on how you account for the cost of selling miles (or rather providing the services) you could arguably get to a profit near half of the total profit. But that would require some heroic assumptions on the costs.
Delta pre tax income was $ 5.1 billion. Depending on how you account for the cost of selling miles (or rather providing the services) you could arguably get to a profit near half of the total profit. But that would require some heroic assumptions on the costs.
Airlines typically sell miles to banks at around 1 c/mile and industry typically assumes the costs to airlines of redemptions at around 0.8 c/mile. Under that premise, airline miles account for around 20% of pre tax income, which is still quite impressive when you consider this model didn't exist 20-25 years ago.
