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Do Airlines Really Make Money Moving Passengers? The Reward Miles Secret

•3 min read
Do Airlines Really Make Money Moving Passengers? The Reward Miles Secret
Major US airlines are reportedly losing money on air travel, with profits coming almost entirely from their lucrative reward miles loyalty programs, creating financial instability.

The commercial aviation sector is a critical economic engine. It contributed an estimated $1.45 trillion to the U.S. economy in 2024. Despite this massive scale, a closer look at commercial airline finances reveals a concerning trend.

Analysis of major U.S. carriers suggests a financial instability. These airlines are struggling to turn a profit from their core business: moving passengers.

The Loyalty Program Lifeline

For major U.S. airlines, their primary profit centers are their airline loyalty programs. These programs compensate for airline operational losses and keep balance sheets in the black.

In 2024, no major U.S. network airline achieved a positive operating profit margin from passenger transport alone. The core airline business essentially functions as a loss leader.

The Delta Example and Financial Reality

Delta Air Lines reported a strong operating profit margin of 10.5% in 2024. However, without the revenue generated by its SkyMiles loyalty program, this margin would have dropped to a -2.5% loss. One analysis showed Delta’s $6 billion operating income turning into a roughly $1 billion operating loss when loyalty revenue was excluded. This highlights the profound dependence on reward miles profit.

Other carriers face similar, or greater, reliance. Without loyalty revenue, American Airlines would have seen its profit turn into an -8.3% loss. The situation was even more dramatic for Southwest Airlines, which would have posted a nearly -20% loss without its loyalty program revenue.

Miles as an Alternative Currency and Debt

Airline miles have evolved into a type of alternative currency. Airlines sell these miles to credit card companies. This generates billions in immediate cash flow for the airline.

This transaction, however, creates a long-term liability. The airline is effectively taking on frequent flyer debt in the form of air travel owed to the consumer. This is why some financial experts view the value of a loyalty program as potentially surpassing the value of the airline itself.

Risks of Financial Instability

This reliance creates airline financial instability. Any change to the status quo could threaten the airline's financial structure.

  • Devaluation: Airlines can reduce their future mile liability by devaluing miles. United Airlines recently adjusted its Close-in Saver Awards. American Airlines went further, stopping the award of miles for the most discounted tickets.
  • Consumer Backlash: Excessive devaluation risks consumer disenchantment. Delta Air Lines faced significant backlash after announcing major changes to its SkyMiles program in 2023, forcing the CEO to backtrack on some restrictions.
  • Regulatory Changes: Potential changes, such as the IRS finding ways to tax miles, could undermine the current financial model.

While airline loyalty programs are not inherently problematic, the industry's extreme dependence on them is a key concern for long-term sustainability. Aviation stakeholders must rethink how to retain customers and maintain cash flow without relying so heavily on this financial structure. For more insights on this and other industry topics, visit our commercial aviation news section at flying.flights. The International Air Transport Association (IATA) continues to monitor global industry financial health.

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