Loyalty Programs Are Keeping America's Airlines Aloft (economist.com)
- Reference: 0178611920
- News link: https://news.slashdot.org/story/25/08/08/0738258/loyalty-programs-are-keeping-americas-airlines-aloft
- Source link: https://www.economist.com/business/2025/08/06/how-loyalty-programmes-are-keeping-americas-airlines-aloft
Delta received $2.1 billion from American Express in Q2 2025 -- exactly matching its total operating profit -- while the airline's passenger operations alone would have posted a loss. These loyalty programs command valuations in the tens of billions, sometimes exceeding the airlines' total equity value, with Delta reporting 1% of U.S. GDP flows through its co-branded cards. Customers can now reach American Airlines' top loyalty tier without boarding a single flight.
[1] https://www.economist.com/business/2025/08/06/how-loyalty-programmes-are-keeping-americas-airlines-aloft
enshitification (Score:3)
Does this mean more than half of all flights are bought with credit card points rather than paid tickets? Kinda explains why fewer people are complaining about the continually diminishing customer service (smaller seats, worse/no food, longer waits, shrinking luggage sizes, etc) if they think that they are getting the flight for "free".
Re: (Score:3)
Not quite. It's more that the airlines' business model is, oddly, no longer centered on actually providing travel: the loyalty partnerships they have with credit card companies are now more profitable than the airline operations.
Airlines have for many years operated on extremely slim margins. That's why you've seen reductions in service and lots of market consolidation. The thing is, people still want to fly in the United States because it's faster than anything else for long hauls, so there's a market, jus
That's not sustainable (Score:2)
Do we all remember what happened with GMAC?
Something is going to destabilize the profitable side of the business and send the airlines into another period of tumult. Airlines won't go away, we need to travel, but the ones we have now might. It could get messy, and we may even make the mistake of federal intervention again.
Not the company mission (Score:2)
It looks like the air travel companies cannot just give the service of transporting people around the globe anymore and be profitable at the same time. They have become a financial institution that profiteers when you get into unrelated debt; it does not sound sane to me. I know that car dealers also have become like that too, pushing buy on credit schemes (with the extra insurance that only benefit them).
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No they can be profitable. But the problem is that it never seems to be enough profit. They need more year over year without any cap based in reality.
Interesting human behavior (Score:3)
This is very interesting. Now one would be mistaken to think that the airline operations don't matter. They actually do very much.
The only reason to use airline affiliated cards is to make air travel easier, smoother. Through free checked bags, priority access, lounges, earlier boarding, etc.
If Delta for example decided to shut down airplane operations and operate solely as a credit card company, people would immediately stop using their cards. So while the cards may generate profits, it's because the actual flight operations have cut things to the bone so much that people are seeking ways to make things better.
And hey, if I can just do my daily routine life spending/shopping and rack up points/access/tiers to make my travel easier, that's great.
That's one element of human psychology. There's another though, not fully understanding opportunity cost. One may think, oh I just do my normal purchases and rack up airline status for free. But if one was using a different credit card, say one of many that give 2% cash back, then one would get actual cash in hand.
Sure you're not paying for the airline status, but you are also not getting money you would have otherwise, so are indirectly paying. I wonder how many have actually done that comparative financial analysis.
Balance (Score:2)
We have a Delta credit card. We do the bare minimum to keep it active - I think it's only a couple of purchases a year. It gets us free checked bags when we fly Detla, which saves us around $60. When my wife has to fly for work she uses it to pay for those tickets, which gets us enough flyer miles for a free ticket or two every couple of years. All in all it's worth it. Most of our purchases are on a different card that give us better returns on stuff we usually buy anyways.
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> This is very interesting. Now one would be mistaken to think that the airline operations don't matter. They actually do very much.
We see this for many companies. Costco earns most, and in some years all, of its profits from its membership fees, but those fees would disappear without the low margin retail business. Amazon earns half its profits from AWS, and although AWS might be able to exist on its own now, it was motivated by the low margin retail business.
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The planes drive customers to their financial services.
This is exactly how Japanese train companies, which are all private companies, work. They are actually real estate companies that operate billions of dollars worth of high-value space in all of their stations that brings in megadollars in leases every year. The trains are important, but they aren't making their money selling tickets. Ticket revenue could never keep them afloat and if they increased ticket costs they would lose money, because they really
Bad deal (Score:5, Informative)
Everything we buy is more expensive to fund the fees that feed these very profitable loyalty programs. Even if you don't participate, it is baked into the credit card fees which are in turn baked into the price at the store.
Simplifying. You over pay by 2% to get 1% back. This is dumb.
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> Everything we buy is more expensive to fund the fees that feed these very profitable loyalty programs. Even if you don't participate, it is baked into the credit card fees which are in turn baked into the price at the store.
> Simplifying. You over pay by 2% to get 1% back. This is dumb.
It is a bad deal and it's dumb, but if you don't take it, then you are over paying by 2% and getting nothing back. The figure is likely higher than 2%, but the point is the same.
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Good deal for me: Everyone really pays +3% or more, but my family gets more than 3% of everything we spend back in air travel and card benefits. However, this entire business model is falling apart in near real time. We have things like UPI [1]https://en.wikipedia.org/wiki/... [wikipedia.org] that started in India and is spreading around the world because it is so inexpensive. We have all of the apps like Venmo and if you believe crypto bros, crypto is going to cut into Point Of Sale (POS) transactions. And then there is
[1] https://en.wikipedia.org/wiki/Unified_Payments_Interface
Credit Card Competition Act (Score:2)
It's no wonder the airlines have lobbied heavily to kill the [1]Credit Card Competition Act [nerdwallet.com] it would absolutely gut their profits. $80M dollars spent so far lobbying against the bill.
[1] https://www.nerdwallet.com/article/credit-cards/what-to-expect-if-the-credit-card-competition-act-passes
It's about to get a lot worse (Score:4, Interesting)
Tourism is collapsing. The Evo fighting game tournament saw a 20% drop in entrants and that's pretty much because people don't feel safe coming to America.
From what I can tell the damage done to tourism is going to hit the tourist industry about 30%. And those are big international flights that are high profit.
We haven't really seen the effects yet but they are coming very soon and it's going to be a bloodbath. But hey how about those cheaper eggs right?
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I love the added touch of adding rsilvergun's Slashdot sig to an AC post like that's fooling everyone.
Re: (Score:1)
Yeah, I dunno.
We spent around $35K on trips in the last 12 months
.
In September, we're going to Ireland on what will probably be a $15K trip.
We see lots of other people everywhere we go.
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Hotels are all booked up for our Dublin trip too. We are going to have to pay out the nose.
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C'mon man, "Well I'm spending a lot on tourism" is meaningless in this discussion and what you see at the airport isnt much better. You might as well tell me crime doesn't exist because when you're out and about you haven't seen any lately.
Foreign tourism to the US is indeed dropping [1]https://cepr.net/publications/... [cepr.net] as the above claims. It's a real thing.
[1] https://cepr.net/publications/decline-in-foreign-tourism/
Las Vegas is feeing people to death like an $50 Ch (Score:2)
Las Vegas is feeing people to death like an $50 Charge for Unplugging A Cord
Re: (Score:2)
While the fee itself is overall dumb, it wasn't a fee for just "unplugging a cord". It was a fee for unplugging a very specific cord to the equipment that monitors the for-purchase, in-room snacks/accessories (like a minibar fridge but not a fridge). That piece of equipment uses pressure-sensitive triggers to charge guests for items that are removed, so if it's unplugged, presumably, it wouldn't accurately monitor those things or know what to charge for.
Yes, still, the fee is absurd for what it is, but thos
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Give the joint a shitball review
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Canadians used to drive hours to an American airport to fly anywhere. These days I expect not so much, since any reason they don't like you in the US can get you arrested. Also I don't belong to any loyalty plans because they are clearly an effort to control me and I don't like being controlled.
It's not about not liking you (Score:2)
Trump has given quotas to the immigration enforcement and they are completely impossible for anyone let alone someone as incompetently managed as the immigration enforcement to meet.
So they are arresting anyone and anything they can get their hands on to meet those quotas.
Very soon you're going to see that in the general populace. You already are really with DUIs. There are tons of sober people being pulled over for DUI.
The way the laws work you're basically guilty until proven innocent with the