Making the Most of Frequent Flyer Miles
(Entrepreneur) — The bottom line is that the airlines are in the biggest money-making opportunity of their entire lives with their frequent flyer programs. The major airlines actually make more money with the frequent flyer programs than they do as airlines. The market value of American Airlines frequent flyer program is more than $6 billion — the market itself is $2.4 billion. What does it tell you? Airlines make a lot of money by selling miles to their miles partners — credit card companies, banks, et cetera — so you get a dollar for every dollar you spend — but guess what? The airlines don’t just print the currency, they’re in charge of the redemption. If they keep the redemption levels under 10%, that’s 90% return on investment. So we’re all mileage addicts — we love knowing how many miles we have. When you call the airline, the first thing they say to you is we don’t have seats at 25,000 miles, we have seats at 50,000 — that’s extortion.