New York — For many travelers, frequent flyer programs are simply a perk of air travel—a way to earn points for future flights. But behind the scenes, these programs have evolved into a financial powerhouse, bringing in billions of dollars for airlines. In fact, frequent flyer programs have become one of the most profitable aspects of the airline industry, far outpacing revenue from ticket sales.
This shift has been driven by lucrative partnerships between airlines and credit card companies. Banks purchase frequent flyer miles in bulk to offer as rewards to their customers, who earn miles for everyday purchases such as groceries or gas. These credit card transactions have turned frequent flyer programs into a major profit generator for airlines.
In 2023, Delta Air Lines earned $6.8 billion from its Delta American Express co-branded card, while American Airlines generated $5.2 billion from similar deals. Even United Airlines, which lagged behind its competitors, brought in $3.2 billion from its frequent flyer program. These programs have become indispensable for the major carriers, with Delta’s adjusted income for 2023 totaling $4 billion, and United’s reaching $3.3 billion.
“Frequent flyer programs are the lifeblood of airlines today,” says Zach Griff, senior aviation reporter at The Points Guy. “They are the reason airlines can remain profitable in such a competitive industry.”
However, it’s important to note that airlines must eventually provide flights to fulfill these miles. Despite this, the profit margins from these transactions are enormous. According to Tom Fitzgerald, an airline analyst with TD Cowen, the margin on miles is around 50%, a striking figure in an industry where single-digit profit margins are the norm.
Government and Regulatory Focus The rise of frequent flyer programs has also caught the attention of regulators. Recently, the Department of Transportation announced it would be investigating these programs, with a focus on ensuring transparency and fairness for consumers. Transportation Secretary Pete Buttigieg highlighted how these rewards programs have become an integral part of the economy, with many consumers viewing their points balances as an extension of their personal savings.
“These programs provide significant value to consumers, but unlike traditional savings accounts, their terms can be changed at any time,” said Buttigieg. “We want to ensure that consumers are treated fairly and receive the value they expect.”
Congress is also considering legislative changes that could impact these programs. Proposals to cap the fees that credit card companies charge merchants could reduce how much credit card issuers are willing to pay for miles, potentially reducing the profitability of frequent flyer programs. United Airlines CEO Scott Kirby has warned that such legislation could “kill rewards programs” entirely.
Although airlines have been relatively quiet about the profitability of their frequent flyer programs, industry groups have defended them, emphasizing the value they bring to millions of travelers.
The Consumer Side of the Story For consumers, frequent flyer programs can be highly beneficial, provided they are used wisely. The key, according to experts like Zach Griff, is understanding the value of your miles. Typically, miles are worth around 1.2 to 1.3 cents each, meaning a $400 ticket should cost about 33,000 miles. Consumers should be cautious when redeeming miles, ensuring that they get the most value for their rewards.
During the pandemic, frequent flyer programs became a crucial lifeline for airlines, as air travel came to a standstill. Airlines sold bonds backed by their loyalty programs, underscoring the critical role these programs play in their financial health.
Although frequent flyer programs might seem separate from the airlines themselves, the two are deeply intertwined. As Andrew Didora, an airline analyst at Bank of America, explains, “Frequent flyer programs and airlines are inseparable—they need each other to thrive.” As travel rebounds and frequent flyer programs continue to drive profits, their importance in the airline industry remains undeniable. These programs not only help airlines stay afloat but also foster long-term customer loyalty, making them an integral part of modern air travel.
