Author Topic: "Airlines Make More Money Selling Miles Than Seats"  (Read 10988 times)

Offline ExGingi

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"Airlines Make More Money Selling Miles Than Seats"
« on: March 31, 2017, 08:11:48 AM »
This might belong in CC or Up in the Air board, or possibly even on DDMS, confirming what Dan has been telling everyone for years.

https://www.bloomberg.com/news/articles/2017-03-31/airlines-make-more-money-selling-miles-than-seats
« Last Edit: March 31, 2017, 08:50:37 AM by Dan »
I've been waiting over 5 years with bated breath for someone to say that!
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Offline David Smith

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Re: Re: Interesting Articles...
« Reply #1 on: March 31, 2017, 08:28:12 AM »
This might belong in CC or Up in the Air board, or possibly even on DDMS, confirming what Dan has been telling everyone for years.

https://www.bloomberg.com/news/articles/2017-03-31/airlines-make-more-money-selling-miles-than-seats
Quote
Each mile fetches an airline anywhere from 1.5 cents to 2.5 cents, and the big banks amass those miles by the billions, doling them out to cardholders each month. 

I'd be shocked if they pay more than a third of that.
Who do you think you are fooling? You think you are going to pull a quick one on your Creator? Good luck with that.
JTZ

Offline ExGingi

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Re: Re: Interesting Articles...
« Reply #2 on: March 31, 2017, 08:46:48 AM »
I'd be shocked if they pay more than a third of that.
Yeah, I also thought that was wrong. They do, however mention margins around 45%, and 100% for expiring miles. I didn't see any mention of devaluations and the fact that it's a currency of which the airlines control the value, unlike the USD.
I've been waiting over 5 years with bated breath for someone to say that!
-- Dan

Offline Dan

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Re: Re: Interesting Articles...
« Reply #3 on: March 31, 2017, 08:50:12 AM »
A DDFer who worked at Citi once posted they pay 1.8.
And I'm inclined to believe it. The airlines have the banks right where they want them.
« Last Edit: March 31, 2017, 11:17:26 AM by Dan »
Save your time, I don't answer PM. Post it in the forum and a dedicated DDF'er will get back to you as soon as possible.

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Re: "Airlines Make More Money Selling Miles Than Seats"
« Reply #4 on: March 31, 2017, 08:56:28 AM »
http://archive.fortune.com/magazines/fortune/fortune_archive/2004/11/15/8191111/index.htm

With enough searching I am sure you can find better numbers. Citi bailed out AA by advancing $1b for miles in 2009 etc etc
Feelings don't care about your facts

Offline Dan

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Re: "Airlines Make More Money Selling Miles Than Seats"
« Reply #5 on: March 31, 2017, 08:57:44 AM »
http://archive.fortune.com/magazines/fortune/fortune_archive/2004/11/15/8191111/index.htm

With enough searching I am sure you can find better numbers. Citi bailed out AA by advancing $1b for miles in 2009 etc etc
Never going to find out the CPM without insider info.
Save your time, I don't answer PM. Post it in the forum and a dedicated DDF'er will get back to you as soon as possible.

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Re: "Airlines Make More Money Selling Miles Than Seats"
« Reply #6 on: March 31, 2017, 08:58:49 AM »
Never going to find out the CPM without insider info.
I remember calculating it at the time-maybe even on DDF.
Feelings don't care about your facts

Offline ExGingi

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Re: Re: Interesting Articles...
« Reply #7 on: March 31, 2017, 09:00:26 AM »
A DDFer who worked at Citi once posted they pay 1.8.
And I'm inclined to believe it. The airlines have the banks by their b*itzim.
As pointed out in the article, it's mutually profitable, so they might be holding each other over there.

The CSR and Amex Platinum models seem to indicate that those numbers might be right, or else why would the CC companies put that floor there?
I've been waiting over 5 years with bated breath for someone to say that!
-- Dan

Offline Dan

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Re: "Airlines Make More Money Selling Miles Than Seats"
« Reply #8 on: March 31, 2017, 09:01:25 AM »
Definitely mutually profitable, but the rates keep going up with each contract renewal as the other banks are willing to overpay to get these customers.

The airlines have all the leverage. Not unlike how Costco was able to squeeze Citi to get free CC processing and still give rebates to customers. AMEX determined that would be a big money loser for them, enough to take a huge hit on their stock price by bailing.
Save your time, I don't answer PM. Post it in the forum and a dedicated DDF'er will get back to you as soon as possible.

Offline David Smith

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Re: "Airlines Make More Money Selling Miles Than Seats"
« Reply #9 on: March 31, 2017, 09:08:11 AM »
A DDFer who worked at Citi once posted they pay 1.8.
And I'm inclined to believe it. The airlines have the banks by their b*itzim.
Wow. That's insane. An average consumer can often buy miles direct from AA for cheaper than that.
Who do you think you are fooling? You think you are going to pull a quick one on your Creator? Good luck with that.
JTZ

Offline ExGingi

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Re: "Airlines Make More Money Selling Miles Than Seats"
« Reply #10 on: March 31, 2017, 09:13:46 AM »
Definitely mutually profitable, but the rates keep going up with each contract renewal as the other banks are willing to overpay to get these customers.

The airlines have all the leverage. Not unlike how Costco was able to squeeze Citi to get free CC processing and still give rebates to customers. AMEX determined that would be a big money loser for them, enough to take a huge hit on their stock price by bailing.
Amex didn't believe they would lose Costco. They were stunned by the loss. They thought they were still bargaining, and would eventually reach a deal. I am not sure if they would have consciously chosen to walk away.
I've been waiting over 5 years with bated breath for someone to say that!
-- Dan

Offline Dan

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Re: "Airlines Make More Money Selling Miles Than Seats"
« Reply #11 on: March 31, 2017, 09:17:23 AM »
Wow. That's insane. An average consumer can often buy miles direct from AA for cheaper than that.
Link?

Amex didn't believe they would lose Costco. They were stunned by the loss. They thought they were still bargaining, and would eventually reach a deal. I am not sure if they would have consciously chosen to walk away.
-1.
AMEX walked away.
Save your time, I don't answer PM. Post it in the forum and a dedicated DDF'er will get back to you as soon as possible.

Offline David Smith

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Who do you think you are fooling? You think you are going to pull a quick one on your Creator? Good luck with that.
JTZ

Offline Dan

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Re: "Airlines Make More Money Selling Miles Than Seats"
« Reply #13 on: March 31, 2017, 09:21:27 AM »

https://thepointsguy.com/2016/12/up-to-80-percent-bonus-buy-aadvantage-miles/
First thing that came up on Google.
1.77 is 1.8 rounded. So AA is willing to mark the price down to what Citi pays when they have a sale.
Save your time, I don't answer PM. Post it in the forum and a dedicated DDF'er will get back to you as soon as possible.

Offline Geshmak25

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Re: "Airlines Make More Money Selling Miles Than Seats"
« Reply #14 on: March 31, 2017, 09:51:23 AM »
1.77 is 1.8 rounded. So AA is willing to mark the price down to what Citi pays when they have a sale.
So chase is actually coming out ahead by offering 1.5 on csr?
PUTPAC = PITA

Offline Dan

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Re: "Airlines Make More Money Selling Miles Than Seats"
« Reply #15 on: March 31, 2017, 09:52:21 AM »
So chase is actually coming out ahead by offering 1.5 on csr?
I have no idea what Chase pays for miles. Probably varies by airline.
Save your time, I don't answer PM. Post it in the forum and a dedicated DDF'er will get back to you as soon as possible.

Offline Baruch

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Re: "Airlines Make More Money Selling Miles Than Seats"
« Reply #16 on: March 31, 2017, 09:55:40 AM »
If the credit card companies pay more than 1.5 cents per mile, then every single credit card company would have a 1.5 cents cashback card.

It would go against all rules of logic and business to say otherwise.

Offline Dan

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Re: "Airlines Make More Money Selling Miles Than Seats"
« Reply #17 on: March 31, 2017, 09:59:59 AM »
If the credit card companies pay more than 1.5 cents per mile, then every single credit card company would have a 1.5 cents cashback card.

It would go against all rules of logic and business to say otherwise.
They do.
CFU
AEP
CDC
COV
ETC
Save your time, I don't answer PM. Post it in the forum and a dedicated DDF'er will get back to you as soon as possible.

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Re: "Airlines Make More Money Selling Miles Than Seats"
« Reply #18 on: March 31, 2017, 10:16:17 AM »
If the credit card companies pay more than 1.5 cents per mile, then every single credit card company would have a 1.5 cents cashback card.

It would go against all rules of logic and business to say otherwise.

  • Why would they pay more if they can get away with less? It is a simple calculation. Does the revenue from the additional cardmembers compare to what it would cost them to give that amount to even the ones who would be satisfied with .01
  • Most cash back card do not have AF
  • They probably do not have the same credit profile
    Quote
    For the banks, people who pay annual fees for those cards to accumulate miles are the closest thing to a sure bet. These consumers typically have higher-than-average incomes and spend more on their cards, which generates merchant fees for the banks. They also tend to maintain high credit scores, which means they pay their bills on time and banks experience fewer defaults.
Feelings don't care about your facts

Offline JACKBLUE

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Re: "Airlines Make More Money Selling Miles Than Seats"
« Reply #19 on: March 31, 2017, 11:40:07 AM »
Nice write up on DDMS!