Originally Posted by
GoCats67
I can't believe that people still don't get this and try to reduce it in such a completely F'd up manor.
The airlines report the revenue from the CC partnerships, but they don't report all the miles they sell to generate that revenue. Those miles have real costs that are included in the operating costs of the airlines as people redeem all those miles for actual flights. Those costs don't have a separate line item on the costs side of the earning report like the CC revenue does on the revenue side. But the fact that the costs are not separated out for the redemption of miles doesn't mean they aren't substantial. The airlines and the CC companies don't want to disclose how many miles are "sold" for how much money, as that would not help either side in generating as much revenue as possible from these relationships
Do the airlines likely make good money on the CC partnership---yes
Do the credit card companies likely make good money on the CC partnerships---yes
If either side was not happy with the arrangement, they wouldn't keep renewing.
But, to state that the 2 Billion in revenue is "almost all profit," is beyond ridiculous.
I agree there is a cost. However, I'll point this out. We are talking about using 2 different currencies when purchasing a ticket. Dollars and Miles. In Dollars, Company A
cannot sell the ticket at the same price it would in miles, why?
Competition. In miles, the consumer has no choice but to use it on whichever airline the credit card company has a deal with. With less choice, Company A can decide how much 1 Mile is worth in Dollars, while the customer is already locked in since they already built up a lot of miles for that Airline. Therefore, one could reasonably assume that selling tickets in Miles currency has a wider margin than selling in dollars, else why bother.
No one can claim that Company A would make the same profit whether it sells the ticket in Dollars or Miles. That's not true. There is a reason they do not have a line item for the cost to provide that seat and you alluded to this. Margins would be exposed.