Airlines are just banks now

They make more money from mileage programs than from flying planes—and it shows

Sep 22, 2023

Last week, Delta Air Lines announced significant changes to its SkyMiles program, making it more challenging to attain status and enjoy perks. They've shifted from a dual criteria approach (dollars spent and miles flown) to a single metric - dollars spent - and raised the spending requirements. Essentially, SkyMiles has evolved from a frequent-flier program into a high-spender program.

Key takeaways

  • Airlines create points from thin air and sell them to banks through co-branded credit card partnerships.
  • Banks then distribute points to cardholders based on their spending, with both banks and credit card companies profiting from transaction fees.
  • Cardholders can redeem points for flights and other products via airline e-commerce portals.
  • For airlines, this system is highly profitable as they don't incur costs until points are redeemed.
  • However, it's a mixed deal for American consumers. While redeeming points might seem like a bonus, it effectively translates into a subtle reimbursement due to credit card swipe fees.
  • Non-cardholders end up paying higher prices for goods and services, effectively subsidizing cardholders who tend to be wealthier.

Get the full story at The Atlantic

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