Mileage Programs Drive Airline Profits — and Not Because of “Loyalty”

In the second quarter of 2006 United reported net income of $111 million on revenue of $5.1 billion. $97 million of that — 87% — was from “United Loyalty Services,” primarily the Mileage Plus frequent flyer program.


In the third quarter of 2006 United reported net income of $220 million on revenue of $5.2 billion. $112 million of that — 51% — was from United Loyalty Services.


It’s reasonable to say that United’s frequent flyer program drives its profitability (though it’s certainly possible for the airline to lose enough money that even its frequent flyer program couldn’t make up the difference).

Meanwhile, Air Canada’s Aeroplan frequent flyer program (which is a separate publicly traded entity) saw

    its third-quarter profit jumped 77 percent as it sold more Aeroplan Miles through its commercial partners.


    Aeroplan earned C$34.3 million ($30.4 million), or 17 Canadian cents a trust unit, up from year-earlier C$19.4 million, or 10 Canadian cents a unit.

Here is my previous post on the importance of airlines selling miles for their bottom-lines.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. That’s an amazing bit of data. While the airlines act like these programs are some gift they are handing to us loyal flyers, they’d really be sunk without them. Thanks for keeping us apprised of how to get the customer’s share of the loot!

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