Did you know that the biggest buyer of airline miles are credit cards and the banks that issue them? Year to date, 6% of Alaska Airlines’ operating revenue is from selling miles to credit card issuers.

When you dig into the numbers it becomes even more interesting. Year to date, Alaska has generated $7.4 billion in passenger revenue (tickets, amenities, and luggage fees) and accumulated $7.5 billion in operating expenses. That means without its mileage plan, which generated $483 million of nearly pure profit, Alaska would have been operating at a $100 million loss rather than a $362 million operating profit over the first 3 quarters of 2023.

Mileage plans are vital to the financial health of airlines. Without them, airlines would be consumed by massive fixed costs, persistently high fuel costs, and sensitivity to the economic cycle. With them, they can actually turn a profit and even ride out tough economic times (mileage plan revenues are significantly less economically sensitive than ticket revenues).

On the other side, the purchased miles allow credit card companies to both lock in customers as well as get them to spend more. We all love miles (and credit card points in general) — when we earn them, it feels like getting a discount. And watching the balance accumulate is also fun — because it makes it feel like we’re saving for something big. This spending in order to “save” points and afford that grand vacation is a behavior that both credit card companies and airlines love because it does several things:

1.For card issuers, it incentivizes higher average spend per cardholder.

2.For airlines, it allows them to sell off-season excess supply for a decent price — raising the capacity utilization on their fixed assets (i.e. airplanes and routes).

3.For both, it locks users in to a credit card (or cards) as well as an airline (or hotel chain) — a.k.a. higher customer loyalty and reduced churn.

And for you and me, if we're willing to travel during non-peak periods, we can do so with the money we've effectively saved via our earned points.