Skift Take
This analyst has a point. Perhaps Wall Street is undervaluing airlines because investors don't know the full value of airline frequent flyer programs. But it's not clear anything will change.
As banks compete to offer the most generous travel-related rewards for credit card customers, airlines are generating massive revenues from loyalty programs that likely account for a major proportion of their overall profits, according to a new analyst report.
Airlines don’t disclose much about their frequent flyer schemes, but Stifel’s Joseph DeNardi studied quarterly reports for seven U.S. airlines and learned all earned more in a key metric during the first six months of this year than a year ago, some significantly.
American Airlines earned most from its frequent flyer program in the first half of this year, DeNardi estimated, reporting roughly $1.15 billion in marketing revenue, an increase of 10 percent, year-over-year. What many airlines call “marketing revenue” from loyalty schemes is not quite profit, but it’s a close proxy: Airlines generally define it as the spread between what they earn for selling miles, and the trust cost for them of that mile.
While American reported the most marketing revenue for the year's first half, other airlines showed larger year-over-year gains. N
