Frequent flyer programs made the relatively simple promise to fly more, earn more, and receive rewards for decades. However, the social contract that was formerly based on trust and material benefits has gradually changed. And now it looks like something very different.
Airlines have deliberately turned their loyalty programs into extremely lucrative financial engines in recent years. They have developed a system that is literally worth more than the actual flights by selling billions of miles to banks and credit card companies. These points are products, not merely benefits.
| Aspect | Details |
|---|---|
| Primary Revenue Source | Selling miles to credit card issuers and banking partners |
| Airline Profit Margins | Loyalty programs often generate 30–80% profit margins |
| Consumer Concern | Devaluation of miles, blackout dates, limited availability |
| Current Investigations | U.S. DOT probing transparency and potential unfair practices |
| Core Strategic Shift | Focus has shifted from rewarding travel to rewarding spending |
Airlines have started creating their own pseudo-currency, which can be devalued, reshaped, and resold on their terms, by collaborating with financial behemoths like American Express, Citi, and Chase. Last year, Delta’s partnership with AmEx alone brought in over $6 billion. For background, in some quarters, that one partnership exceeded their passenger revenue.
The efficiency of the business logic is astounding. Customers use co-branded credit cards, make unrestricted purchases, and accrue miles at almost no cost to the airline. In the meantime, the financial partner relies on interchange fees and long-term loyalty to pay the airline up front. This system is very effective for airlines. This is a moving target for travelers.
There has been a slight change during the last ten years. The frequency of your flights no longer determines your airline status. Rather, it is now linked to your spending, especially through linked credit cards. Because of this, a hierarchy has been established that is remarkably similar to a pay-to-play economy, where loyalty is measured in dollars charged rather than miles traveled.
I once met a retiree who, without taking a single international flight, attained Diamond status on an airline. What’s her secret? achieving spending goals and using a co-branded card for routine costs. A friend who takes weekly flights for work, on the other hand, hardly gets mid-tier benefits. The disparity seems deliberate.
Airlines have made loyalty more transactional by switching from mileage-based earnings to spend-based systems. The benefits appear to be endless for cardholders who spend a lot of money. It can feel like chasing advantages that keep getting farther away for conventional travelers—those who actually make travel arrangements.
The cost of redeeming miles has grown more uncertain due to dynamic pricing. Depending on the day, destination, and demand, a ticket that used to cost 60,000 miles might now need 110,000 or more. There is only a silent reevaluation of values; there is no formal announcement or warning.
Amazingly, regulators have taken notice of this lack of transparency. Currently, the U.S. Department of Transportation is investigating whether these actions are illegal under consumer protection regulations. The inquiry focuses on airlines’ marketing strategies for loyalty programs as well as their covert, unannounced changes to redemption policies.
For frequent travelers, value erosion is a betrayal of trust rather than just an annoyance. Imagine learning that your miles are suddenly worth less than half after years of saving. Not only is that disappointing. It is dehumanizing.
Even airline lounges, which were once revered by devoted travelers, are getting crowded and unimpressive. Once exclusive, access has become more widely available due to tier inflation and credit card benefits. The outcome? Watered-down experiences, long lines to enter, and few seats. Loyalty has become a commodity in many ways.
From the standpoint of the airline, what’s especially novel is how well this system has assimilated into routine financial behavior. Airlines have established their loyalty programs as the go-to choices for dining, shopping, travel, and even rent payments through strategic alliances. It is no longer about taking frequent flights. It has to do with engaging with their ecosystem.
However, loyalty points are now easy targets for fraud due to this financialization. These days, accounts with hundreds of thousands of miles are frequently compromised. Additionally, travelers are left vulnerable because many programs lack robust security measures like two-factor authentication. Recovering lost miles is frequently treated more like a favor than a right, and it can be a bureaucratic nightmare.
The disparity has gotten even more pronounced since the pandemic. Due to their heavy reliance on loyalty programs for liquidity, airlines have persisted in highlighting credit card partnerships as a vital source of funding. Some treated miles as company assets rather than rewards by using them as collateral for loans.
Interestingly, this strategy has produced a precarious dynamic. The entire model might falter if consumers start to doubt the worth of miles or if authorities intervene with more stringent regulations. In contrast to government currency, loyalty points are not guaranteed. Internal policy, not consumer protection legislation, governs them.
Citing that customers were redeeming more value than expected, Ryanair terminated one of its own loyalty programs in the early 2020s. They came to see that loyalty had become unsustainable when it was truly fulfilling. Longtime travelers were not blind to the irony.
The emotional significance of loyalty has changed for a lot of people. There is now a subdued skepticism where there was once pride in achieving elite status. People question whether the rewards outweigh the work. if the improvements are ever made. if the miles will continue to be valuable.
The system persists in spite of this because it is simple to have hope. That’s what loyalty is powered by. a trust-based assurance of future benefits. A ledger of transactions—flights taken, money spent, miles redeemed—is all that remains when that trust is undermined.
Airlines have developed a very resilient business model by utilizing behavioral economics, which gradually reduces tangible returns while rewarding emotional commitment. Yes, it’s clever. However, it’s also very illuminating.
Travelers may need to reconsider their definition of value in the years to come. Being loyal is still a decision. However, it might no longer be reciprocal.
