A billion dollars worth of miles

Just how many frequent flier miles does a billion dollars buy?  Ask the folks at Citibank, who have just made such a purchase from AMR, parent of American Airlines.  It is no secret that the frequent flier programs have been the most consistently profitable part of airlines for the past several years and it is transactions like this that make them such.

But the credit card companies need these miles to continue to entice folks to sign up for their credit cards and pay the annual fees (often waived in the first year) and run charges through the system, earning money for the banks.  And then the customers have all these miles that they can use to redeem for free trips.  Everybody wins.  Except that the airlines are barely staying in business.  Ditto for the banks.  And those “free” tickets are anything but.  Still, it does seem to work in theory.

Ultimately it seems that the best thing for us to do as consumers is to ensure that the cycle continues.  We want the airlines to stay in business so we need the banks to keep buying miles and giving them to us, 25,000 at a time.  Keep churning those CC applications, folks.  We’ve got an industry to protect.


Seth Miller
