US Airlines Makes Profit Beyond Ticket Sales in 2024

Zdjęcie: us-airlines-makes-profit-beyond-ticket-sales-in-2024

Airlines in the US no longer rely solely on ticket sales to generate profit. Instead, frequent flyer programs have become their primary revenue stream.

Despite carrying millions of passengers, major network airlines in 2024 operated at a financial loss when excluding loyalty program earnings, Visual Approach reported.

Photo: Visual Approach

How Airlines Make Money Beyond Flights

The business model of network airlines has shifted dramatically. Traditional revenue from ticket sales and cargo transportation is no longer the primary source of profit.

While airlines traditionally make money by transporting passengers, their financial success now hinges on loyalty programs.

These programs, fueled by frequent flyer miles and credit card partnerships, have become a primary revenue source.

Without loyalty revenues, major airlines like United Airlines (UA) and Delta Air Lines (DL) would have reported negative operating profit margins.

This shift highlights how airlines function as financial entities rather than pure transportation providers.

The valuation of frequent flyer miles and their accounting treatment play a crucial role in airline profitability.

Photo credit: Joe Pries

2024 Airline Profitability Breakdown

A financial analysis of major US airlines in 2024 reveals the importance of loyalty revenues. The image below illustrates the operating profit margins of airlines with and without these revenues:

• United Airlines (UA): +8.9% with loyalty revenues, -1.9% without.
• Delta Air Lines (DL): +10.5% with loyalty revenues, -2.5% without.
• American Airlines (AA): +4.8% with loyalty revenues, -8.3% without.
• Alaska Airlines (AS): +4.9% with loyalty revenues, -11.4% without.
• Southwest Airlines (WN): +1.2% with loyalty revenues, -19.9% without.

This data underscores how airlines rely on financial strategies beyond passenger transport to remain profitable.

Southwest Airlines, in particular, would have suffered a significant -19.9% margin without loyalty revenue, highlighting the necessity of these programs in offsetting operating costs.

No major U.S. network airline achieved a positive operating profit margin in 2024 from passenger transport alone.

Instead, airlines function as loss-leaders to drive customer engagement with their financial products.

• Frequent flyer miles act as a form of airline currency, generating revenue through banking partnerships.
• Loyalty programs provide sustained profitability, covering operational losses.
• Airlines must balance the liability of unredeemed miles with the benefits of customer retention and credit card spending incentives.

Photo: Visual Approach

Role of Loyalty Revenues

Loyalty revenues primarily stem from two sources:

1. Branded Credit Cards: Banks purchase airline miles and distribute them to credit card holders as rewards. The airline records a portion of these sales as immediate marketing revenue, while the rest is held as a liability until redeemed.
2. Mileage Redemption: When customers redeem miles for flights, the previously recorded liability is converted into passenger revenue. This creates an accounting benefit without direct cash transactions.

Airlines also benefit from mileage expiration. If a passenger fails to redeem miles within a certain timeframe, airlines can remove the liability and book it as revenue, increasing profitability.

Photo: JFK Spotting

Future of Airline Profitability

The reliance on loyalty programs highlights a fundamental shift in airline economics. In an era of rising operational costs, airlines without strong loyalty ecosystems struggle to compete.

As financial institutions continue to fund these programs, airlines remain dependent on non-ticket revenue to maintain profitability.

The airline industry has transformed into a financial services business, where the primary product is no longer air travel, but rather the sale of miles and credit card partnerships.

Without these revenue streams, ticket sales alone would not sustain the current airline business model.

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