The Nugget
- Airline loyalty programs are valued higher than the airlines themselves by Wall Street, turning the airlines into essentially banks.
Key insights
The Value of Loyalty Programs
- United, Delta, and American Airlines valued their loyalty programs at around $21.9 billion, $26 billion, and $31.5 billion respectively.
- The airlines' market caps were lower than the value of their loyalty programs, indicating that according to Wall Street, the airlines themselves are essentially worthless.
Evolution of Loyalty Programs
- The first formal frequent flyer program was started by Texas International and later American Airlines in 1981.
- These programs quickly evolved to offer points with partners like Hertz and Holland America, monetizing their rewards system.
Revenue Generation
- Frequent flyer programs became profit centers as airlines sold points to external partners like credit card companies.
- Airlines shifted to revenue-based systems for point accumulation to ensure profitability and prevent exploitation.
Key quotes
- "Today, airlines are basically banks."
- "The airlines essentially acting as the central banks for their own virtual currencies."
- "Airlines power actually goes far beyond that of these central banks."
Make it stick
- 💸 Airlines have become like banks, with their loyalty programs valued higher than the airlines themselves.
- 🤯 Airlines have unchecked control over their own virtual currency, essentially acting as central banks.
- ✈️ Loyalty programs have evolved from simple reward systems to profit centers for airlines.
- 🚀 Airlines shifted to revenue-based systems to prevent exploitation and ensure profitability.
This summary contains AI-generated information and may have important inaccuracies or omissions.