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by bdunks 46 days ago
This is a common narrative that simply isn’t true.

American Airlines has the largest loyalty program.

In last week’s report to shareholders they project it will grow to $1.5B in pre tax revenue, against a total 2025 pre tax revenue of $54bn (50bn passenger revenue).

The core business of airlines is still airlines. Optimizing TRASM & CASM, with tremendous effort on upsell and cross sell of premium services (seats, bags, food), at every point in the passenger flow.
2 comments
tylervigen 46 days ago
It can both be true that (1) most of the revenue and operations focus is on the core airline and (2) most of the profit and valuation is driven by the loyalty program.

This is true for American Airlines: https://viewfromthewing.com/new-report-says-aadvantage-is-wo...

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hnav 46 days ago
profit != revenue. Airlines have thin margins and the argument is that they're getting most of their profit from the financial side of things. This is the end state of any endeavor in capitalism: up the value chain there's always the business of trading imaginary units.
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boppo1 46 days ago
Can you elaborate on your claim about capitalism and all activities being about trading imaginary units? My uni gave me a degree in finance & I can still basically explain CAPM off the top of my head, but I'm unfamiliar with this aspect. Always interested in expanding my understanding.
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hnav 46 days ago
I guess a better characterization is that it's more profitable to be in a meta-business than what's stated on the label. The original business is a almost a foot in the door and the money is all in value adds, ancillaries and side quests.

McDonalds -> leasing land to franchisees. Private equity -> saddling existing business with debt while chopping them up for parts. Stock markets -> pump and dumps. Selling anything -> rewards programs and branded CCs. Car dealerships -> captive audience for servicing. Owning real estate with the goal of leasing it out -> speculation on its value.

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abustamam 46 days ago
I know this is a bit tongue in cheek but I think they're referring to dollars being made uo, which is true, to the extent that anything else is made up.

But just because it is made up doesn't mean it isn't real.

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