Nov. 11 at 5:09 PM
Core airline business for US carriers acts as a loss leader, subsidized by high-margin loyalty revs
FY24 op profits of 5 most profitable US carriers:
$DAL op margin: 10.5% vs -2.5% w/t loyalty revs (loyalty 10.8% of Revs)
$UAL op margin: 8.9% vs -1.9% w/t loyalty revs (loyalty 12.9% of Revs)
$AAL op margin: 4.8% vs -8.3% w/t loyalty revs (loyalty 13.1% of Revs)
$ALK op margin: 4.9% vs -11.4% w/t loyalty revs (loyalty 16.3% of Revs)
$LUV op margin: 1.2% vs -19.9% w/t loyalty revs (loyalty 21.1% of Revs)
Loyalty program sales & premium cabin revs are extremely high-margin & bypass operational costs of flying. Network carriers leverage this profit center to subsidize economy fares, making it impossible for ULCCs/LCCs, who lack these revs, to compete on price alone. Core operational goal - fill planes to protect
$1B+ loyalty business
Interchange fee settlement b/n Visa/Mastercard & US merchants may allow mercants to refuse premium cards - it significantly reduces utility & value of airline cards
