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July
@july
1/n Do airlines make a lot from their rewards programs? if so, how much? I got curious (thanks @heavygweit & @jachian) about this and wanted to see. United as an example, (source: recent form 8-K and recent 10-Q forms) first some overview: Revenue: - United made $27.5B in the first 6 months of 2024: - Passenger airline operations revenue: $24.99B constitutes about 90.8% of their revenue - Cargo operations Revenue: $805M, ~2.9% of total revenue - Other revenue (including loyalty program earnings like MileagePlus and the credit card partnerships: $1.5B and about ~6.3% of total revenue Costs: - United paid $25.5B in the first 6 months of 2024: - Salaries and related costs $8.03B (31.5% of revenue) - Aircraft fuel: 6.09B (this seems to fluctuate the most obviously, 23.7% of total revenue) - Maintenance & repairs: $1.49B - D&A: $1.43B Operating Income: - $2.03B in the same time (27.5 - 25.5), total margin is about 7.4% - Passenger Profit: $2.5B - Cargo Profit: $805M - MileagePlus (Credit Card Program) $1.5B
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July
@july
2/n Focusing on MileagePlus: - It made 1.5B in the first 6 months - Definitely has higher margins than the other revenue sources, about 50% or higher reportedly, and low Opex to run it (compared this with passenger flight ops which is about 10% if you are lucky) - Deferred revenue: they have a portion of the MileagePlus revenue as of June 2024 at around $7.35B - They have about 100 million members supposedly as well, with relatively high retention. The flying forces people to stay on and use it, which is pretty good. The more they want miles, the more you use the program and the likelier you buy the credit card Also on Passenger Flight operation margins -Premium economy makes about 1.5~2x more margins compared to economy - probably 15~20% compared to the normal 10% in economy. - Business class makes 4 to 6 times higher than economy class and has a whopping 30~40% margin on longer haul international flights. So, mileage plus drives 1.5B about ~42% of the business's operating income, that's pretty good.
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July
@july
3/n So taking a step back, there are: - Around 4.5 billion passengers flew in 2023 (crazy) - United flew about 150 million of them (which is only going up) - Of that, 100 million members are subscribed to MileagePlus - Active credit card holders are probably 3~7% of that, let's say who have the United Explorer Card or some variety - so you make a pretty good amount per person on the credit card (mileage plus has other revenue sources as well like deferred revenue
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