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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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erica
@heavygweit
wow what everyone considers an airline earns a good portion of their profit from something that isn’t directly air travel
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Jason
@jachian
Closer than I thought on the operating income side but this part varies heavily with the cost of fuel compared to operating the reward program Not apples to apples obviously. The points program doesn’t have legs without the flight operator
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sparkz
@jacy
excellent research. united premiere, cc, mileage plus member & previous shareholder here. not b/c i'm bullish on the company, just b/c of the major carrier options surving my airport, they're the top option. the boeing situation terrifies me, but that's not exclusive to united. appreciate the deep dive, thx!
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tomu
@tomu.eth
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Wev 🐰🎩
@wevans247.eth
I did a 5-month round the world trip in 2013 with all but one flight paid for with Mileage Plus miles. Bonus: Had 2 Turkish Airlines flights in first class for no apparent reason. Me and this other guy (who also got bumped up) guessed that it was because we were both using miles and they had extra first class seats 🤷 I was booking all short-notice, one-way tickets and using miles was def the way to go in that situation. Austin to Oslo was 33k miles + $75. Barcelona to Kathmandu was a little more … but first class!
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Luigi Stranieri
@luigistranieri
Instill curiosity in @july and he make an airline company due diligence 😅
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