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Business & Economics
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Why Major US Airlines Lose Money on Flights But Still Make Billions
The four major US airlines actually lose money on their core business of flying passengers. Their immense profits come from a surprising source: selling frequent flyer miles to credit card companies, effectively turning them into high-margin financial loyalty businesses.
Have you ever boarded a flight, squeezed into your seat, and wondered how airlines make any money with soaring fuel costs, fierce competition, and tight margins? The truth is, on that flight, they probably don't. In fact, a recent analysis revealed a shocking reality: all four major U.S. airlines—American, Delta, United, and Southwest—actually lost money on their core business of flying passengers last year.
Yet, they all posted billions in overall profits. This isn't a magic trick; it's a fundamental shift in their business model that most travelers are completely unaware of. Airlines are no longer just transportation companies. They're financial powerhouses that happen to own planes.
The Numbers Don't Lie
According to a detailed analysis by Investopedia using data from airline regulatory filings, the gap between passenger transport revenue and profit is staggering. In 2023:
- American Airlines: Lost $822 million flying passengers, but its loyalty program generated $3.1 billion in profit.
- United Airlines: Lost $834 million on passenger transport, while its loyalty program brought in a massive $6.9 billion.
- Delta Air Lines: Lost $1.9 billion from its passenger business, which was dwarfed by its loyalty program's $6.4 billion profit.
- Southwest Airlines: Lost $761 million flying people, but its loyalty program earned $2.9 billion.
The pattern is undeniable. The part of the business we interact with—booking tickets, checking bags, and flying—is a loss leader. The real money is made before you ever step foot in an airport.
The Billion-Dollar Handshake: Loyalty Programs and Credit Cards
So, where does this mountain of cash come from? The answer lies in your wallet. The primary driver of airline profitability is the sale of frequent flyer miles, in bulk, to credit card companies.
Here's how it works: An airline like Delta makes a multi-billion dollar deal with a bank like American Express. Delta sells billions of SkyMiles to Amex at a fixed price. Amex then uses these miles as a core feature for its co-branded credit cards, offering them to customers as sign-up bonuses and rewards for spending. You, the consumer, sign up for the card to earn miles for your next vacation. You swipe your card at the grocery store, the gas station, and online. For every dollar you spend, the bank rewards you with miles it already bought from the airline.
For the airline, this is a dream business model. They receive billions in cash upfront from the banks, a stable and predictable revenue stream completely insulated from the volatility of fuel prices or air traffic demand. They are essentially selling a high-margin digital currency that they create out of thin air.
"What [the loyalty program] does is it produces a stream of cash that is not dependent at all on how the airline is doing," Vasu Raja, American's Chief Commercial Officer, has said. "It doesn't matter if people are flying or not."
You're a Customer of the Bank, Not Just the Airline
This business model fundamentally changes the airline's priorities. The goal isn't just to sell you a plane ticket; it's to get you into their loyalty ecosystem, ideally as a holder of their co-branded credit card. Once you're in, your daily spending habits generate profit for the airline, whether you fly once a year or once a month.
This explains why the passenger experience can often feel secondary. The core business isn't luxury or comfort in the sky; it's a massive, data-driven marketing operation on the ground. The flights themselves exist, in large part, to give the miles value. Without the promise of a trip to Hawaii or Paris, the miles would be worthless. The planes are the engine that makes the financial machine run.
So the next time you board a flight, remember that you are part of two different businesses. The first is the low-margin, capital-intensive, and logistically complex business of transportation. The second is the incredibly lucrative, high-margin business of financial loyalty. And it's the second one that's truly keeping the airline aloft.