Just how much are airlines making from selling miles?

There was a very interesting article yesterday by Scott McCartney of the Wall Street Journal, discussing just how much money airlines are making from selling miles. And we’re not even talking about airlines selling miles to credit card companies, which is a multi-billion dollar industry, but rather just the direct sale of miles to consumers. Some of the statistics are exactly what I expected, while others are shocking.

US Airways says about 5% of its customers are opting to pay to double or triple their miles when they buy tickets, and that revenue from mileage sales was up 236% in the first six months of this year compared to the same period of 2009.

The first statistic is shocking. 5% of customers are opting to double or triple their miles when buying tickets? That seems insanely high. On the other hand, it’s no surprise that revenue from mileage sales is up 236% for the first six months of this year compared to last year. US Airways has been insanely aggressive when it comes to selling miles at very reasonable costs over the past 12 months, as I’ve probably blogged about a dozen times.

Compared to US Airways, which apparently has 5% of their customers opting for double or triple miles, here’s United’s info:

United says it’s doing 700 double- or triple-mileage transactions per day.

That’s more in line with what I expected. I’m not sure how many passengers United carries a day, but 700 is definitely way less than 5% of their customers. While this is substantial revenue for United, most likely, they do aggravate a lot of customers with their constant efforts at upselling during check-in, especially since they try to trick customers into buying things by making the bigger button the one to select miles, while they make the “no thanks” button much smaller and place it on the side. Still, assuming each of the 700 customers is spending an average of $50 on extra miles, that’s $35,000 a day, or over 12 million dollars per year.

Comments

  1. I guess you can count me as one of those 700 transactions.. though I didn’t buy just the multiplier but the travel option that included everything including the economy plus the checked bag and priority lane because it was a better cheaper option for me.

  2. @Nathaniel – If I didn’t fly often and had no status, I would probably buy the whole package too. I would buy economy plus anyway, and the bag fee would be a given (travelling for business where they make me take stuff with me) – So why not throw in just a few more bucks and get the whole package. It comes with an RCC 1-time pass too, right? And boarding with seating 1 would be early enough to still get space in the overhead.

    For a 1K though, award accelerator doesn’t seem to make much financial sense.

  3. @huntersfo that is exactly it I don’t fly enough to get status so its worth it to me to purchase it as needed.

  4. Oh and you can choose to have rcc or not… not really worth it as all the rccs I could use suck..

  5. Lucky, don’t be so shocked by 5%. Keep in mind a lot of people travel on business and expense their travel expenses. While plenty of expense reports don’t allow this, I’m sure plenty do or, more likely, it goes unchecked. If somebody else was paying the bill, wouldn’t YOU be buying award accelerator every time?

  6. What I haven’t been able to sort out with US, for example, is…. do the miles just count as bonus miles, or do they count as PQM’s? And, no, I haven’t doubled by paying yet – but if they were to count toward status, then….. quite possibly.

  7. @ johosofat — They make it sound like it’s 5% of all customers, though maybe just Dividend Miles members.

    @ Susan — They’re only redeemable miles; not elite qualifying miles.

  8. Lucky, do you have any idea/figures on how much US Airways pays to its partners for each segment on these complex first-class bookings that so many FTers are putting together on upper-tier airlines? I have no idea how award tickets are worked out between airlines, but I understand that there is some sort of payment system…

  9. There is no way you can get me to pay more for the miles than it actually costs to pay for the flights… I <3 to $$$crew (the airlines?).

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