Loyalty Programs - A silent cashcow

Loyalty That Lasts: Rewarding Engagement, Driving Growth

How innovative loyalty strategies are creating stronger customer connections and sustainable success.

Executive Summary

Airlines aren’t just transportation companies anymore — they’re financial ecosystems. The real profit engine? Loyalty programs and co-branded credit cards. With over $25 billion in annual revenue driven by points and cardholder spend, airlines have transformed into miniature banks with wings. For investors, this means reliable cash flows, high-margin revenue, and a powerful moat of customer loyalty. At Jasmine Blue Capital, we see this as a prime example of how traditional industries can evolve into scalable, finance-driven ecosystems.

Airlines Are No Longer Just Airlines – They’re Banks with Wings

Once a miracle of modern engineering, air travel today is business as usual. Planes take off, land, and crisscross the sky every minute. But behind this logistical ballet lies an unexpected profit engine: loyalty programs and co-branded credit cards.

While moving passengers from A to B is operationally impressive, it’s not where the money is made. Today, the real margin driver for major carriers isn’t the jet fuel — it’s the financial fuel coming from billions in loyalty-based revenue.

From Takeoff to Take-In: The Financial Shift in Aviation

Starting in the 1980s, airlines began rewarding frequent flyers with miles and perks. What started as a clever customer retention tool has become a $25+ billion annual revenue stream. Programs like Delta SkyMiles (120M+ members) and co-branded cards with Amex, Citi, or Chase are now financial cornerstones of the airline industry.

• In 2024, Delta earned $7.4 billion (12% of total revenue) from loyalty.

• American Airlines brought in $6.1 billion (11.3%).

• United, $2.9 billion.

• Even Southwest, with a more casual business model, earned $2.2 billion.

And most of that? It comes not from flying — but from cardholder spending.

The Model: Print Points. Sell to Banks. Repeat.

Airlines issue points (an IOU for future travel), sell them to banks for real dollars, and banks then reward cardholders every time they spend — on groceries, gas, fashion, or that unused VR headset.

The more you swipe, the more banks pay the airline.

The more you earn, the more you want to fly.

Everyone wins — especially the airline.

Banks pay 1.5–2.5 cents per point, but redemption value for travelers sits around 1 cent. That’s a 39–53% margin for the airline, before perks or fees.

And when travelers don’t redeem? Even better.

Unused points = zero cost, full revenue.

Loyalty as a Balance Sheet Asset

Airlines have evolved into mini financial institutions. Points behave like currency. Programs are valued like assets. And the stickiness of a loyal flyer is greater than any marketing campaign.

Aviation used to be about the Wright brothers.

Now? It’s JPMorgan in the skies.

Why This Matters for Investors

At Jasmine Blue Capital, we look for strategic convergence — moments where industries blend in unexpected but scalable ways. Aviation’s financialization is a textbook example.

What used to be a capital-intensive, low-margin business is now a hybrid model:

• Hard asset operation (planes, routes, logistics)

• Recurring revenue engine (points, cards, data)

• Brand moat (loyalty, lifestyle, exclusivity)

Even in downturns, credit card spend remains resilient. During the pandemic, it was loyalty revenue — not ticket sales — that stabilized balance sheets.

But Not Without Risk

The model isn’t bulletproof. Airlines can (and do) devalue points. They cap lounge access. They shift perks behind higher tiers. Regulators are taking notice.

In 2024, the U.S. Department of Transportation began investigating the Big Four airlines for “unfair, deceptive, or anticompetitive practices.” And yet, despite scrutiny, loyalty remains the golden goose.

Final Boarding Call: Lessons for Capital Allocators

What can investors learn?

• Don’t underestimate soft power assets — like data, loyalty, and habit.

• Recurring revenue beats cyclical demand, even in aviation.

• When a legacy business turns into a financial platform, margins multiply.

At Jasmine Blue Capital, we believe in businesses that create ecosystems — not just products. Loyalty programs are proof that the value isn't in the seat — it’s in owning the relationship.

And in that game, airlines are no longer just carriers.

They are capitalists at 30,000 feet.