How Airlines Quietly Became Banks

Summary

The video script reveals the astonishing financial value of airline frequent flyer programs, which during the COVID-19 pandemic, became a crucial asset for airlines struggling financially. United Airlines, for example, used its MileagePlus program as collateral for a $5 billion loan, with the program valued at $21.9 billion. This valuation was surprising as it exceeded the market cap of the airlines themselves, suggesting that the airlines' primary value lies in their loyalty programs. The script explains how these programs evolved from simple reward systems to complex financial instruments, with airlines acting as banks that control a virtual currency. The programs generate significant profits through partnerships and co-branded credit cards, and have shifted to revenue-based systems to prevent exploitation. The power dynamics between airlines and credit card companies also play a role in the valuation of these programs, with airlines holding the upper hand due to their control over the supply and redemption of points.

Takeaways

• 📈 **Financial Insights**: The public got a first glimpse into the financials of airline frequent flyer programs, revealing their astonishing value during the COVID-19 pandemic.
• 💸 **Collateral Dilemma**: United Airlines sought a $5 billion loan and used their loyalty program, MileagePlus Holdings LLC, as collateral due to their diminished worth at the time.
• 📉 **Market Cap Surpass**: The valuation of loyalty programs like United's MileagePlus ($21.9 billion), Delta's ($26.5 billion), and American Airlines' ($31.5 billion) exceeded their respective market caps, indicating the programs' significant financial contribution.
• 🛫 **Operational Losses**: Airlines like American were losing money on a per-mile basis on passenger seats but offset these losses with substantial pre-tax profits from their frequent flyer programs.
• 💳 **Credit Card Partnerships**: Airlines have lucrative partnerships with credit card companies, which significantly contribute to their profitability, transforming the industry from mere transportation to financial entities.
• 🔄 **Evolution of Programs**: Frequent flyer programs evolved from simple reward schemes to complex financial instruments, with American Airlines pioneering partnerships with other travel-related companies to earn and redeem miles.
• 💵 **Monetary Valuation**: Airlines began to assign a monetary value to their loyalty points, selling them to partners like Hertz, which in turn used them to incentivize customer spending.
• 📊 **Revenue Shift**: The shift to revenue-based earning systems instead of distance-based ones has made it harder for customers to exploit the system, ensuring a more consistent revenue stream for airlines.
• ✈️ **Dynamic Award Pricing**: Airlines have implemented dynamic award charts, linking point redemption rates to cash fares, which has closed the loophole for arbitrage and maximized airline profits.
• 💼 **Central Banking**: Airlines function like central banks for their own virtual currencies, with control over both the supply of points and the availability of flights to spend them on, giving them significant financial power.
• 🧮 **Point Valuation**: The value of points varies by airline, with estimates suggesting an average value of 1.218 cents for Delta SkyMiles, 1.226 for United MileagePlus, and 1.416 for American Advantage.

Q & A

Why did airlines look for loans during the early days of the COVID-19 pandemic?

Airlines were losing a significant amount of money due to the drop in travel demand, and they needed loans to financially sustain themselves until travel resumed.

What did United Airlines offer as collateral for their loan?

United Airlines offered MileagePlus Holdings LLC, which is their loyalty program, as collateral for the loan.

What was the approximate valuation of United's loyalty program, according to the Form 8-K filing?

The valuation of United's loyalty program, MileagePlus, was approximately $21.9 billion dollars.

How did the value of the loyalty programs compare to the market caps of the airlines themselves?

The values of the loyalty programs were equal to or greater than the market caps of the airlines, indicating that, from a financial perspective, the airlines themselves were considered to have negative value.

Why did airlines start to lose money on each seat per mile flown?

Airlines began to lose money on each seat per mile flown because the cost to operate a seat one mile (including factors like fuel, insurance, etc.) exceeded the revenue generated from passenger fares.

How did airlines generate pre-tax profits despite losing money per mile flown?

Airlines were able to generate pre-tax profits thanks to the significant revenue generated from their frequent flyer programs, which included earnings from co-branded credit card partnerships and other benefits.

What was the significance of the American Airlines partnership with Hertz and Holland America in 1982?

The partnership allowed American Airlines members to earn points when renting cars or booking cruises, marking the first time that an airline put a real monetary price on its frequent flyer points, which was a revolutionary step in the monetization of loyalty programs.

How did the introduction of co-branded credit cards change the frequent flyer programs?

Co-branded credit cards dramatically increased the volume at which airlines sold points to external partners, shifting these programs from incentives for more airfare spending to profit centers in their own right.

Why did frequent flyer programs evolve from a distance-based to a revenue-based system?

The evolution to a revenue-based system prevented exploitations where passengers earned more miles on less expensive, longer itineraries. It also aligned the point earning more closely with the actual revenue generated by the passenger.

How do dynamic award charts affect the value of frequent flyer miles?

Dynamic award charts make the point redemption rates rise during high demand periods, correlating them with cash fares, which prevents arbitrage and ensures that the value of miles is more closely aligned with the cost of the flight.

Why are frequent flyer programs considered financial instruments that airlines can hardly lose money on?

Frequent flyer programs are structured in a way that airlines control the supply of points, the availability of seats to be redeemed, and the pricing for point redemptions. This control, combined with the revenue generated from selling points to partners, makes these programs highly profitable for airlines.

Outlines

00:00

💰 The Financial Revelation of Airline Loyalty Programs

The first paragraph reveals the surprising financial value of airline loyalty programs during the COVID-19 pandemic. United Airlines sought a $5 billion loan, offering its MileagePlus program as collateral. The Securities and Exchange Commission filing disclosed that United valued its loyalty program at approximately $21.9 billion, while Delta and American Airlines valued theirs at $26.5 billion and $31.5 billion, respectively. These valuations were astonishing because they exceeded the market capitalization of the airlines themselves, suggesting that the airlines' core transportation business had negative value. The loyalty programs were not only profitable but were also the primary source of value for these companies. The paragraph also explains how these programs generate revenue, with American Airlines earning $1.9 billion in pre-tax profits from their program, despite losing money on passenger revenue per mile flown.

05:00

🛫 The Evolution of Airline Loyalty Programs

The second paragraph discusses the evolution of frequent flyer programs beyond the basic concept of earning rewards for loyalty. American Airlines' partnership with Hertz and Holland America allowed members to earn points for car rentals and cruise bookings, which was a significant development. The monetization of these points was revolutionary, as American Airlines sold points to partners like Hertz, creating a new revenue stream. This led to the introduction of co-branded credit cards with Citibank, which further increased the volume of points sold and transformed the programs into standalone profit centers. The paragraph also highlights the tax advantages of these programs, as points are generally not taxed, and how they are treated similarly to rebates or cash back, despite their potential high value.

10:02

✈️ The Strategic Shift to Revenue-Based Loyalty Programs

The third paragraph explains how airlines addressed the issue of passengers earning more miles on less expensive, longer itineraries, which was costly for the airlines. To counter this, airlines transitioned to a revenue-based system where points are earned based on the dollar amount spent rather than the miles flown. This change prevented the exploitation of the system and ensured that airlines could not lose on the earning side. Additionally, airlines implemented dynamic award charts, making point redemption rates rise during high-demand periods, thus aligning mile rates with cash rates and eliminating the possibility of arbitrage. The power dynamics are such that airlines control the supply and value of their loyalty program 'currency,' and their profit from selling points to credit card companies and partners is a significant factor in determining point valuations.

15:04

🎧 Audible Advertisement and Its Benefits

The fourth paragraph is an advertisement for Audible, a platform offering spoken word entertainment including podcasts, audiobooks, guided fitness, sleep tracks, and more. The narrator shares a personal experience of listening to an audiobook about Bob Iger's career at Disney. The advertisement promotes a special offer where new users can save 60% on their first three months with Audible, encouraging listeners to take advantage of the deal through a provided link or text code.

Keywords

💡Frequent Flyer Programs

Frequent Flyer Programs are loyalty initiatives offered by airlines to reward regular customers with points for each flight taken, which can be redeemed for free or discounted flights. In the video's context, these programs have become highly valuable financial assets, with their valuation sometimes exceeding the market capitalization of the airlines themselves. The script discusses how these programs have evolved into significant revenue streams for airlines, transforming them into financial entities rather than just transportation companies.

💡Collateral

Collateral refers to an asset or property that a borrower offers to a lender to secure a loan. It is pledged with the understanding that it can be seized if the borrower defaults on the loan repayment. In the video, United Airlines used its loyalty program, MileagePlus Holdings LLC, as collateral for a loan, highlighting the high value placed on such programs by the company and the financial sector.

💡EBITDA

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a financial metric used to evaluate a company's financial performance by calculating its profits from core operations before the impact of taxes, interest, and non-cash expenses. The script mentions EBITDA in relation to the valuation of MileagePlus Holdings, using it to calculate the worth of United's loyalty program.

💡Market Cap

Market Cap, short for Market Capitalization, is the total value of all a company's shares of stock outstanding. It is calculated by multiplying the current market price of one share by the total number of shares outstanding. The video discusses how the market caps of airlines are sometimes less than the value of their loyalty programs, indicating a shift in the perception of the airlines' core business value.

💡Co-branded Credit Cards

Co-branded Credit Cards are credit cards that are jointly issued by a bank or financial institution and a partnering company, often an airline or retailer. These cards offer rewards or benefits that are aligned with the partner company's services. In the context of the video, co-branded airline credit cards are a significant source of revenue for airlines, as they earn a commission for each new sign-up, further integrating the financial aspect of the airline industry.

💡Revenue Management Systems

Revenue Management Systems are used by airlines to optimize the pricing of their tickets to maximize revenue. These systems take into account factors such as demand, seasonality, and competitor pricing. The video script explains how these systems have evolved to become more complex, leading to a disconnect between the miles earned and the actual cost of the flights, which airlines later addressed by shifting to revenue-based earning systems.

💡Dynamic Award Charts

Dynamic Award Charts are pricing structures used by airlines for redeeming frequent flyer miles, where the cost of using miles for a reward flight fluctuates based on demand. The video discusses how airlines have implemented dynamic award charts to correlate point redemption rates with cash fares, eliminating the potential for customers to exploit the system and ensuring a more consistent revenue stream for the airlines.

💡Sunk Cost Fallacy

The Sunk Cost Fallacy is a concept in which individuals continue a behavior or endeavor because they have already invested resources, such as time or money, even if continuing is no longer rational. In the script, it is mentioned in the context of customers choosing to fly with an airline to accumulate enough miles for a free flight, even if a more cost-effective option is available, because they have already earned a significant number of miles with that airline.

💡Partner Earning

Partner Earning refers to the practice where loyalty program members can earn points not just from flying but also from spending with partner companies, such as car rental services or hotels. This concept is highlighted in the video as a key evolution in frequent flyer programs, allowing airlines to monetize their loyalty points by selling them to partners like Hertz, which then offer these points to their customers as incentives.

💡Opportunity Cost

Opportunity Cost is an economic concept that represents the potential benefit an individual, investor, or business misses out on when choosing one alternative over another. In the context of the video, the opportunity cost for airlines involves offering a seat on a flight in exchange for loyalty points when that seat could have been sold to a paying customer, especially during high-demand periods.

💡Arbitrage

Arbitrage is the practice of taking advantage of a price difference between two or more markets to buy and sell an asset and profit from the difference. The video explains how airlines have closed loopholes to prevent arbitrage between the cost of miles and cash, ensuring that the value of miles in terms of flights is consistent with the cash price, thus eliminating the potential for customers to gain an unfair advantage.

Highlights

Airlines' frequent flyer programs were revealed to be financially significant during the COVID-19 pandemic, with United Airlines seeking a $5 billion loan.

United Airlines used its loyalty program, MileagePlus Holdings LLC, as collateral for a loan, highlighting the program's value.

MileagePlus Holdings was valued at approximately $21.9 billion, according to United's financial disclosures.

The value of loyalty programs for major airlines like Delta and American Airlines was disclosed to be between $26.5 billion and $31.5 billion.

The market caps of the airlines were less than the value of their loyalty programs, suggesting the airlines themselves were considered worthless by Wall Street.

American Airlines earned $1.9 billion in pre-tax profits from their frequent flyer program, despite losing money on passenger revenue per seat mile flown.

Airlines have become banks, selling points to external partners and turning their loyalty programs into profit centers.

The concept of frequent flyer programs originated from the deregulation of the American airline industry in 1978, with Texas International being the first to implement it.

American Airlines' partnership with Hertz and Holland America marked the first time miles were given for activities outside of flying.

Airlines monetized their loyalty points, with Hertz estimated to have paid one cent per mile to American Airlines.

American Airlines' co-branded credit card with Citibank significantly increased the volume at which points were sold, turning the program into a profit center.

Frequent flyer programs are treated similarly to a sandwich shop punch card by governments and businesses, with points often not taxed.

Airlines have shifted to rewarding points based on spending rather than miles flown, making their revenue management systems less exploitable.

Dynamic award charts have been implemented by airlines, correlating point redemption rates with cash fares to prevent arbitrage.

The value of a single point in loyalty programs is estimated to be between $0.1218 and $0.1416, influencing consumer behavior and credit card company negotiations.

Airlines act as central banks for their own virtual currencies, with complete control over the supply and redemption of points.

The financial success of frequent flyer programs has made them more valuable than the airlines themselves, reflecting their power as financial instruments.

Transcripts

last year for the first time ever the

public got a glimpse into the financials

of airline frequent flyer programs

what they saw was truly astonishing

during the early days of the covet 19

pandemic airlines were hemorrhaging

money and so naturally they looked for a

loan

united for example sought 5 billion to

tie the company over until travel came

back but like with any loan they needed

to put up collateral they needed to

offer something to the bank that it

would acquire if the company failed to

pay the loan back

the problem was united wasn't worth much

at the time since of course it was

hemorrhaging money meaning it would have

had to offer a huge chunk of itself as

collateral rather they decided to offer

one of their subsidiaries as collateral

mileageplus holdings llc essentially

their loyalty program

of course given that united is a

publicly traded company they have

various financial reporting requirements

including the obligation to file a form

8k with the securities and exchange

commission whenever a major business

event takes place such as taking out a

multi-billion dollar loan of thousands

one line on this document stood out

quote multiplying mileageplus holdings

2019 ebitda by a factor of 12 equates to

a mileage plus valuation of

approximately 21.9 billion dollars 21.9

billion dollars that's the value of

united's loyalty program according to

the company and this loan similar

financial disclosures from delta and

american airlines pegged the value of

their loyalty programs at 26 billion and

and a half to 31.5 billion dollars

respectively

so not withstanding their size why did

these numbers turn heads

well because of these the airlines is

market caps these figures equal the

total value of all the shares in each

company it's essentially a real-time

indicator of what wall street considers

a company worth given the ebbs and flows

in stock prices at the time united's was

10 billion dollars delta's 20 billion

dollars and americans 6 billion dollars

so the value of each airline is less

than the value of their loyalty programs

which is interesting in and of itself

but the airlines own their loyalty

programs therefore at least according to

wall street airlines themselves

are worthless in fact they're more than

worthless they have negative value

they're lost leaders and the only thing

imparting each airline with value is its

loyalty program

this is a less absurd proposition than

it might initially seem in 2018 well

before the covet-induced travel downturn

american airlines earned about 14.42

in passenger revenue per seat per mile

flown but simultaneously it cost them

14.85 cents to operate a given seat one

mile so the airline actually lost about

half a cent for each mile it flew each

seat

the company however earned 1.9 billion

dollars in pre-tax profits thanks

exclusively to their 4.2 billion dollars

in frequent flyer program revenue in the

u.s airports are plastered with ads for

co-branded airline credit cards touting

free checked bags and other benefits

they're stuffed with lounges accessible

to frequent flyers but not even first

class passengers they're littered with

priority lanes reserved for getting

elite status members through security

and onto planes more quickly airlines

even have their flight attendants acting

as salespeople reciting credit card

pitches at 30 000 feet in exchange for

the chance of a commission on a

passenger sign up the reason why the

entire flying process in the u.s and

increasingly other countries seems like

a carefully manicured experience nudging

you to sign up for credit cards and

frequent flyer programs is because of

these numbers airlines are hardly

transportation companies anymore over

the past 40 years they have crafted a

system so effective so unbelievably

advantageous to their own interests that

they are now willing to lose money

flying to prop up their frequent flyer

businesses businesses whose core

proposition is giving away free flights

today airlines are basically banks

this all snowballed from a concept no

different than the loyalty punch card at

your favorite sandwich place you fly a

certain number of times you get a free

flight while airlines had already

started tracking the activity of

individual flyers formal frequent flyer

programs became technically and legally

possible with the deregulation of the

american airline industry in 1978. the

first program was set up by a small

airline called texas international which

later merged with continental but the

first major long-haul airline to do so

was american airlines in 1981. what the

airline observed was not surprising

american advantage members were more

likely to choose to fly with american so

that they could accumulate enough miles

to get a free flight in fact they were

even willing to pay slightly more some

five percent extra for an american

flight rather than an equivalent united

flight for example since that united

flight wouldn't get them any closer to a

free american flight it's all sunk cost

fallacy if someone's earned 10 000

advantage miles they'd prefer to fly

american and get to the 12 and a half

thousandth for free flights rather than

starting from zero with united even if

they'd earn the same number of miles

overall the program certainly did have

an expense for the airline but it

quickly became clear that the expense

was far eclipsed by the additional

revenue it brought in but more

significant that the program's launch

was its first evolution beyond the

sandwich shop punch card in 1982

american partnered with hertz and

holland america to allow its members to

earn points when renting cars or booking

cruises but the concept of earning

points with partners was not what was

revolutionary about this rather it was

the behind-the-scenes mechanics that

made that possible american wasn't going

to give miles away for free when people

spent money at another company because

the redemption of miles did have a cost

for the airline beyond small variable

costs like food fuel insurance and more

there is potentially significant

opportunity cost from offering a seat in

exchange for points if that seat might

have otherwise been booked by a paying

passenger therefore america needed to be

compensated for the miles he gave to

hertz and holland america and so for the

first time it put a real monetary price

on its imaginary points while the actual

numbers are closely guarded secrets

american airlines would for example sell

one point to hertz for one cent which

hertz would then reward to its customers

in order to incentivize them to rent at

hertz rather than another rental car

company that did not reward airline

points now if hertz paid that one cent

per mile which is within the range of

educated estimates and if a customer

redeemed 25 000 miles for domestic

flight which was a typical redemption

rate at the time that means american

would have earned 250 dollars for a

domestic flight considering the typical

variable cost for a domestic flight was

about 15

american airlines quickly recognized

just how incredible the profit

opportunities could be they started to

realize them in 1987 when american

teamed up with citibank to offer a

co-branded credit card

that way for every dollar spent on the

card the member would earn a point

this dramatically increased the volume

at which american and other airlines

sold points to external partners and

shifted these programs from ways to

incentivize more spending on airfare to

profit centers in and of themselves

today part of the strength of these

multi-billion dollar programs is based

on the fact that despite their strength

government and businesses essentially

treat them the same as that sandwich

shop punch card to start with almost

universally points are not taxed despite

the fact that one can accumulate points

like income and redeem them for

something worth money governments

consider it a rebate or cash back on

your purchase because to get that reward

you had to spend money and you can't

exchange that reward for money at least

officially just as you don't pay tax on

the amount saved when bananas are 25 off

at the grocery store you don't pay tax

when the airline awards you points you

can use for free flights in this case

the savings just happened further away

from purchase however unlike with

sandwich punch cards or banana discounts

in this case the people paying for the

flights are often different than those

receiving the reward almost all of

airline's most frequent flyers travel on

business in which case their employers

pay the airfare despite that frequent

flyer programs award points to the

individual flying not the individual

paying in addition if the employee books

the trip on their company card they also

get the credit card points from that

spend the companies paying don't really

have a problem with this because it

essentially acts as a free tax free

benefit for their employees business

travel isn't anywhere as glamorous as it

used to be so companies are happy to

allow their employees to earn points

they can eventually use for leisure

travel in exchange for them getting out

on the road and making money of course

this potentially creates a scenario in

which the individual is incentivized to

fly or pay more on the company's dime

but most don't seem too worried about

this

so both tax law and company policy or

the lack of it works in favor of the

airline the way in which frequent flyer

programs were set up wasn't perfect

though there was potential for exploits

namely as airline revenue management

systems became more complex price and

travel distance became less and less

correlated nowadays it's rather

intuitive to us that the 400 mile flight

from dc to nantucket a high-end vacation

destination is going to cost more than

the 400-mile flight from dc to boston in

fact american's lowest price for that

nantucket flight is 98

while its flights to boston start at

just 49

so it's double the price for the same

distance simply because the more wealthy

travelers headed to nantucket are more

likely to pay for the convenience of a

non-stop flight meanwhile based on the

traditional one mile one point system

the member would still gain just 400

points for each of those flights despite

the difference in price therefore if

someone found an itinerary that was low

cost but long distance their mileage

earning could be so high that the miles

earned would be worth more than the cost

of the flights for example if one found

an itinerary from los angeles to san

francisco via chicago the traveler would

earn 10 times the point than if they

flew direct and more complex revenue

management systems would likely price

that long circuitous connecting

itinerary lower than the non-stop one

since it was less convenient all around

this was bad for airlines it was

incentivizing people to take longer

multi-stop itineraries which cost the

airline more to operate and it forced

them to give out more miles which cost

the airline more in redemptions in short

they were incentivizing against their

own interests this was a rare element of

the system that did not work in their

favor

so they changed it over the past decade

nearly every major program has pivoted

to a system where passengers are

rewarded points based on how many

dollars they spend rather than how many

miles they fly among the big three

american airlines it's simple you spend

one dollar you earn five points this

shifted the system from one where the

airline wins overall but might lose out

from time to time to one where the

airline quite literally cannot lose at

least on the earnings side revenue based

systems cannot be exploited but airlines

quickly figured out how to restructure

the redemption side in their favor too

it used to be that any economy class

flight within the continental us cost 12

and a half thousand points on united

regardless of whether it was a tuesday

in february or the sunday after

thanksgiving that's despite the fact

that cash rates were undoubtedly far

higher on the sunday after thanksgiving

one of the highest demand travel days of

the year while availability of point

seats differed that meant that someone

who did manage to score thanksgiving

sunday booking on points got a deal the

cost for the airline to offer that seat

on points was greater than what the

airline earned that's since the

opportunity cost on those highest demand

days is huge as almost every available

seat is likely to be sold for cash even

if it all worked out in the end in the

airline's favor they didn't like these

losses so they switched the way

redemptions works too

now nearly every major airline has

dynamic award charts

just like how cash fares rise for high

demand days so too do point redemption

rates for example in october 2022 united

is charging 114 dollars for non-stop

newark to denver flights on low demand

tuesdays and 254 on high demand sundays

meanwhile mile redemption rates rise

from 8

300 to 22 200 points

that roughly two and a half times rise

for each means that mile rates are now

correlated to cash rates and so

arbitrage between what airlines charge

in miles and cash is no longer possible

so they've now closed loopholes on both

ends of the equation you can't exploit

the accumulation of miles or the

redemption of miles essentially the only

factor placing a check on airlines is

power is the exchange rate considering

how much of their profit comes from

selling points to credit card companies

and other marketing partners airlines do

care tremendously about how much those

companies are willing to pay for points

and how much those companies are willing

to pay is loosely based on what the

general public believes those points are

worth

various travel and finance websites

publish their estimated point valuations

to help inform consumers of whether

they're getting a good deal with a given

redemption and there is a good amount of

variability aggregating 5 estimates the

average value of 1 point is 1.218 cents

for delta sky miles 1.226 for united

mileage plus and 1.416 for american

advantage what this means is that if all

else were to be equal consumers would be

more incentivized to fly american

flights use american co-branded credit

cards transfer points to american and

more which means credit card companies

and other marketing partners are likely

to run out of american points sooner and

need to buy more that being said power

is still in the hands of airlines as

there are only three major long-haul

airlines in the u.s but far more credit

card companies united has partnered with

chase american with citibank and delta

with american express but if any of

these credit card companies refused to

agree to a higher mile purchase price

when contract negotiations came around

the airline could dump them and switch

to bank of america barclay capital one

discover each of which would be

delighted to score a major airline

partner

so why is it that the value of these

frequent flyer programs has eclipsed the

value of the airlines themselves well

it's because what's happening here is

that airlines are essentially acting as

the central banks for their own virtual

currencies they're acting like the us

treasury or the bank of england or the

european central bank and that they

control the supply of their currency but

airlines power actually goes far beyond

that of these central banks not only do

they control the flow of the currency

but they also control the availability

of goods to spend it on then on top of

that it's as if these all-powerful

central banks are operating as private

for-profit companies that can just

create more of their currency for the

purposes of selling it at any given time

airlines have nearly complete unchecked

control over a currency with which they

are the only entity that can convert it

to cash

that is the key to their power

frequent flyer programs are genius

financial instruments because it's

nearly impossible for airlines to lose

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