Airlines Are Just Banks Now – How They Do It?

Well, it’s all about the tactics they adopted and the ways airlines in the industry are making money nowadays. If you’ve ever heard about the frequent-flyer programs, then it will not be a difficult task to understand this. But, if you haven’t, this read will help you clear every single doubt in your mind. So, keep reading, and get all your questions answered. 

Special Programs Quick Overview

No matter whether you are buying a lower-priced ticket or a higher one, if the airline has a special frequent flyer program available, there’s no doubt that they are making a lot of money from there. In addition, almost every single frequent flyer program is directly tied to the credit cards you are carrying, which makes them the biggest dominators in the finance world. Here are a few things to understand that will clear some of the doubts on how airlines becoming banks day by day:

• Special Frequent Flyer Programs: Almost every airline introduces a program to the passengers that benefits them in terms of points whenever they book flight tickets with them. There are hundreds and thousands of airlines on this list, and a few of them are Delta SkyMiles, United MileagePlus, and American AAdvantage Programs. After getting the points as a reward from these airlines, you can either get free flights or other benefits. 

• Companies Buying Reward Points: The airlines are not only limited to offering rewards to the passengers under their programs, but they are also selling these reward points to the Credit Card Companies so that individual credit card holder can use their cards to book a flight, and the company gives them these points as additional reward points. In addition, these cards, such as Delta SkyMiles-American Express Card and United Explorer Card, allow passengers to make purchases of various different things and earn more and more points with every single purchase.

• Earning from Purchases with Cards: If you are holding any specific premium credit card, you are already aware of the fact that there are some recognizable outlets and shops where these card purchase offers are always available. So, whenever you make a purchase using a Credit Card, the store pays a small fixed charge to the Credit Card Company. In addition, the Credit Card company works on revenue sharing with the airlines, and the airline receives some amount from this money. That’s how this complete system works, and airlines such as Southwest generate more revenue with their Rapid Rewards Plus Credit Card on every single penny spent on buying things by the customer, and not just on buying the flight tickets. 

• Rewards Points Work Like Money: Travelers, on every purchase of tickets, making changes, or buying things, can use these points like money. Additionally, the airline itself decides the worth of a single reward point and how passengers can use it. 

So, the airlines are not only making money by selling tickets but generating a huge lot of amount by selling these frequent flyers and other program reward points, which are quite similar to banks. 

Biggest Transformational Changes!

The airline industry has been working continuously for more than 100 years, and we have seen many big changes year by year. However, there are three major changes that ultimately and completely changed the image of airlines into a bank among travelers. These changes are mentioned below:

1. First Change: American Airlines introduced the first change in 1987 when it partnered with Citibank and started offering a branded credit card named “Citi/AAdvantage Mastercard credit card” that allowed passengers to redeem points for flights. 

2. Second Change: During the 90s, another major change was introduced by the airlines when they rapidly increased the number of cabin fare classes and started charging different prices for the different fare tickets, making it a more complicated fare structure. 

3. Third Change: The third change was one of the biggest changes in the aviation industry made by Virgin America Airlines in 2007. The airline has found that passengers traveling with any of the airline’s flights only consider the fare classes, spending a lot more on this than the number of miles flown. Then, Virgin America Airlines introduced a Loyalty Program that focuses on rewarding the travelers who spent more money instead of those who collected more mileage points through flying. 

Delta Air Lines Incident!

A few days back, Delta, one of the most renowned airlines in the aviation world, introduced a few changes in its SkyMiles Program policies. These changes were so unexpected and disappointing that one of the finest reporters of a travel reward website, The Points Guy, clearly said that he was going to “stop chasing airline status.”

In addition, he continues that statement, saying that the changes announced by Delta Air Lines are a proverbial nail in the coffin. A few years back, reaching or achieving any specific reward points level was not so difficult and completely depended on the type of tickets purchased, how frequently you were flying, or how far a passenger flew. But now, achieving these airline status levels is next to impossible for most travelers. 

After the airline announced the update, it clearly showed that it wants passengers to spend as much as possible on credit cards and make other kinds of purchases, such as shopping through online portals, booking hotel rooms, etc., to earn elite status. 

So, the moral of the story is that Delta Airlines changed its frequent flyer program to a big-spender program and will only provide the status to those travelers who spend maximum dollars instead of the combination of air miles traveled and dollars spent. 

Concluding!

There are many other factors responsible for making these airlines or the aviation industry something more like financial institutions that also operate flights on the side. But, the changes mentioned above are the major ones that drastically transformed the airline industry, and made travelers think that Airlines are just Banks now. 

Still, the airline industry is one of the vital needs of the people out there. So, travelers who understand that system completely can easily take the maximum benefits out of it by making informed decisions. 

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