Loyalty Programs Help Keep Airlines in the Sky — and Credit Card Issuers Play a Vital Role

Loyalty programs provide a significant source of revenue for airlines in the U.S., boosting their bottom lines even more than the income they see from ticket sales in many cases. But the programs just don’t benefit air carriers and their passengers.

Credit card issuers also gain revenue and long-term customer loyalty from partnering with flight operators on loyalty offerings.

If a coworker told you an airline makes more money from sources other than ticket sales, you might think they were joking.

After all, 45,000 flights fill the skies over the U.S. every day, on average. And more than 2.3 million passengers board those planes each day. A recent analysis indicates that a ticket for a domestic flight averages $265, while international flights can cost closer to $1,000 or more. 

An average of 2.3 million people travel on airlines every day in the U.S.

At first glance, the numbers might suggest that airlines make more than enough money from ticket sales alone.

But a recent report from The Economist reveals that many leading U.S. airlines would be operating at a loss if it weren’t for the revenue they earn from loyalty programs.

Many airlines, including American, Delta, Southwest, and United, would have lost more money than they made in 2024 without the revenue related to co-brand agreements and mileage redemptions, according to the report.

“What used to be a nice add-on for frequent flyers is now woven into the very financial fabric of both airlines and card issuers,” Rahul Chawda, Product Manager at Mastercard, told us.

Chawda’s comment refers back to the beginning stages of frequent flyer programs. 

In the early 1980s, American Airlines launched the first mainstream frequent flyer initiative. Its goal for the program was to provide a way to link frequent business travelers with rewards such as free flights and access to better seats.

But American’s program, and others like it, evolved over the years to a system that benefits three different stakeholders: airlines, credit card issuers, and cardholders.

Airlines sell miles to credit card issuers that in turn bolster their card offerings with opportunities for consumers to earn miles by using their card to pay for purchases. Spending drives interchange revenue and, in some cases, other fee income, for issuers.

And cardholders can take those miles they’ve earned and redeem them for free or discounted flights.

These programs can also help airlines with their cash flow needs. Chawda told us that co-branded card programs “are like a steady stream of oxygen” to airlines.

“They deliver non-cyclical, high-margin revenue that keeps the lights on even when ticket sales dip,” he said. “Selling huge numbers of loyalty points to issuers at favorable rates brings in quick cash. That cash funds network expansion, new aircraft, and passenger-experience upgrades.”

Issuers on the other side of a co-branded partnership shouldn’t underestimate the appetite consumers have for travel rewards. 

A current study reveals that nearly 90% of people “prefer travel-related rewards and benefits as a core credit card feature.”

Airline partnerships allow issuers to attract high-value customers while deepening loyalty through travel rewards.

“For issuers, these cards are magnets for a particular type of customer who is affluent, travel minded, and prone to spending generously on dining, retail, and experiences,” Chawda told us. “They stick around longer, spend more, and open the door for cross-selling other premium financial products.”

Credit card issuers looking to get into the travel rewards space, or seeking to fine-tune their existing programs, shouldn’t assume that a new or updated offering will guarantee them lasting revenue streams. 

In early August, a North Dakota judge issued a ruling that could severely limit the amount of interchange fees issuers can collect on debit card transactions. Debit and credit cards are very different types of payment instruments, but the judge’s decision brings concerns about the future of credit card interchange fees.

Merchants that pushed back against debit card interchange structures may feel emboldened to turn their sights on credit card interchange in the wake of the judge’s ruling. Issuers would be wise to stay abreast of any developments on that front to better understand how they may impact the revenues they receive from travel rewards products.

A recent ruling on debit card interchange fees may motivate merchants to seek reforms on existing credit card interchange structures.

Artificial intelligence may also bring changes to future credit card rewards offerings. Chawda mentioned that agentic AI systems and network tokenization advances may have a hand in shaping how customers interact with these programs.

“This is a future where the ‘card’ is just a secure, tokenized credential in your mobile wallet or wearable, and an AI travel assistant takes over the heavy lifting using that card and controls you have established,” Chawda said.

An AI travel assistant may one day be able to check a person’s earned miles and redeem them per the cardholder’s instructions. 

Chawda told us that emerging technologies can lead to stronger loyalty and faster redemption cycles for airlines while issuers benefit from more transactions, access to better data, and payment tools that deeply integrate into a customer’s daily life.

“An airline co-brand card won’t just be a piece of plastic or even just a digital card,” he added. “It will be a secure, AI-driven travel-commerce platform, quietly working behind the scenes to align your journey, your spending, and your rewards with your personal preferences and goals.”