Jay Sorensen has a new report on frequent flyer program revenue which is largely revenue from co-brand credit card deals.

In 2022 he found that American Airlines actually generated more revenue than Delta from its program. That’s reversed for 2023 – but it’s close. And in some ways, Southwest Airlines is more effective generating revenue than either of them.

That’s because Southwest is generating more revenue from its loyalty program than United and that it represents 22.4% of the ariline’s revenue. They’re entirely a domestic airline. They have no premium cabin. They also have about twice the percentage of passengers flying on their planes using points as competitors. (These two facts are not unrelated.)

United did get Chase to increase how much they pay for their credit card deal just as the pandemic was starting. But it was off a low base. The American and Delta deals are richer.

At American’s Investor Day they revealed that they’d fallen to third place in co-brand credit card charge volume behind Delta and United. Six years ago they were in first place.

The deep dive here into Delta SkyMiles is fascinating.

• Out of 130 million stated members (everyone in their marketing database) 25 million are ‘active’ with activity in the past 12 months. 9 million members had non-flight activity.

• 7.5 million SkyMiles members have Delta credit cards. That is 30% of active members, which is an amazing number. It also suggests to me that their ability to grow the number of cardmembers may be limited out of their current member base. It’s why they’re aggressively trying to grow membership by giving people free inflight wifi if they sign up.

• On the other hand, 2% of active members (500,000) earned miles from vacation packages, hotels, car rentals, and travel insurance. There’s upside opportunity here.

• 60% of those earning miles through retailing of other travel and ancillaries were premium customers (buying Comfort+ or a premium cabin product). People who spend more for seats spend more for other Delta products, too.

• SkyMiles members spend five times as much with Delta than non-members.

Delta makes technically true but exaggerated claims about how much activity runs through their American Express cards. Delta cards push $168 billion in charge volume through Amex, but it’s not 1% of GDP.

On average a cardmember spends $22,400 per year, but that’s not interesting. What would be valuable would be knowing the median.

And I think most readers are surprised to learn that banks often pay airlines more for their miles than they would as customers (indeed, more than sometimes the airline will sell to consumers for with a bonus). Two cents a mile is actually what you should assume as a rule of thumb, though banks usually pay less for the miles earned from a card’s initial bonus – since the airline benefits from new cardmembers who then go on to spend and generate revenue for them.

Delta may have tapped out the potential of SkyMiles. With 30% of active members already holding their credit card, that explains the move last fall to push their most engaged members to spend more on their cards – or lose the benefits of status. They can’t just add more cardmembers to grow, and there’s no more money to take from American Express for existing business.

Meanwhile, American in the number three position in charge volume and generating nearly as much revenue as Delta. They can grow by pushing more spend through their cards, and this explains why they were first to move to a system where most earning – especially card earning – counts towards status. Only they’re more generous than SkyMiles. They’re generally employing carrots, to Delta’s elite member sticks.