Everyone’s a Bank Now. Bitcoin Tech Talk #277

Airlines are a tough business. The customer base is culturally attuned to paying as little as possible for flights, there are all sorts of regulations, it’s taxed like crazy and the cap ex is incredibly high. Add unions for every job, the vicissitudes of weather, jet fuel prices and random travel restrictions and you have yourself a very difficult industry to succeed in

Yet when you dig into how these airlines make money, you realize that they’re pretty profitable, despite the high costs. Is it because they’re innovating at such a rapid rate that they can outpace inflation? No. Is it because they’re raising prices constantly? No. The reason airlines stay afloat is due to their loyalty programs.

Operationally, airlines actually lose money. Airline prices haven’t kept up with salary increases, fuel price increases and so on. Most of these airlines are operating at a loss and their flying businesses have negative equity. The reason airlines are able to post profits is because of their loyalty programs.