Its power as a marketing tool to develop customer loyalty was immediately apparent and the AAdvantage program was imitated by airlines around the world. But the full value of frequent flier programs has only become apparent in recent years as airlines began boosting revenue by selling points to third parties. Air Canada sells its points to about 40 businesses in addition to the approximately 20 airlines on which points can be earned. These third parties include such companies as Future Shop Ltd. and CIBC Aerogold Visa. Mr. Peterson, who is considered the world expert on frequent flier programs, said that by selling points, frequent flier programs have become the highest-margin businesses that airlines are involved in.
Airlines are secretive about what third parties pay for their miles.
But the cost of providing these tickets is much less. After all, tickets purchased through frequent flier points are considered seats that would otherwise go unsold. With the fixed costs already covered, there are only incremental costs associated with redeeming frequent flier points. Air Canada is planning to release more detailed information on the revenue and liabilities associated with its Aeroplan program in the coming months with the hope that the data will help investors better value the asset. While most observers see frequent flier programs as hidden jewels that can be exploited to help boost the sagging stock price of airlines, some are concerned that the points are becoming too readily available.