How airline credit cards became more profitable than flying

Ask most people what business Delta Air Lines is in, and they'll say the obvious thing: flying planes. That answer is increasingly incomplete.

In 2024, Delta's co-branded credit card partnership with American Express generated roughly $7.4 billion in revenue. That figure is larger than the airline's entire operating profit for the year, which came in at around $6 billion. American Airlines pulled in $6.1 billion in cash from co-branded cards and other loyalty partners, a program anchored by Citi, with Barclays and others alongside it.

United recognized on the order of $2.9 billion in loyalty and marketing revenue tied to its co-brand partnership with JPMorgan Chase, and its true co-brand value is higher still, since a large share of what Chase pays is deferred rather than booked immediately. These aren't side hustles. In most cases, they are the difference between an airline turning a profit and posting a loss.

The math that should give every airline passenger pause

Strip out loyalty and credit card revenue, and the picture gets bleak fast. By one widely cited analysis, without that money American Airlines would have posted roughly a -8.3% operating margin in a recent year, United around -1.9%, and Southwest a devastating -19.9%. Not a single major U.S. airline would have been reliably profitable purely on the business of flying people from one place to another.

Those specific percentages come with a caveat worth stating plainly: they depend heavily on loyalty accounting. Airlines book mileage revenue using deferred-revenue and "breakage" assumptions, which are estimates of miles that will never be redeemed, and different assumptions move the numbers around. So treat the exact figures as informed estimates rather than hard numbers pulled straight from a filing. The direction, however, is not in dispute and is repeated across the industry: strip out the loyalty machine and the core airline is, at best, a break-even business.

Delta's own numbers illustrate the point. Executives have described quarters where credit card revenue is the swing factor between an operating loss and a healthy double-digit margin, the reason a quarter that would have been red on flying alone lands comfortably in the black. That's not a bonus on top of a healthy business. In effect, that is the business.

How the loop actually works

The mechanics are almost embarrassingly simple once you see them. Airlines generate frequent flyer miles essentially out of thin air, at near-zero marginal cost, and sell them in bulk to banks like American Express and Chase. The banks then give those miles away to cardholders as spending rewards. Every time someone swipes a co-branded airline credit card at a grocery store or a gas station, roughly $2 of every $100 spent flows to the card issuer as interchange, split broadly between funding the mile rewards and the bank's own profit. (Real interchange rates run anywhere from about 1.5% to 3.5%, with premium travel cards at the higher end.) Crucially, the airline gets paid for the miles it sells regardless of whether the cardholder ever sets foot on a plane.

That last part matters more than it sounds. A majority of the miles airlines now issue are earned through credit card spending rather than actual flying. One industry estimate puts it at roughly 57% of all miles issued in the U.S. The clearest sign of how far this has gone: American Airlines now hands out its top loyalty tier to customers who have never boarded one of its aircraft, and Delta has said spending-based status has become the norm rather than the exception. The flying, in other words, has become almost optional to the loyalty program that once existed purely to reward it.

The moment this became undeniable

The clearest proof of where the real value sits came during the pandemic, when planes were grounded worldwide and ticket revenue collapsed. Airlines didn't survive primarily by mortgaging aircraft. They survived by borrowing against the future cash flows of their loyalty programs. United raised $6.8 billion this way, securitizing MileagePlus. Delta raised $9 billion against SkyMiles. American set a record for the largest financing transaction in airline history, announced at $7.5 billion and upsized to $10 billion, backed by the intellectual property and projected cash flows of its AAdvantage program.

Banks were willing to lend billions against a rewards program while the airlines' actual planes sat idle on runways, worth comparatively little as collateral in a grounded industry. In their loan filings, American and United valued their programs at roughly $24 billion and $22 billion respectively. That single fact tells you which part of the business investors actually believe in.

Why this matters beyond airlines

This isn't just a quirky airline-industry factoid. It's a pattern worth recognizing anywhere a company has a highly visible core product and a quieter, more profitable one running underneath it. The visible business, the one customers think they're paying for, sometimes exists mainly to justify and fund a second, less visible business that actually keeps the lights on. Flying, for major U.S. airlines, has drifted toward being the loss leader. The real product is increasingly the financial relationship: sold not to travelers but to banks, who then sell it back to spenders who may never fly at all. As one consumer advocate put it, the modern airline is essentially a giant rewards program that happens to operate airplanes.

Next time you swipe an airline credit card at the supermarket, you're not really buying groceries with airline miles. You're helping fund an airline's profit margin, whether or not you ever board a plane.