Wednesday, July 29, 2020
How Lucrative is United's Mileage Plus?
Because United is using its Mileage Plus as collateral for financing, they had to reveal the financial details and, according to an article in Crain's Chicago Business, it's very lucrative.
Mileage Plus sells miles for about 2 cents each to partners (like credit card issuers) and 1 cent each to the airline itself (which issues them to travelers). It then costs about a cent when travelers redeem miles for tickets.
The bottom line is that, last year, Mileage Plus posted a $1.8 billion profit, for a profit margin of 34%—compared to 16% for the airline overall.
This is further proof that selling intangible and virtual goods is more lucrative than selling physical goods.
© 2020 Praveen Puri