Airlines are a lot like central banks (2020)

[A_Duck]

>> Unfortunately, in the EU, rules concerning credit card payments and fees make co-branded credit cards unattractive to airlines and banks

In the EU card fees are capped and this is a good thing. AMEX extracting excess fees from my local coffee shop and then giving (some) of it back to me as air miles is the dysfunction.

[indus]

I was shocked to find out that there is a 3-legged marketplace between acquirers, issuers, and merchants that funds a trillion dollar business model where neither the merchant nor the customer gets benefited.

Large merchants like Walmart and Amazon pay 50% less fees for every dollar compared to smaller merchants—-Smaller merchants is the channel where the most cashback accrues to cardholders.

[Shrezzing]

It seems like false equivalence to state that Central Banks and airlines are the same because they both create an intangible asset.

Most nation's central banks bailed out airlines (if by proxy) just a few days after this was originally posted, which should be a fairly big indicator that airlines are far from akin to Central Banks.

[dermesser]

But that's only because (unfortunately for the airlines) miles are not a universally accepted currency. Just like some poorer countries needing to be bailed out by the IMF, despite issuing their own currency.

[johnzim]

To be fair to the article, the title is "the strange way airlines are actually central banks", implying that it's just in that one way that they are central banks.

[yieldcrv]

analogies compare dissimilar things with a common attribute

it is almost impossible to judge an analogy, despite how common it is to do so

[bunga-bunga]

A day doesn’t go by without someone claiming a company is a bank.

Apple is a bank, Starbucks is a bank, my hospital is a bank, my cat prints money.

[banannaise]

Just because it sounds silly on its face doesn't make it not true. The basic premise is solid: many of the most successful corporations today make a large portion of their profit from convincing customers to park funds in their accounts, and investing that money in financial instruments.

Everyone's got millions of unsecured creditors at zero interest. What could possibly be problematic about that?

[mcbishop]

> All and all, frequent flyer points are a massive business for airlines. According to some valuations, these programs are worth just as much as the airline itself.

This alternative currency that's been around long before cryptocurrency... is more significant / interesting than your cat printing money.

[nocoiner]

The only really interesting breakdown I’ve seen along these lines was a dissection of how cheap Starbucks’ cost of capital is due to their gift card system. It’s quite a remarkable business they’ve created totally apart from selling coffee!

In my opinion frequent flyer points are only interesting to consider in terms of the implications of a currency that will only get shittier over time.

[anononaut]

They're notably distinct in that you can simply exit their system and choose not to participate. Calling them banks is apt, I suppose, but calling them central banks takes gravitas away from the most heinous, utterly unethical institutions that are the actual central banks.

[albybisy]

and this is the only the beginning. Wait until everyone can create his own credits and everything is liquid and can be exchanged :)

[citizenkeen]

Max Berry's book Jennifer Government[1] posits that WW3 will be fought over airline miles.

[1]: https://en.wikipedia.org/wiki/Jennifer_Government

[indus]

I’m sure the author has a sequel planned——Cashback Planet :-/

[suoduandao2]

There’s a blast from the past. I played the associated online game back in the day, dang I’m old.

[jmopp]

Relevant Wendover video: https://youtu.be/ggUduBmvQ_4

[logshipper]

Also relevant Byrne Hobart post on how frequent flyer miles programs are worth more than the airlines themselves: https://archive.is/yUTay

[efitz]

I just want them to upgrade my damn seat. United 1k, hundreds of thousands of lifetime miles, and they almost never upgrade me even with their new “plus points” model which appears just to be some kind of fixed price bid for increasing your place on the waitlist.

[balderdash]

It’s been my experience over the past ~year (as a top-tier flier on multiple airlines) that the airlines have completely depreciated their frequent flyer programs to the extent that regardless of your status the only thing you really get is, preferred economy seating, not boarding last, and some free checked bags.

I used to direct my spend to preferred airlines, now I don’t bother, it literally doesn’t matter.

(Not to mention the ~80% devaluation in mile value)

[pknomad]

Also United 1K here for 2 years straight.

It really depends on the flight segment and the seating class you bought. Flying to/from the hubs? Forget it. Everyone and their mother are 1K for United if you're flying from SFO. United really screwed the pooch by allowing insane amount of people to qualify for 1K.

At least you get priority boarding (assuming non-1K members don't line up in 1K pre-boarding) and 1K priority support line.

[sand500]

This post is from 2020 when all air travel ceased. It would be nice to see an update with the new creative airline miles schemes.

[cratermoon]

I 100% agree I would love to see a follow-up. The post made predictions about post-pandemic air travel, I wonder if they've panned out.

As for the new miles schemes: airlines used to publish charts showing you earned for X points per mile. The shorthand "miles" referring to FF points is telling. Now airlines use "Dynamic award pricing". It's impossible to tell in advance how much your points are worth.

https://thriftytraveler.com/guides/points/points-principles-...

[OO000oo]

Could someone elaborate? What are the new airline miles schemes?

[jpcfl]

Side bar: Does anybody else dislike this one-sentence-per-paragraph format?

[cratermoon]

I dislike it, but there's something maybe related to it that I do like and recommend. Unsurprisingly, it appeared here on HN about a year ago. One sentence per line: https://news.ycombinator.com/item?id=31808093

I started writing like that after I saw it here and it's definitely improved my writing process. Note that this is not one sentence per paragraph. After my source writing (in markdown) is processed to whatever output format, the paragraphs look normal.

Just like the comment you are reading now.

[ada1981]

I dislike it less than the hyphen-between-every-word format.

[wonderwonder]

This is a pretty interesting read. There is definitely a similarity to crypto currency here as well. Wonder why the SEC does not categorize airline points as securities and come after them...

[breser]

See the Howey Test: https://www.investopedia.com/terms/h/howey-test.asp

Airline Miles don't grant you access to a portion of the profits from the airline. They aren't an investment. They are a currency for future travel.

[HWR_14]

Because people don't buy FF points as a speculative investment. If you said "I am starting wonderwonder's airline. I will only sell tickets based on FFPs. I am currently selling FFPs at a discount to what I will sell them at later and they are transferable. You should buy them now to resell them later" they would be securities.

[Shawnj2]

You can generally only get frequently flyer points by flying on an airline, and even then airlines sometimes sell points for money and it’s always a bad deal.

[d3vmax]

Central bank comparison is farfetched here.

[victorp13]

Was going to post the exact same here. Economics major. Making this comparison shows lack of insight into what a central bank actually does, or the power it yields.

[bartvk]

> According to some valuations, these programs are worth just as much as the airline itself

Interesting source about this: https://www.wsj.com/articles/are-frequent-flier-programs-rea... or its archive: https://archive.is/ZOVme

[kykeonaut]

Ha, I just posted about this in another discussion about an hour ago [0]. It astonishes me how a link to an article tucked away in a thread can find itself in the top page of HN an hour later.

[0] https://news.ycombinator.com/context?id=36943868

[flygurl]

That’s where I first read it! Very interesting analogy.

The automatic title mangling somewhat hides that the author intends it to be an analogy only, not an identity.

[JohnFen]

Personally, I ignore frequent flier points (and similar programs in other industries). They add additional complication that I don't need to something that's already a substantial hassle.

[shark1]

It's different. Nowadays, central banks create money out of nothing. Companies can create these loyalty points but they need to pay the customer back with services when they come back to exchange it.

[altcognito]

Should be noted that this is from March 2020