Absurdly Driven looks at the world of business with a skeptical eye and a firmly rooted tongue in cheek.
What do airlines make money from?
You, of course.
But which part of you is the most profitable to them?
You're going to tell me it's all the bits and pieces you now have to pay for, right?
It's true that airlines are happy to take money for all the things that used to be free.
There's another area, though, that passengers might not often consider.
In a recent earnings call reported by Skift, Delta Air Lines CEO Ed Bastian lauded an area of the business that he said would generate $7 billion by 2023.
No, the airline isn't raising baggage fees to $100.
Instead, Bastian's proud claim was incited by the airline's new deal with American Express.
Many customers might not realize that credit cards are such a good profit center for airlines.
Financial institutions actually pay to have these co-branded cards peddled to customers.
Especially to customers who both the bank and the airline believe most lucrative.
In this case, it's those who are starting out in life and whose financial and travel aspirations are the greatest. You know, the younger types.
As Bastian put it:
Do we invest in acquiring high-value potential customers early in their life? Absolutely. It's one of the reasons I think our brands align so well because we have similar strategies in terms of our thinking about our brands and how we think about consumers.
Both Delta and American Express enjoy aspirational qualities.
They both claim to offer superior customer service. For a higher price, that is.
Yet a recent study just fell onto my laptop that unveils some of the consumer psychology behind the allure of credit cards.
Performed by personal finance comparison site Finder.com, it suggests that the only reason 39 percent of Americans use credit cards is to get the points.
I'm astonished the number is so low. Still, it shows just how much financial institutions have trapped people into the points-counting sphere.
The rewards game is just that--a game.
It sucks people in like fantasy football. Or Facebook.
Once you're involved, you spend hours calculating how much you need for your coveted reward and rarely stop to think how much you've spent to get it.
In Facebook terms, it's Likes. In credit card terms, it's perhaps a fancy hotel room for one night.
Finder.com says that of its sample of 2,100 Americans, the average amount spent to get rewards was $1,814.75. Or think of it as $158 billion nationally.
Airlines don't want to tell anyone how much--and precisely how--they profit from these credit cards.
Some have surmised that credit cards are actually the most profitable part of airlines' businesses.
You can see why airlines might not want to admit it.
Many airlines have a bad enough reputation, but who'd want to fly a bank?