Ever wonder why airlines seem desperate to get you to sign up for their credit cards? The answer might shock you: they're making almost nothing from actually flying you around.

According to a Sherwood News analysis of company reports and Bureau of Transportation Statistics data, major US airlines earned just $5.51 in profit per passenger between 2021-2024. That's down dramatically from $19.26 per passenger in the pre-pandemic years of 2016-2019.

But here's where it gets interesting for us points and miles enthusiasts: while airlines struggle to profit from flights, they're raking in massive profits from credit card partnerships. Delta alone earned $2 billion from its American Express partnership in just the first quarter of 2024 – with profit margins around 50%.

This fundamental shift in airline economics explains everything about modern travel rewards. Let's dive into why this matters for your points strategy.

The Shocking Reality of Airline Profit Margins

When you pay $383 for a domestic flight (the 2024 average), the airline keeps roughly $5.51 as profit. That's about 1.4% – a margin so thin it makes grocery stores look like gold mines.

The numbers get even more sobering when you look at recent trends. In the first quarter of 2024, as airlines dealt with economic headwinds and reduced travel spending, profit per passenger dropped to just $0.55. That's less than the cost of a pack of gum.

This razor-thin profitability from actual flights helps explain several puzzling aspects of modern air travel:

• Why airlines nickel and dime you for everything from seat selection to carry-on bags
• Why customer service can feel like an afterthought
• Why they're so aggressive about pushing their credit cards
• Why flight prices can swing wildly based on demand

Where Airlines Actually Make Their Money

While passenger profits have plummeted, airlines have found goldmines elsewhere. The revenue shift has been dramatic and tells us everything about where the industry is headed.

Baggage Fees: The $7 Billion Cash Grab

Checked luggage charges totaled $7.27 billion among major US airlines in 2024 – up more than 26% from 2019. That's an extra $1.5 billion in just five years.

This explains why even "premium" airlines like American and Delta charge for checked bags on domestic flights. When you're only making $5.51 per passenger, a $30 baggage fee represents a 544% increase in revenue from that customer.

Credit Card Partnerships: The Real Money Maker

Here's where the story gets really interesting for points enthusiasts. Airlines discovered they could make far more money selling points to credit card companies than from flying passengers.

The numbers are staggering:

• Delta earned $2 billion from American Express in Q1 2024 alone (up 13% year-over-year)
• Airline credit card businesses operate with approximately 50% profit margins
• This compares to the 1.4% margin on actual flights

Think about that for a moment. Delta made nearly as much from Amex in three months as they probably made from flying passengers all year.

The New Airline Business Model

Bill McGee, senior aviation fellow at the American Economic Liberties Project, puts it perfectly: "The airline industry, over time, looks like the Alps in terms of profitability and loss."

What's emerged is essentially two different businesses operating under one airline brand:

1. The Flying Business: Low-margin, operationally complex, weather-dependent
2. The Financial Services Business: High-margin, predictable, recession-resistant

The flying business gets you in the door. The financial services business (credit cards, loyalty programs, partnerships) pays the bills.

Why This Is Great News for Points Enthusiasts

This profit structure shift actually works in our favor as points and miles collectors. Here's why:

Airlines Can Afford Generous Sign-Up Bonuses

When Delta makes 50% profit margins selling points to Amex, they can afford to be generous with sign-up bonuses. That 75,000-mile welcome offer that seems too good to be true? It's actually a smart business move for the airline.

The airline immediately gets cash from the credit card company for those miles, while you get incredible value for future travel. It's one of the few true win-win situations in modern commerce.

Competition for Your Wallet Is Fierce

With credit card partnerships being so profitable, airlines are competing aggressively for your loyalty. This means:

• Higher sign-up bonuses
• Better elite status benefits
• More transfer partners and redemption options
• Enhanced earning opportunities

The Math Works in Your Favor

Here's a simple example of why the economics favor us:

• You earn 75,000 miles from a sign-up bonus
• Those miles might cost the airline $750-$1,125 in cash paid to the credit card company
• But if you redeem them for international business class, you could get $3,000+ in value
• The airline still wins because they got immediate cash and filled a seat that might otherwise go empty

How to Take Advantage of This Knowledge

Understanding airline economics can make you a smarter points collector:

Focus on Credit Card Sign-Up Bonuses

Since airlines make their real money from credit card partnerships, sign-up bonuses represent genuine value transfers. The airlines aren't losing money on these offers – they're investments in customer acquisition.

Action Item: Prioritize airline credit cards with substantial sign-up bonuses over hotel or general travel cards.

Time Your Applications Strategically

Airlines increase sign-up bonuses when they need to hit partnership revenue targets, often at:

• Quarter-end (March, June, September, December)
• During travel booking seasons (January-March, August-September)
• When launching new routes or services

Understand Elite Status Value

Airlines use elite status to drive credit card spending and loyalty. The perks aren't just goodwill – they're calculated investments in customer lifetime value.

Pro Tip: Focus on airlines where you can reasonably achieve elite status, as the enhanced earning rates compound the credit card partnership benefits. Learn more about maximizing your elite status potential.

Don't Feel Guilty About Manufactured Spending

When done responsibly, manufactured spending on airline credit cards isn't "gaming" the system – it's participating in the business model airlines designed. They make money from every swipe, regardless of what you're buying.

The Future of Airline Profits

This trend toward financial services profits is accelerating, not slowing down. Recent developments suggest airlines will lean even harder into credit card partnerships:

Budget Airlines Adding Premium Services

Even traditionally low-cost carriers like Southwest and JetBlue are adding premium seating, lounges, and enhanced credit card partnerships. Why? Because the profit margins on these services dwarf anything they make from base fares.

Consolidation Concerns

Since 2007, only two new scheduled passenger airlines (Avelo and Breeze) have launched in the US. This lack of competition could drive both fares and fees higher while making credit card partnerships even more valuable.

Technology Integration

Airlines are investing heavily in apps and digital platforms that make credit card sign-ups and points earning more seamless. Expect to see more targeted offers based on your travel patterns and spending habits.

What This Means for Your Travel Strategy

The airline profit structure shift should influence how you approach travel rewards:

Diversify Your Loyalty

Don't put all your points in one airline's basket. Since profitability depends on ancillary services, airlines might devalue programs more aggressively when needed.

Prioritize Transferable Points

Programs like Chase Ultimate Rewards, Amex Membership Rewards, and Capital One miles give you flexibility when airlines change their economics or partnerships.

Stay Informed About Partnership Changes

Credit card partnerships are now mission-critical for airlines. When these relationships change (like when Chase and United restructured their deal), it can dramatically impact your earning potential. Stay ahead of these changes with tools like Point.Me for award search optimization and Going.com for flight deal alerts.

The Bottom Line

The next time an airline aggressively markets their credit card to you, remember: they're not doing it as a favor. They're offering you a piece of their most profitable business line.

This knowledge is power. Airlines need credit card customers more than credit card customers need airlines. Use that leverage to maximize sign-up bonuses, negotiate better retention offers, and time your applications for maximum value.

The golden age of airline credit card benefits isn't ending – it's just getting started. Airlines have found their profit center, and it happens to align perfectly with what we points and miles enthusiasts want: generous earning opportunities and valuable redemptions.

So the next time you're debating whether that airline credit card sign-up bonus is "too good to be true," remember: for the airline, it's just good business. For you, it should be an easy decision.

Looking to maximize your airline credit card strategy? Check out our comprehensive guides to the best airline credit cards and current sign-up bonus offers.