How airline miles affect airline profits

When a bank pays for miles, the airline does not book revenue. It records a liability, deferred revenue, at the estimated selling price of a mile, and recognises the revenue only when the mile is redeemed for a flight. United describes the selling price as "an equivalent ticket value, which incorporates the expected redemption of miles". Delta says its miles "are combined in one homogeneous pool and are not separately identifiable". IAG Loyalty put it plainly to investors: partners pay upfront for issuing Avios, but "most revenue is only recognized upon customer redemption, not issuance".

Part of what the bank pays is recognised at once, because it buys things other than flights: marketing to the airline's members, brand use, lounge access, boarding perks. United booked US$3.2 billion of partner payments this way in 2025, American US$3.5 billion of "marketing services" revenue and Delta US$3.4 billion of "loyalty program" revenue. Only the travel component waits on redemption.

Every program assumes some miles will expire or sit unused, and it books that share as revenue without ever providing a seat. United says its "mileage breakage model is based on the assumption that the likelihood that an account will redeem its miles can be estimated based on a consideration of the account's historical behavior". Singapore Airlines defers revenue "based on historical trends of breakage, which is then used to project the expected utilisation of these benefits". Delta and United both say most new miles are redeemed within two years.

Breakage is also why programs that never expire miles, such as Delta and United, still earn from them: a balance that is forgotten is as good as one that expires, and the accounting estimate does the rest. For a member, an unused balance is a gift to the airline, which is the case for selling miles you will not redeem.

IAG's investor day laid out the economics: financial-services partners (card issuers) earn IAG Loyalty a 25% to 35% operating margin, retail partners 5% to 10%, and the airline's own use of Avios roughly breaks even; capital spending is under £50 million a year, and cash arrives at issuance while the cost arrives at redemption. The disclosed segment margins line up: Qantas Loyalty 21.7%, Flying Blue 24.6%, IAG Loyalty about 19%, JAL's mileage and lifestyle segment about 20%, against group operating margins of about 9% at Delta and Qantas and 15% at IAG.

Delta calls loyalty and premium "high-margin, diversified revenue streams" and reports American Express payments of US$8.2 billion in 2025 on the way to a US$10 billion target. Sixty percent of Delta's revenue now comes from what it calls diverse streams, of which the card deal is the largest.

The airline books your balance as a cost it expects to bear, valued at what an average mile is worth to it, not to you. A program that earns most of its cash from a bank has every reason to keep issuing miles and to keep the redemption cost per mile in check, which shows up as dynamic pricing and periodic devaluations. The valuations page tracks what a mile buys today; the program pages here show how much each airline is carrying and how fast it is issuing.