How Airlines Quietly Became Banks

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Title	:	How Airlines Quietly Became Banks
Lasting	:	16.45
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Views	:	5,1 jt

One thing i understood esrly on in life is if a business doesnt make a profit they wouldnt be in business
Comment from : The Truth

It’s not just airlines, the situation is very similar with hotels having various credit cards and reward tiers driving their business Hotels have an average margin of -2 with a handful of big tourist markets sustaining the rest
Comment from : alex2792

So much wrong info in this video
Comment from : Burningarrow

The only thing this video is missing is that the points, like many virtual currencies, is completely worthless if the company goes under
Comment from : Michael K Woods

American should make their flights suck less if they want that higher points value to be meaningful
Comment from : Derek

@2:25 "airlines themselves are worthless"brThis isn't really an accurate way to state this since the airlines own the loyalty programs Makes a good sound bite though brbr@4:03 "so unbelievably advantageous to their own interests"brA subtle jab at capitalism? If it wasn't also in the interests of flyers, they wouldn't participate Instead they could pay more for flights The airline business has historically struggled to survive Is it a bad thing if they've finally figured out a way to make it sustainable? Is it not in the interests of flyers?brbrbr@7:48 "points aren't taxed"brThis is stated as if it's universally accepted that all purchasing should be taxed This isn't even true in other forms But also, it seems no matter how large, over-bloated (and now slowly tyrannical) government becomes, it's never enough It's more anti-capitalism rhetoric Can't you just enjoy your cheap flight?brbrbr@11:26 "Airlines quickly figured out how to restructure the redemption side in their favor too" brAgain, isn't it also in favor of customers who enjoy cheaper flights and other benefits?brbrbrbr@14:46 "Their acting like the bank of England" "They control the supply of their currency" brThis is nothing like a central bank The federal reserve created 52 trillion in currency during Covid by simply clicking a button on a computer The airlines "currency" is linked directly to money spent on flights Can an Airline magically double their flight revenue by clicking a button on a computer? Additionally, why is your default position that government should control currency? It wasn't always that way and need not be that way now I guess you'd be shocked to know that Federal Reserve activity results in wealth transfer from poor/middle class to the rich/elite You like to use the word "power" here, but I fail to see justification for it, unless again, your goal is anti-capitalist rhetoric The market exchanges between businesses and customers here is voluntary Where is the "power"? Using your logic, I can claim the customer has power over the airline by manipulating them into using FF programs to decrease the cost of the flight and provide other benefitsbrbr@15:00 "control the flow of currency"brThis is false It's more accurate to say they have influence over what customers spend currency on The same could be said for google or any other ad agency What is it your driving at here anyway?brbr@15:10 "operating as private, for profit companies"brOk, at this point you might as well put a hammer and sickle symbol as the thumbnail on this video
Comment from : Axel onetwoman

i never collected enough miles to redeem them on anything 😭😅😂😂😂😂
Comment from : Queen of the North

for me I like the jobbrpeople my body 20 yearsbrI like change
Comment from : Maria de Lourdes Anies Sanchez

The little girl standing in front of the bull literally represents the ruin of the american bull market AKA everyone is poor and in financial ruin
Comment from : Kaveman _

Market Cap does not equal enterprise value That is hugely misleading Comparing apples to oranges my guy
Comment from : MrSnackpackable

I remember flying with Delta a few years ago, they straight up turned on the seat belt buckle sign and gave a presentation about their stupid credit card for the majority of the flight A freaking ad for 80 of the flight I couldnt even get up to pee I will never fly delta again
Comment from : Upper Aquatics

RE airlines tightening their control over when/where/how you can use your points for a free or subsidised flight:brThat's exactly why I don't give a crap about points anymore It's not worth the inconvenience, time, or energy spent
Comment from : Prizm

Someone tell Kenya Airways this because they suck
Comment from : A Martin

As someone who routinely flies to Nantucket, I’m shocked
Comment from : J R

So what's stopping airlines from just arbitrarily devaluing all the precious miles and points we've earned?
Comment from : xygomorphic44

One year later, and just a minor point @14:25, Barclays already has JetBlue No expert myself here, but w/the way this airline is growing, still having a modern, upstart image but moving into hubs and becoming more like the Big Three w/o as many big problems, I imagine the bank probably wants to keep it
Comment from : Laura T

I hate airlines
Comment from : AA

They tried this in a small town
Comment from : TrendTrader

Airlineses!?
Comment from : Luca LAurora

Superb objective analysis Sadly, cheapened by the very forces it is trying to explain Shilling for Amazon? Seriously?
Comment from : Ridgewood Productions

Further proof that our economy is just one big cycle of debt slavery
Comment from : K Note

GENIUS!!!
Comment from : fhickson

But I still dont get it, the math sounds good and makes sense as a business model, but they are still operating at a loss
Comment from : Rodrigo Maselli

The more traditional full-service airlines depreciate flyers' miles and turn a blind eye to passengers' experience (eg, by introducing basic economy class and disallowing free checked bags on all domestic flights), the more likely non-business frequent flyers will consider abandoning their programs, resort to the actual price they pay every time they buy a ticket as a reliable reference, and begin to value low-cost carriers At least the service quality is basically the same and low-cost carriers don't try to pretend to offer better service than their "full-service" counterparts
Comment from : Pascal Law

Between the grating robotic cadence and hearing someone say “Airlineses” over and over, this was tough to finish The subject kept me interested though Who says airlinses? lol
Comment from : Kenyon

Sure do love an economic system that really can only make profits by moving money around, and all real value exists just to be a base of capital for that financial trickery At least in the gilded age the insane wealth of the oil and steel barons was based on something real and the profit gouging was from monopoly The finance industry has divorced money from value to humans It's a game of minmaxxing numbers that have increasingly less to do with what they're supposed to represent
Comment from : SpecialJ11

Banks often own the planes the airlines fly This keeps their capitol costs low by leasing planes from banks Therefore they do not have equity in planes as part of their value
Comment from : Douglas Merkel

I swear the way business has evolved is so interesting I would have never expected things to reach levels this complicated
Comment from : Random Person

So why isn't everyone doing this? What's special about airlines that allow them to become "banks"? I would imagine any B2C company would gain the same benefits: Taxis, cinemas, supermarkets, car washes Is it just a hack they haven't figured out yet?
Comment from : Robin Squares

😮
Comment from : Mark Wallace

It's the same thing as gas stations They don't profit of of the pumps They profit off their contracts with lotto, coke products, cigarettes, and loyalty credit cards
Comment from : sweaty keyboard

this seems good for passengers We would be paying much more for a ticket if the airlines had to make a profit from just flying not sure I understand the comments slamming the airlines for doing this
Comment from : Jeff

Not a frequent flyer and I have 2 airline credit cards for The free checked bags mostly
Comment from : jcman240

it’s good because if they did not do that the dollar cost to the general public would be astronomical for flights , this system works for everyone the airline , the consumer with rewards and cheap flights , and the various companies who want a piece of the pie like citi bank etc it’s a win win and without this system flights would instantly double or triple
Comment from : lamb tron

Kind of like McDonald's being a real estate business with selling burgers as a side hustle to pay for the real estate
Comment from : c j

It’ll be a shame if a law was signed 😂
Comment from : Driving America LLC

you don't really explain how the point exchange profit them
Comment from : Hendra L

I’m waiting for Starship to start running these people out of business with trans-orbital flights in another decade or so
Comment from : OneBiasedOpinion

When you compare the reward program value vs airline company market cap, you can try to EV (Enterprise Value, market cap + net debt) which indicate the total cost of the company for someone to buy, you will find the difference is small
Comment from : Ning Liu

The US treasury is not a central bank the federal reserve is the central bank and its neither federal nor reserve
Comment from : Seb Fettel

Their pilots make $300,000 per year
Comment from : Angus MacKaskill

Airlines should be regulated again is the lesson ive learned from this video
Comment from : Fallen Deus

Grocery items are not taxed in the US 8:02 brbrIf your store charges you tax for milk or banana's, they're pocketing that Totally legal and totally BS
Comment from : Darth Obscurity

Interesting video, but the numbers seem off - or perhaps I misunderstood - as the "value" of the programs stated are the total earnings of 2019 MULTIPLIED by a factor of 12, which is not really comparable to the company's market cap or valuation, which are based on estimated earnings for the next year, for example Without the x12 factor used in the 8-K valuation, the mileage program is equivalent to roughly 18 of United's market cap, rather than 250 This also makes sense because there are other assets within company valuation (ie airplanes) which definitely are not worth zero Still, it's a pretty significant business, no doubt, and a significant generator of revenue when airlines are competing for market share
Comment from : Scott San Roman

Hmm Funfact: The most viewed section of this video is actually the audible AD at the end
Comment from : Narendra Prasath

I really wish your channel produced a video on specific airlines and how they're interacting with other entities, specifically thinking about airlines operations in Mexico and their partnership with the government, or the way low cost operates there Pretty interesting!❤
Comment from : Kevin Pineda

What the heck, what even is this world
Comment from : Sebastian

Except if people don't travel, the only way they lose is if people don't travel
Comment from : Avianna Reign

Started wondering why this video is so long This is not HAI
Comment from : Anthony Helms

Airlines's??? Wtf
Comment from : GoogleShouldntRequireThis

Were can I get one of the subs shown at 8:11😂
Comment from : 3D PRINTING FOUNDERS

Everybody is becoming bank hahabrbrApplebrGooglebrFacebookbrAirlines brStarbucksbrHotels brbrAnything I missed?
Comment from : Train FC

10:19 I know a guy who used to fly like this to get more miles and higher status
Comment from : Bill c

Frequent Flyers’ Point is nothing but “ Discounts” on sales price Instead of giving an upfront discount it’s given as a “Credit Card” which can be redeemed When virtually no “payments” have been made This “Points” does not have a “Bank Account” of it self rather a discounted amount is set aside ( probably ) to make this extremely lucrative “ Marketing Promotion” is this part of GoodWill? Yes! As alternatively this shows you the number of “referrals?” - a sale has generated While calculating Good Will it’s extremely tricky to decide the value of “AIR”
Comment from : M Fazlur Rahman

Why did you use market cap rather than enterprise value?
Comment from : J O

Problem is, they make “spending” those miles pretty difficult - trying to book flights with points used to be pretty easy but is virtually impossible these days I see no point in accumulating miles that you can’t spend
Comment from : kardy12

Creditor yes, bank no
Comment from : Call me ThreeOne

Not sure about GAAP but the accounting standards for the rest of the world (IFRS, most countries align to IFRS these days instead of GAAP) have specilic accounting requirments for loyality programs for all business; the 'loyalty program' needs to be reflected on the balance sheet otherwise the future claimable (payable) amount to all of these frequent flyer programs would be an invisible LIABILITY of the company But IFRS says a company needs to offset revenue to ensure these loyality programs can be funded in future So the accounting law says to set aside cash for the value of the loyalty program promise Presumably it was finacially beneficial for these airlines to establish a seperate company and transfer both brbrA) The LIABILITY of the "promise of future goods/services" and brB) A big sum of Cash (ASSET) equalling the "promise of future goods/services"brbrOver time the LIABILITY to CASH value would need adjustments as loyalties are claimed or expire, and for other reasons The result after the estimate of loyalty is reduced is CASH, accounted for as revenuesurplus cash that the companies can divert to shareholders, reinvest in capital equipment, buy real estate for ground services or give every employee a limosine Ok the limosine is unlikely but the others are a valid choice brbrANNNNNND in the case of this video the airlines decided to reveal the future inevitable release of Liabilty ( therefore free cash from revenue earned from years before) to ask the bank for a loan between NOW (a time the LIABILITY still exsists) and the FUTURE (a time when they could resonably prove the LIABILITY wont exsist and the estimated balnce of the amount that will be released as revenue back to the airline!!
Comment from : JadCom

This is not new news It's called "creative accounting" Should points/miles be classified as a liability in the first place?
Comment from : Sergei Victorov

My American Airlines miles expire every 2-3 months It’s an absolute joke It’s impossible to reach higher tiers of membership without spending enormous amounts of money or flying every single month I despise airlines
Comment from : Nixed Gaming

Private businesses should never get bail out money from the government If they government needs to pay for these essential services, make it public Capitalism only serves the corporations, not the public needs
Comment from : Stephss

YouTube ads on the video - American Express Business card 😂
Comment from : John Boden

so airline loyalty programs are basically just cryptocurrencies got you
Comment from : doorhandlechannel

So where is the value coming from? All currency extracts value from somewhere Where is the profit from the loyalty program ultimately coming from? Higher cost of services from the companies paying for points?
Comment from : Innomen

14:44 Did you just pretend the us treasury is America's central bank? Why would you lie about that? It's obviously the federal reserve and no one who knows the word arbitrage would ever make that mistake
Comment from : Innomen

Double ticket prices, make people follow a dress code, and re-define “service animals”
Comment from : No ID Reculse

Interesting I wonder how Southwest compares Same deal?
Comment from : RL Shultz

Quietly? damn these mfs always try to sell the entire plane on to a credit card
Comment from : SB

You mentioned 125K miles … It’s far higher now…
Comment from : Off-Roading Arizona

So that means the air transportation portion of their business is just bait to get people to use their point system as financial services
Comment from : 1 2

Airlines is making money selling tickets Flighting is just an expense Same is for any private business which is meant to profit rather than making something useful for a society
Comment from : Федя Крюков

I don’t want to hear how airlines became banks Why cant any business model survive as itself nowadays? Mcdonalds is real estate? Apple is paymemt processinf?brbrEveryone shut the fuck up and go to time out
Comment from : Colocasia Corm

Classic example of American's preferring " A Bargain" over any particular product or level of quality As long as airlines offer "Deals", Americans will overlook the diminishing quality of the end product
Comment from : Cake Batter

Earnings are after expenses are subtracted Revenues are money brought in before expenses are subtracted
Comment from : Matthew Huszarik

But if too many people travel it became less comfortable than the busIf I were car company or really want to open up the heart and mind is cross ocean freeway link Tokyo to Taiwan to Saigon to Hawaii to La to Alaska ect each freeway cost even less than a air craft carrier of navy so 50 billion for those linkage we could deploy 20 million cars to all those cities in a month while air line can not take care with them and hotel and casino every 500 miles in middle ocean is priceless
Comment from : Eric T Pham

The problem is airline is not properly appreciated they can help diplomatic , news media , and business operation more than even phone because a face to face meeting if ceo to ceo is more than empty promise on internet plus in case of war dying in space is heavenly than on the muddy boody field
Comment from : Eric T Pham

How much money if $100 bill in one traveling suitcase?
Comment from : Eric T Pham

Airlines don't make money, govt does I looked at a recent fare breakdown for a transcontinental flight, $3000 total, $1800 in fees and taxes
Comment from : Monroe

@Wendover Productions, Freakonomics Radio just had 3 episodes on Airlines The 3rd episode covered this topic in about 1 sentence and clearly disagree with your video It would be amazing if you could reach out to them and figure out why your assessment is so different from theirs
Comment from : greggman

I take issue with the way the speaker forms the plural possessive Three times
Comment from : Johnny Cataneo

I wonder if its true just for US based airlines or its like this in the entire world 🤔
Comment from : Mihir Saspara

1:50brMisleading Comparing market caps to enterprise values 🙄
Comment from : Kanes4life

Lockheed Martin and Raytheon loyalty points when
Comment from : MemeWarVeteran

Airline and other points awarded to employees based on employment travel are indeed taxable benefits In the US, the IRS has said that, while they are indeed a benefit, they will not see them taxed to this point In Canada, the situation is pretty much the same but I don't believe that Canada Revenue Agency has addressed the issue other than to pretty much ignore it
Comment from : David M

Turns out money changing is the most lucrative buisness
Comment from : James Madisons spirit animal

This is why my 5 point plan to reduce emissions from airplanes is:br1 Ban all loyalty points / frequent flyer miles / etc systems for airlinesbr2 Ban airlines from any and all banking & cooperation deals with banksbr3 Minimum same gas taxes for aircraft fuels as for car gasoline/diesel Including any & all emissions & carbon taxes in the country the airports are inbr4 No points on credit/debit cards for buying flightsbr5 No points on credit/debit cards for purchases at airports
Comment from : Gustav Svärd

since the deregulation its brilliant
Comment from : FEETLE

Good videobrHowever, I disagree with your statement that airlines are no longer transport companiesbrIn order to make a net profit they still need to own planes, and fly passengers to carry out their businessbrbrAnd this sort of thing where the financial part of a company is (vastly) more profitable than the rest is quite common Look at GE and Schlumberger GE Capital made huge sums from loaning the money needed to buy the big toys that the rest of the company made And Schlumberger Finance earned lots by investing the big cash flows that went through the companybrbrThe point you missed was the capital investment needed to buy planes, and how this is financed Although I think in many cases now the airlines don't actually buy their planes but lease them And some jet engine makers lease them at a fixed cost per mile: including maintenance
Comment from : WarthogARJ

1:50 Airlineses? 🤣 Bro, one of them alone is an airline, multiple are 'Airlines' You're pluraling a plural, double plural, like when some people say breakfastses, for more than one breakfast That should be breakfasts
Comment from : Paying For Free Speech