The Value of Airline Frequent Flyer Programs The value of airline frequent flyer programs has surpassed the value of the airlines themselves, making them the most valuable asset of the airlines. Airlines are essentially acting as central banks for their own virtual currencies, controlling the supply of their currency and the availability of goods to spend it on. The airlines' power goes beyond that of central banks, as they are private for-profit companies that can create more of their currency for the purposes of selling it at any given time.

The Evolution of Frequent Flyer Programs Frequent flyer programs became technically and legally possible with the deregulation of the American airline industry in

The first program was set up by a small airline called Texas International, which later merged with Continental. American Airlines was the first major long-haul airline to set up a frequent flyer program in

The concept of earning points with partners was not what was revolutionary about this, rather it was the behind-the-scenes mechanics that made that possible.

The Financial Mechanics of Frequent Flyer Programs Airlines have crafted a system so effective that they are now willing to lose money flying to prop up their frequent flyer businesses, businesses whose core proposition is giving away free flights. Airlines are essentially acting as banks, and their frequent flyer programs have become profit centers in and of themselves. Airlines have nearly complete unchecked control over a currency with which they are the only entity that can convert it to cash, making frequent flyer programs genius financial instruments because it's nearly impossible for airlines to lose.