Because the hit on the balance sheet occurs when the miles are earned, not burned.delldude said:i'm confused here......how can a large group of customers cash in their miles at a "freebie" if you will and not affect the total rev picture?
Because the hit on the balance sheet occurs when the miles are earned, not burned.delldude said:i'm confused here......how can a large group of customers cash in their miles at a "freebie" if you will and not affect the total rev picture?
Because the miles are a liability, whenever they're used they reduce the liabilities of the company, with no corresponding change in assets. This improves profits when the miles are used, again provided that they're not being used to displace revenue of greater than the book liability of the miles.
This improves profits when the miles are used
That's true.usair_begins_with_u said:decreasing an acrued liability (FF Miles) will not have any effect on net income, or profits..
True. Of course, it had a corresponding concentration of earnings at the time that the liability was accrued.If anything its dilutionary on earnings..
Again, I'm no expert here, but liquidating liabilities can result in "paper" earnings can't it? It's not cash in the bank, put the P&L looks better.
To amplify Piney's comment a bit... so far this year I guess I've earned about 300,000 miles -- 75,000 or so with my butt in a seat, 225,000 via bonus and non-flying methods. (I'm too lazy to go through all my statements and pull the real numbers -- but these should be close enough.) That's 12 25,000 mile awards at $15 each -- liability to the airline is $180. Of those miles about 100,000 or so are BofA Visa miles. BofA pays US something for that -- I suspect it's about $0.02/mile (that would be in line with what the MCI bankruptcy filing revealed.) Quite a few of the rest are hotel and other partner miles -- again paid for by a 3rd party. All of which US has collects and holds well in advance of me "cashing in" any of those miles. My miles probably age 4 years before they get used.PineyBob said:The key with a program like Dividend Miles is the undisputed fact that FF Programs are PROFIT CENTERS for every major airline. They sell miles to their "Partners" Like Avis.