Ever wonder why the costs between airlines for trans-Atlantic routes are pretty much the same?
Turns out there's a perfectly-reasonable explanation for that...
YouTube video about Atlantic-route collusion exceptions for airlines.
-- Mike Beebe
Posted by
Eastern Iowa, USA
9119 posts
The fact that partner airlines in a shared alliance charge about the same fare (ie: United and Lufthansa) for the same route is hardly surprising.
Though the video does not really claim so, but that among the big three alliances that the same routes have comparable prices is also not surprising. That is what competition does.
Just my observation, but in todays world of constant inflation, the fact that I am paying about the same for a round trip ticket to Europe as I did some 25 years ago, and most years in between, indicates that competition seems to be working OK. That is not the case with hotels, meals, venue entries, etc.
In my view, alliances offer a great benefit, imagine landing in Europe and always having to re-check-in with another airline, re-check bags, figure out how much time to allow as a layover, I feel the headache coming on.
Posted by
Virginia
607 posts
They can be less going the other way. Somehow Virgin Atlantic thought I was a UK customer and I get their emails offering much cheaper flights to the US than I get to the UK. But I can’t book them.
Posted by
Lexington, KY (formerly Southeast US)
4528 posts
The interesting reality is that for US airlines, flying is a "loss leader." For the 4 majors (Delta, AA, United, Southwest), cost per available seat mile (CASM) is greater than passenger revenue generated per available seat mile (PRASM).
Delta, the strongest performer of the group, had a 2025 pre-tax income of $5 billion dollars on $58.3 billion in revenue. How much of that revenue came from its AMEX partnership? $8.2 billion. Yikes! Delta lost $3.2 billion without its AMEX remuneration.
The real money for airlines is in credit cards!
Posted by
West Michigan
560 posts
Dave, that is really interesting. I have an American A/L Mastercard. If I spend $30,000 per year with it, that means AAL gets $30k x 2.5% = $750 in commissions? It's actually AAL who gets the percentage?
Or are you talking about if I didn't pay the M/C bill every month, would AAL get all the 20% interest I would then be paying? Certainly that would be a massive amount of money.
Posted by
Dana Point
1268 posts
It's actually AAL who gets the percentage?
That can be part of it, but a huge hunk is from (in this case) AA selling miles...lots of miles...to Citi (and, for a little while longer, Barclays), who in turn doles them out to cardholders.
Posted by
Portland, OR
851 posts
I had a class a long time ago on early American History. Banks could (and did) issue their own "notes" which were used as currency. Many things (like Airline points) can be done when you have your own currency, including the fairly reliable percentage of notes that "never came back to be redeemed".
Posted by
Lexington, KY (formerly Southeast US)
4528 posts
travelerguy...
I don't know the exact terms of the AMEX relationship with Delta (or AA with Citibank). But, as Eric notes, the revenue is connected to selling miles to the financial institutions to use to reward card holders and to promoting cards/funneling users to the financial institutions. Delta CEO Ed Bastian was quoted in 2023 as saying that the amount charged on Delta co-branded AMEX cards was approaching 1% of US GDP.
Posted by
Virginia
1261 posts