1. There's a reason high margin businesses are so rare- generally, competition will bid the prices down to more reasonable levels of profit. I understand each a

1. There's a reason high margin businesses are so rare- generally, competition will bid the prices down to more reasonable levels of profit. I understand each airline has their own branded credit card, which they have pricing power over. But besides branded cards and direct mileage purchases, why would mileage margins stay so good? Surely the mile buyer would have negotiation power between the airlines. Why can't these mileage buyers (banks, rental car companies, etc) get lower prices for the miles, given the high margins? Is it possible there is mileage price collusion among the airlines? 2. How do airlines account for the cost of mileage seat redemptions when calculating their margins? Do they just use their marginal cost of carrying that passenger (very small)? In my mind, the cost of selling a seat with miles should be at least as much as the lowest price they charged other paying customers. If a plane flies 100% at capacity with mileage redeemers onboard, certainly the airline could have sold the mileage seats for at least about the same as the lowest ticket price paid onboard. I'm skeptical that this how they account for it though... 3. Like others have mentioned, the miles game really is fun for many people. It's fun to collect points, to win things, and get the satisfaction of free travel. In general for me psychologically, the price of airline tickets is the bar for whether a trip is worth taking or not- regardless of the other trip expenses. When you get a vacation with free redeemed airline tickets, it somehow feels so incredibly satisfying.