Am I the only one who gets ethical qualms about frequent flier programs? If your job was to buy supplies for the company you work for, and a printer company offered to give you and your family a Hawaiian vacation if only you would have your company buy their printers instead of the competition's, could we all agree that would be a kickback or bribe? And that it would be, if not illegal, certainly unethical?
So why don't the same rules apply to airline travel? When buying an airline flight for business, you are acting as a purchasing agent for your company. And the airlines, in the form of frequent flier miles, are offering you [not the company] something of value to steer your corporate purchasing decisions to their product. Frequent flier miles are a blatant kickback. Informal poll: How many of you have purchased flights that are a worse deal for your company but a better deal for your frequent flier account?
A further rant: OK, if you are not turned off by that rant, here is a related one about Visa cards that give out frequent flier miles. As mentioned earlier, these are hugely profitable for credit card companies, so much so that they create much of the value in modern airlines. Credit card companies, perhaps the only stable monopoly I have seen in my lifetime, have perfected the art of forcing retailers to subsidize their credit card users.
Now, a fairly rational person would expect that a cash transaction is cheaper than doing one on credit. However, due to the very strong position of MC and Visa processors, credit card customers actually get a lower price than cash customers. Here is why: Credit card companies have taken to giving their users a rebate on their purchases, either in cash or frequent flier miles or some other compensation. These rebates are funded by charging higher interchange fees to merchants (basically a percentage of credit card transactions cleared). The magic occurs because merchants, in their processing agreements, are generally banned from giving discounts to customers for using cash. As a result, the higher credit card interchange fees are spread among all customers, cash or credit card, equally. The result is that credit card customers pay lower net prices than cash customers, when the rebates are factored in.
Though our trade association tries to seek government action of some sort, I am neither confident that this will help or philosophically inclined to ask for such help. Right now, I am working within the association to try to build support for some sort of one day boycott against accepting credit cards as a starting point to trying to build up some group negotiating power vs. the credit card processors.