Loyalty glossary · 4. Airline-specific (30)
Revenue Based Earning
Revenue based earning is a loyalty accrual method that credits points or miles according to the fare paid rather than the distance flown, typically as a fixed number of points per dollar of ticket price.
The old distance based model credited points per flight segment, which meant a cheap ticket earned the same as an expensive one. Revenue based earning replaces that with a simple rule: the fare is the only input that matters. This is not a minor tweak. It changes who the programme rewards and by how much.
Airlines did not switch to revenue based earning to be fairer to big spenders. They switched because it cuts the points liability on cheap fares and ties earning to the cash the airline actually collects. The earn rate is set low enough that most members accrue fewer points per flight than under the old charts. Accrual now follows revenue, and the link to flying is severed.
Take two passengers on the same route. One buys a 400 dollar ticket and earns 5 points for every 1 dollar, producing 2000 points. Another buys a 200 dollar ticket at the same earn rate and gets 1000 points. Double the spend produces double the points, which is exactly the intended arithmetic. Under a distance based scheme, both would have earned the same points for the same flight.
The points themselves do not become more valuable because they were earned from revenue. Award availability is set by the airline's seat release decisions, not by how much a member paid to earn the points. A member who earned points from an expensive ticket still faces the same redemption chart as a member who earned points from a cheap one.
Under ASC 606, points are a separate performance obligation, and a portion of the ticket revenue is deferred until redemption or breakage. Revenue based earning changes the deferral calculation because the number of points issued now scales with the fare. Airlines hold a smaller liability per discount passenger and a larger liability per premium passenger, which smooths the breakage assumption.
The switch to revenue based earning is a rational airline decision, but it is a worse deal for the member who buys the cheapest ticket. The programme still calls itself a loyalty scheme, but it now rewards spending behaviour rather than flying behaviour. Members should not confuse the two.