What is the best frequent flyer program out there?

What is the effectiveness of a frequent flyer program to an airline and a credit card company?

• Are there any report on increase in flying, purchase or other activities after the introduction of a frequent flyer program? How long does this effect usually last?

• Answer:

  There's a few trillion miles unredeemed out there so that kind of explains how profitable/effective frequent flyer programs are to airlines: they lure you into the promise of huge benefits when you sign up to their program, you fly with them to rack some miles up but the truth is that only less than 10% of travelers ever redeem those miles (airlines only bear the cost when you redeem those miles for flights so the downside of offering miles is more than covered). If you add to that the billions of $US that credit card companies spend buying miles from the airlines (these companies buy those miles for $0.02 from airlines and offer them to you at a 1 mile per $US spent ratio) you start to realize what a great business this is. 10% of all travelers make 50% of the airline's profits. These travelers are the 'frequent flyers, certainly the most loyal customers airlines have. Everyone knows loyalty towards airlines has been decreasing over the past years. I don't think there's data on this but I am pretty sure without these programs these 10% customers would be scattered across even more carriers and a lot more airlines would have gone out of business.