Airlines Don't Make Money on Tickets. So How Do They Survive?

Hi everyone, welcome to Cold-Knowledge Blind Box.

A while ago, I flew to Singapore.

It was a flight of a few hours, and the ticket wasn't cheap. After landing, I looked at that ticket and suddenly wondered: how much money did Singapore Airlines actually make on this trip?

The answer is probably: none.

In the quarter ending June this year, the Singapore Airlines Group reported record revenue of S$5.7 billion. More people flew, more tickets were sold, and yet the group ended up with a net loss of S$76 million.

One reason was that fuel costs rose sharply within a single quarter. However many tickets you sell, if fuel, labor and airport charges all climb together, the profit can vanish in an instant.

This is what makes the airline business a bit awkward: the ticket is its most visible product, but it isn't necessarily its most reliable source of money.

So what do airlines actually live on?

I looked into it, and found that three things are really valuable.

The first is slots.

Here, a "slot" isn't a time on the clock. It's a permit: whether you have the right to land at a certain airport at a certain time, and then take off from there.

Busy airports have limited runways and gates, and the most valuable morning and evening times are a scramble for a limited number of spots. London Heathrow is the most typical example. Its capacity has been close to saturation for a long time. If a newcomer wants to add a flight in a prime time slot, it usually can't just buy another airplane. It has to get a slot first.

What's more, slots come with "grandfather rights." Put simply, as long as an airline keeps using a slot and meets the required usage rate, it usually keeps the slot for the next season. Those who arrived first not only got the spot, they can keep renewing it.

So a pair of prime-time slots can be astonishingly expensive.

In 2016, Oman Air reportedly paid US$75 million for a pair of takeoff and landing slots at Heathrow so it could add an early morning flight there. Earlier, American Airlines had bought a pair from SAS for as much as US$60 million.

What they bought wasn't a slab of concrete on the runway. It was the right to enter the most valuable airline window in the world.

Because the same airplane is worth completely different amounts depending on whether it flies in the morning or at midnight. Whether business travelers are willing to sit on it, whether connections can be made, whether the plane can fly one more round a day, all depend on the slot.

So the first truly scarce asset an airline has is not the aircraft. It's position. Airplanes can be bought, but prime slots are not always for sale.

But position alone isn't enough.

The second asset an airline has is its network.

Aviation has a peculiar pattern: the more destinations you have, the faster the number of possible itineraries grows.

Three airports can form up to six directional connections. Ten airports can form ninety. Every new city adds more than one route. It can connect with the other cities already in the network.

This is the value of a hub airport.

Airlines first bring passengers from various places to the same hub, then send them on to different destinations from there. Two routes that couldn't fill a plane on their own can be joined together through the hub and fill an entire aircraft.

By common sense, neither Singapore Airlines nor Emirates has an obvious advantage.

Singapore is a city-state with almost no domestic market. Since Singapore Airlines began operating independently in 1972, it has faced almost entirely international routes. Dubai's local population is also limited, and it has no domestic hinterland big enough to support a vast route network.

But they came up with the same solution: since local customers aren't enough, bring the travelers passing through the whole world to their own doorstep.

In the industry, this model is called the "sixth freedom of the air."

The name sounds complicated, but the principle is simple. Say you want to fly from London to Sydney. You don't have to take a direct flight by British Airways or Qantas. You can take Emirates to Dubai, then transfer there to Sydney.

Emirates effectively packages the "London to UAE" and "UAE to Australia" legs into one "London to Sydney" product.

At Changi Airport, Singapore Airlines does the same thing. It doesn't sell "where Singaporeans want to go." It sells "where people all over the world can go by way of Singapore."

About seven in ten Emirates passengers are only transferring in Dubai. Based on rough estimates from booking data, that could mean more than 30 million transfer passengers a year, the equivalent of about 100,000 people a day passing through Dubai.

It doesn't have a hinterland, but it borrows everyone else's hinterland and weaves it into its own network.

What's more interesting is that this network started out very small.

In 1985, Dubai decided to set up its own airline. The startup capital was only US$10 million, preparation took five months, and the first two airplanes it used were leased from Pakistan International Airlines.

On October 25 of that same year, Emirates' first flight took off from Dubai for Karachi.

Forty years later, its routes cover more than 150 cities, and its profit in the most recent fiscal year was about US$5.4 billion, a record high. It didn't join Star Alliance, oneworld or SkyTeam. Instead, it started from Dubai and wove a global network on its own.

Singapore Airlines took a different path.

It turned Changi Airport into a transfer factory. Singapore Airlines serves the premium market, Scoot serves the low-cost market, and through Star Alliance it brings passengers from other airlines into its own network.

Having no domestic market was a weakness. But because there was no way back, transfers became the main business.

Having reached this point, I thought the business logic of airlines was clear: secure scarce slots, then build a big enough network around a hub.

But there's a third thing, one that seems even less like the airline business than the first two.

That's miles.

We usually think of miles as a perk airlines give passengers: you fly, you earn points, and once you've collected enough, you can trade them for a ticket or an upgrade.

But the real big business of loyalty programs isn't giving points to passengers. It's selling points to banks.

Banks buy airline miles and package them as credit card rewards. Every time you swipe a co-branded card, the bank pays the airline some money, and the airline credits the corresponding miles to your account.

For airlines, this business has two advantages.

First, passengers may redeem their miles half a year or even several years later, but the bank's money has already arrived.

Second, some miles will never be used at all. Even when passengers do redeem them, the airline often provides only seats that might have gone empty on the flight anyway, so the actual cost isn't necessarily equal to the ticket price.

Take Delta's SkyMiles as an example. In 2019, it earned about US$6.1 billion in cash from selling miles. More than three-quarters of that came from third-party partners, and the biggest buyer was American Express, which contributed about US$4 billion that year.

United Airlines even once pledged its MileagePlus frequent flyer program as collateral and raised US$5 billion.

At that point, miles are no longer just points. They are a financial asset that can be sold, financed, and turned into cash ahead of time.

Singapore Airlines' KrisFlyer works the same way.

The program started in 1999. By March 2025, its membership had passed 10 million, and it had more than 1,700 partner brands where members could earn or spend miles on the ground. The most important category among them is banks and credit card issuers.

You might think you're just swiping a card to earn a free flight someday. In fact, every time you swipe, the bank may already have paid the airline some money on your behalf.

So the cheaper the ticket, the more the airline looks like a transport company. The stronger the loyalty program, the more it looks like a financial company.

Back to the original question: if tickets don't make money, how do airlines survive?

The answer can be condensed into three sentences.

Hold golden slots, so you have the right to appear in the most valuable places.

Build a network around a hub, so the travelers passing through the world become your passengers.

Sell miles to banks, so the cash comes back before the passenger ever boards the plane.

Of course, airlines can't do without ticket revenue. It's just that the ticket isn't the whole story. It's more like an admission pass: it brings the passenger into the network, gets them transferring, earning miles, using credit cards, and keeps the whole system running.

Later, I looked at that ticket to Singapore again.

What I paid for was, of course, a stretch of a journey. But what supports Singapore Airlines' long-term competitiveness isn't just how much money one flight made. It's whether it can hold its slots, expand its network, and tie together its 10 million members and more than 1,700 partner brands.

Singapore Airlines and Emirates have proven the same thing:

What's truly scarce in the aviation industry has never been just the seats on the airplane.

It's whether you can hold your position, weave a network, and turn a single flight into a business that happens over and over again.

It doesn't matter if few people live at your doorstep.

As long as enough people pass by.

Well, that's where this episode of Cold-Knowledge Blind Box ends. See you next time!

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