Frequent Flyer

How should an airline account for the "invisible" revenue generated by its frequent-flyer plan?
Trevor Harris, Ira Weiss, Amir Ziv  | Summer 2010
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American Airlines' pioneering marketing program, AAdvantage, introduced millions of travelers to the concept of the frequent-flyer plan. A year after its inception in 1981 more than one million had joined, and thirty years later the program was still cited by American as one of its competitive strengths. However, the airline faces the challenge of assigning a value to each ticket redeemed through the program, as well as properly accounting for the liabilities incurred. In this case students create a model for recognizing the frequent-flyer miles after considering at least three different revenue recognition procedures.

Case ID: 080106

This case is used in core curriculum

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