One of the things that almost every airline has in common is a frequent flyer program.

Frequent flyer programs were initially designed for loyal customers who flew frequently.

However, they eventually branched out to people who use certain credit cards and earn miles by making everyday purchases.

These programs have become so popular that many airlines now make a considerable amount of their money from them,

and in many cases, they're the difference that makes airlines profitable.

Learn more about frequent flyer programs, how they started, and how they work,

on this episode of the airline industry. The origins of frequent flyer programs were not always a part of the airline industry.

The origins of frequent flyer programs date back to the late 1970s and the deregulation of

the aviation industry. Before the late 1970s, the United States airline industry operated

under a highly regulated system that was essentially designed during the New Deal. The Civil Aeronautics

board, or CAB, created in 1938, set almost every major operational parameter. It approved or

denied routes, controlled which carriers could serve which cities, and had the power to set

passenger fares. Airlines competed mainly on service quality, food, and

comfort because prices and routes were largely fixed. This created a stable but inflexible

market with relatively high fares and limited options for customers, especially on less-traveled

routes. Economists such as Alfred Khan argued that regulation-stifled competition kept fares artificially

high and prevented market forces from rewarding efficiency.

The economic turbulence of the 1970s, including inflation and oil price shocks, put pressure

on the government to make industries more efficient and consumer-friendly.

Airlines like Southwest, which initially only operated within the state of Texas and

thus avoided federal regulation, demonstrated that lower-cost, high-frequency service

could be viable without CAB micromanagement.

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