Originally Posted by oldmate
Could someone in the know please explain the money path for frequent flyer.
Well as best I can, but I'm not really that much "in the know".
Originally Posted by oldmate
I assume the partners pay cash for points to give their customers,
Yes. In the case of Qantas about 1c per point.
Which doesn't seem much but when you consider it is usually 1 point per dollar spent this means QF effectively gets 1% of relevant turnover of that business. A nice diversified revenue stream.
Originally Posted by Oldmate
and then the frequent flyer business pays the airline business for redemption seats.
Yes. Bear in mind that the airline set the thing up so they determine how this works.
Originally Posted by Oldmate
Can a frequent flyer business run with no association to a particular airline?
In theory yes, as long as they have an avenue for collection of points from somewhere and airlines willing to sell them seats. i.e. Negotiate a wholesale purchase price for seats and the airline will sell to you, how you choose to sell to your customers is your issue.
Bearing in mind most of these FF schemes were set up by the airlines themselves this is not the norm but it would certainly be possible. When Air Canada/Aeroplan undertook this route these issues needed to be determined. Presumably the auditors and legal types would need to satisfy themselves they can offer relevant services to redeem points in order not to fall foul of laws such as "bait advertising".
Alternatively by running a non airline program and keeping the points tally there but then simply purchasing tickets as customers seek to redeem points all the criteria are met.
Originally Posted by Oldmate
Does the ff pay commercial rates for redemption tickets?
One presumes that airline backed systems do whatever is most tax advantageous to them. It is after all an internal transfer.
Spinoffs would have to have their costs defined so one presumes they negotiate a wholesale agreement before they part.
External programs negotiate the best wholesale deal they can and go from there.