klm617 wrote:I am curious who eats the cost for all those free first bag fees that are lost to Delta when one carries the AMEX Credit card.

Sancho99504 wrote:With annual fees and interest, I think AMEX might come out ahead on those free first bags.

The financial paths are pretty fascinating, and we can see how it roughly plays out with a very simple example with estimated numbers:

- AMEX pays Delta $1,000 for 100,000 SkyMiles (I'm making that up as the actual rate is highly confidential)

- Jim the traveler signs up for a Delta Reserve Card, and gets those 100,000 SkyMiles as a welcome bonus so long as he meets the spending threshold. Jim pays AMEX the annual fee of $450

- Let's say Jim also has to finance some of his balance on that Reserve Card, so that's an additional $550 in interest to AMEX per year (Again I'm making these numbers up)

- Jim might now have some added loyalty to Delta given he has lounge access and 100,000 SkyMiles in his pocket, so let's say the result there is that he spends an additional $1000/yr on Delta where he otherwise would not have. Excluding bag fees and lounge fees let's cut that in half to $500/yr to Delta, which is a highly conservative estimate

- Here's a kicker, I believe that AMEX pays Delta something to the tune of $20 every time Jim uses the lounge with his membership via AMEX, so let's say that's $200/yr from AMEX to Delta

- Let's say Jim redeems those 100,000 Delta miles where he otherwise would have paid for a ticket, so a one-time Delta 'loss' of $500

So let's recap where we stand:

**AMEX**: -$1,000 up front to Delta and an additional -$200 to Delta per year for lounge, but now they get $1,000/yr from Jim in fees and interest

**Delta**: +1,000 from AMEX one-time, and a one-time loss from Jim's mileage redemption of -$500. +$1,000/yr from Jim's loyalty, but -$500/yr from Jim in lost bag fees and lounge fees and +$200/yr from AMEX in lounge fees

So for a $1,000 investment, AMEX gets $800/yr

Delta gets $500 up front and $700/yr under a very, very conservative estimateBoth Delta and AMEX win in a big way. It's beautiful really.