It obviously causes them harm. The points are often redeemed at a discount to their regular tickets... which are often loss leaders for their points business.
Most airlines lose money on every ticket, and make it up in their rewards programs. Only to lose money again on redemption. They really only make money on some of the inefficiencies..
Easy to follow source:
https://www.youtube.com/watch?v=ggUduBmvQ_4