American Express Closes Gap with American Airlines

American Express Closes Gap with American Airlines

In a somewhat unexpected move, American Airlines has teamed up with American Express to launch a new co-branded credit card that, while not directly giving away AAdvantage miles, does seem to indicate that perhaps in our lifetimes AAdvantage will become an American Express Membership Rewards partner.

The new Business ExtrAA Corporate Card for American, issued by American Express, offers rewards that are held by the company, rather than the individual. Companies that acquire this card for use by their employees can earn cash rebates and many other benefits included in the Business ExtrAA program. Rewards in that program include upgrades on both domestic and international flights, Admiral’s Club memberships and, of course, free airline tickets.

The things that obviously set this card apart is the fact that the company maintains control of the rewards, and there is no revolving line of credit.

Both sides are being very quiet about implications that this could evolve into a more formal relationship. We believe that it will, especially as airlines seek the revenue that additional partners can bring. This strategy can backfire, however, as it did when airlines added numerous car rental companies as partners. The car rental companies, sensing an inability to move much market share among all partners, simply started to offer fewer bonus miles to members.

Since the mid-1980s, Citibank has owned the exclusive credit card relationship with American Airlines. The Citibank AAdvantage cards have become the most successful line of affinity credit cards, generating an estimated $80 billion in annual card spending (or enough miles for 3.2 million free awards annually). But, whether it be the uncertain times or changing strategies, more and more of the airlines are deserting the concept of a single co-brand credit card partner. Prior to the agreement between American Airlines and American Express, Air Canada was the most recent airline to add more credit card options. And, once again, it was American Express that nudged in on what had previously been an exclusive credit card relationship between CIBC and Aeroplan.

In light of these types of industry changes, we would not be surprised to see Delta SkyMiles offer up a Visa/MasterCard in the future. But we don’t advise holding your breath waiting for United Mileage Plus to bring in another credit card partner. In that situation we think it will remain exclusive, given the financial support that BankOne has come forward with to help United through its bankruptcy.

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