Credit Card Roulette

Well, that was fast. American Airlines has announced an early renewal (and expansion) of its credit card affiliate program, keeping Citibank on as a provider but adding Barclaycard to the mix. While multiple co-branding partners is unusual, it makes sense for the new American Airlines, given that Barclays had been the previous issuing bank for US Airways and now issues the Aviator card, the successor piece of plastic.

Details

Not many details so far, although we do know that the new program will go into effect in January, 2017. We also know that the marketing channels will be broken up to some extent, with Citi offering the card digitally, through direct mail and lounges, while Barclays will be selling the card onboard and in the airports beginning in 2017. And congratulations to MasterCard, which now has an exclusive relationship on new cards.

There’s something to be said for having multiple banks as your credit card affiliate partner. Not only will it increase the revenue to the airlines but it will make you that much more attractive to your customers, as each bank is likely to offer exclusive bonuses. And yes, it may make it that much easier to pick up two AA cards for the extra points when you sign up.

Financials

Big winner: Shareholders, who haven’t had much to celebrate recently. American is estimating that the deal will add pre-tax income of $200 million in the second half of 2016 alone (There were likely some concessions from Citi in the back half of this year.), growing to as much as $800 million in 2018. That’s an enormous number for the airline. It earned over $6 bn last year, but that number was inflated off a combination of strong sales in the first half of the year and declining fuel prices. If we look back to 2013 and 2014, we’re looking at pre-tax numbers of $1.3 bn and $4.2 bn, respectively.

The Bottom Line

More details of the cards will no doubt be issued closer to the end of the year, but AA clearly did well here. Both Delta and United renewed their credit card agreements over the past few years, and each got significant increases in what it received per mile. That appears to be the case with American, who not only boosted its bottom line but also brought a second bank into the family, which will no doubt benefit them in their next round of negotiations, even if it makes Thanksgiving dinner a little awkward.

---

Cover Photo Credit: Creative Commons