Citi Card Rights thru 2017

Discussion in 'American Airlines | AAdvantage' started by Aloha-Rick, Apr 29, 2013.  |  Print Topic

  1. Aloha-Rick

    Aloha-Rick Silver Member

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    Any thoughts on page 37 (44 of 489 in Disclosure statement):

    "Citibank has been granted an irrevocable, exclusive, sublicenseable, royalty free
    and fully paid-up license through December 31, 2017 to use, reproduce and
    otherwise exploit American’s proprietary customer information and customer lists
    relating to the AAdvantage Program in connection with Any and All Credit card
    Solicitations or the Operation or Administration of Any Credit card program in the U.S."
     
  2. jbcarioca
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    jbcarioca Gold Member

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    That is a normal provision in co-brand card programs. Most of them allow such use for some years following termination of a co-brand program, but some allow such use during a contract term. Those that do usually reflect either a very long term relationship (Citi with AAdvantage counts) or serious negotiating power, such as US Airways with Barclays. Note taht the agreement does NOT permit use of AA branding, only the information. Part of that concession comes because Citi made concessions to AA due to the increased valuation of the portfolio taht resulted from the ability to use Advantage data.

    In co-brand card portfolios, in particular airline ones, cardholder behaviour with reference to the program sponsor has very strong predictive value about portfolio quality, stability and volumes. In cases taht have had portfolio retention following contract cessation without access to sponsor data the portfolio value has been much reduced.

    there is little public data on such metrics but they are quite well known in the co-brand card issuing community.
     
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  3. Aloha-Rick

    Aloha-Rick Silver Member

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    Thank You for the Insights. Citi is the logical issuer going forward, but has the option to use AAdvantage data for any Citi card with no fees or costs paid to AA (favorable terms). We agree that Elite cards are very high value to issuers, so Citi has the advantage and may seek to shift some Top-of-Wallet cards.
     
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  4. jbcarioca
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    jbcarioca Gold Member

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    Actually, if you're referring to airline Elite loyalty program members the value correlation from an issuers perspective is not always so clear-cut. Issuer value is driven by several factors, and the highest Elites are not necessarily the most lucrative, although they are sometimes depending on the specific card products they use and other related factors. IME, beware of broad generalisations. They are not always true. Anything else I would say would very very specific and not appropriate for a general interest forum such as this one.
     
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  5. Aloha-Rick

    Aloha-Rick Silver Member

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    Good Points and Deeply Appreciated. My goal in this general interest forum was Citi's ability to offer non-AA cards, targeted using Citi data and AAdvantage data, to capture the best and most profitable spenders onto Citi cards.
     
  6. Aloha-Rick

    Aloha-Rick Silver Member

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    see Bloomberg article: US Airways Merger With AMR Spurs Talks on Branded Credit Cards, April 29, 2013


    “As we bring two strong currencies together, we’ll have one, stronger currency,” Andrew Nocella,
    US Airways senior vice president for marketing and planning, said today at a conference.
    “We are working with all our banks. Every single one wants to work with us.”


    US Airways’ loyalty credit card has been handled by Barclays since 2006, while
    American’s have been issued by Citigroup for 26 years.
    The cards, which carry the airlines’ names, are valued by passengers
    because purchases made with them earn credits that can be used to buy tickets.

    The new airline will have the second-largest card program in the world, behind only retailer Sears, Nocella said."
     
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  7. jbcarioca
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    jbcarioca Gold Member

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    Actually the AAdvantage cards are Citi property anyway and Citi owns the portfolio. The only significant point in the clause is Citi cross-marketing rights, which they won because Citi was in a stronger bargaining position than was AMR when the most recent contract was negotiated.
     
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  8. Aloha-Rick

    Aloha-Rick Silver Member

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    Cross-Marketing with No Costs or Fees is the key, plus card Terms and Strong Currency (Earn/Burn) per comments. The Best Terms and Strongest Currency will attract and retain with Top-of-Mind/Wallet for 95% of spending on 1 card.
     
  9. DestinationDavid
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    DestinationDavid Milepoint Guide

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  10. Aloha-Rick

    Aloha-Rick Silver Member

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    Chase created a proprietary platform with attractive terms, competing with United etc.
    AmEx Delta card spending qualifies for elite benefits, just spend more to get more.
    Citi can issue for AA, or attract the most profitable spenders with targeted offers.
     
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  11. jbcarioca
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    jbcarioca Gold Member

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    Citi has been doing that for decades. AAdvantage did, until 2012, count all AAdvantage miles, wherever earned, to Elite benefits. The highest level Citi card still had such benefits last year. They stopped that benefit because of what they regarded as excessively high cost.
    Chase may not really be competing with United etc. They both have shopping malls, both run by third parties. Chase would not have the UA co-brand were they regarded as a direct competitor. They do have a substantial corporate aircraft fleet, including a couple of G650's, at HPN, but those don't compete with UA.:)
     
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  12. HaveMilesWillTravel
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    HaveMilesWillTravel Gold Member

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    By elite benefit you mean that it counted towards lifetime status, right? They weren't elite qualifying miles, but many (not me) got enough miles from Citi to reach MM status.
     
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  13. jbcarioca
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    jbcarioca Gold Member

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    IIRC, until 2011 there were Elite Qualifying Miles without limit. There still are AAdvantage cards that offer EQM but they're now limited to 10,000EQM per year.
    https://creditcards.citi.com/credit-cards/citi-executive-aadvantage-world-mastercard/
     
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  14. Aloha-Rick

    Aloha-Rick Silver Member

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    Chase says proprietary for Freedom, Sapphire, and Ultimate Rewards (2009) for All Airlines, Hotels, Cars etc.

    Chase Merchant Services (new deal with Visa) has extraordinary terms for Rewards and Discounts on card use:
    http://www.paymentlawadvisor.com/20...s-cards-to-foster-its-partnership-with-chase/
    these entities are permitted by federal law to share the data for rewards purposes, see Regulation P, 12 C.F.R. 1016.14(b)(2)(iv).
    And by virtue of their issuing operations, these institutions could link rewards – customized to the card, merchant and cardholder – to the use of the cards they issue.
    For example, they could agree with Merchant A to offer one cardholder 5% off specific purchases at Merchant A on Card X,
    while agreeing with Merchant B to offer another cardholder 5% off specific purchases at Merchant B using Card Y –
    both Cards X and Y being Visa cards issued by the financial institution’s card-issuing bank.
     
  15. DestinationDavid
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    DestinationDavid Milepoint Guide

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    I very rarely disagree with you, but your recollection does not match mine. EQM was not handed out with previous AA credit cards, it was lifetime status/ Million Miler miles as HaveMilesWillTravel indicates.

    Perhaps there were EQM giving AA mileage credit cards in years past where I wasn't really active in the FFer world, but it hasn't been an option as long as I've been an EXP other than the newly introduced CC you linked to above.
     
  16. jbcarioca
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    jbcarioca Gold Member

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    When you do disagree with me it's for good reason. I remembered the EQM with the card I linked and my previous Citi AAdvantage card also had some EQM. I assumed that such was a broader benefit. Thanks for correcting me...keeps me humble.:)
     
  17. DestinationDavid
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    DestinationDavid Milepoint Guide

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    Always a pleasure to discuss anything with you. :)
     
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  18. gleff
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    gleff Co-founder

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    It's almost inconceivable that Citi will lose the AAdvantage deal with the merger. At the end of 2012 there was a balance of ~ $800 million in prepurchased miles that AA would have to refund to Citi if the relationship were to terminate (admittedly that balance should be down to ~ $600 million by the end of 2013). That means the ante, just to have AA break even with cash, would be for a competitor bank to front $600 million. And that just pays Citi bank, it doesn't put AA in a better position to get them to walk away from Citi. Some bank will need to come up with > $1 billion, and at a higher price per point than Citi will pay, in order to take away the franchise.
     
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  19. jbcarioca
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    jbcarioca Gold Member

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    Excellent points. Further, Doug Parker was in AMR during the formative years of the AMR/Citi relationship, including the invention of AAdvantage itself and Citi entrance to co-brands. He had a sweeter deal at Barclays for US, but they don't begin to have the operating scale to handle the new AMR program, even if they managed to overcome the deep mess at Barclays.
    The only possible argument in favor of Barclays, IMO, is that Tony Jenkins, the new Barclays chief, is an ex-Citi card guy.

    However this plays out publicly, not only are there your excellent points, gleff, but the Citi/AMR contract that was not repudiated in BK, that allows Citi free access to AAdvantage data for years following dissolution of their contract. There is almost no practical way to overcome all those points.

    This one is reminiscent of the endless speculation over LATAM leaving OW. The basics were always almost foregone, but there was always a chance, however remote. So we speculated. We'll probably do that in this case until AMR reaffirms Citi. I'm curious to see what Barclays will do with the DM portfolio, especially since the portfolio is heavily loaded with duplicate accounts due to their poor policy that encouraged opening multiple accounts.
     
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  20. Aloha-Rick

    Aloha-Rick Silver Member

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    Excellent Points by All. Citi will likely retain AAdvantage cards, but can offer competing cards if they desire at no cost.
     
  21. gleff
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    gleff Co-founder

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    One imagines that despite the fundamentals pointing in a clear direction, that AA continues to play coy (1) potentially because of provisions in the Barclays contract in the event of change of control of the carrier, don't want to say anything that potentially exposes them to liability, plus (2) as a bargaining strategy intended to extract some minor concessions from Citi before locking things in.

    A Barclays exec at the Randy Petersen Travel Executive Summit last week actually copped to having two of the same card..!!
     
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  22. jbcarioca
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    jbcarioca Gold Member

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    Interesting. As usual what you say sounds correct.
     
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  23. HaveMilesWillTravel
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    HaveMilesWillTravel Gold Member

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    Not that Citi historically was much smarter ... I had at one point three virtually identical AA cards, their differentiating mark being the VISA, MC and Amex logos. And they even marketed them to me. I had the VISA AA card, and they kept spamming me with adverts suggesting that I get for Amex version as a "companion" (why!?) for 5000 bonus points. I did get it alright, but for the full sign-bonus if memory serves right.
     
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  24. jbcarioca
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    jbcarioca Gold Member

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    Citi, though, at least sold multiple products rather than multiple accounts of the same product. Probably minimal difference to a customer but a big deal to them. They persist on thinking customers care.

    Sent from my iPhone using milepoint
     
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  25. LETTERBOY
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    LETTERBOY Gold Member

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    When you put it in those terms, it's hard to imagine a bank being willing to put up that kind of cash in this economy.

    I'm wondering what will happen here, too. What will Barclays replace the US card with? The US-based airlines are all spoken for, so do they try to poach someone, or do they want to go after a foreign airline without an American credit card like SAS or AF/KLM? Will people who hold US Airways cards go over to Citi with the new AA, or will they switch to another Barclays card? Of course, there will be FF types who have both cards and will replace one Barclays card with another, too.
     
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