AMERICAN Airlines Group is renegotiating its current contract for co-branded credit cards to boost its share of a crucial source of revenue for United States carriers.
The carrier is in talks with current card partners Citigroup and Barclays, American chief commercial officer Vasu Raja said on Monday (Mar 4) at an investor day in New York. The airline will seek “a bank that can create the largest branded credit card” and an agreement that would increase revenue from cards to 10 per cent from 2023 to 2026 from 7 per cent in 2019 to 2023, he said.
“We very much are targeting something where we would clearly grow our remuneration to a leadership position in the space,” Raja said.
US carriers earn billions of US dollars annually from agreements under which banks purchase miles that are then distributed to consumers using the cards. These revenue streams have become increasingly important to the industry’s business model. American earned cash payments from its co-branded credit card and other partners of US$5.2 billion last year, up from US$4.5 billion in 2022. That compares with Delta Air Lines’ US$7 billion in such payments from its agreement with American Express in 2023.
“We are always actively working with our partners, including American Airlines, to look for ways to jointly enhance customer products, and drive shared value and growth,” Citi said.
A representative for Barclays did not immediately respond to a request for comment.
American last renegotiated its card contract in 2016, when it extended an unusual arrangement of having dual credit card providers, a holdover from its 2013 merger with US Airways. American said at the time that it expected the dual arrangement to provider higher customer growth than a traditional accord with a single provider. Most airlines have one card provider.
The cards are tied to American’s AAdvantage loyalty programme, with holders able to earn miles with credit purchases – including enough to earn elevated status – and to also spend miles with some retailers. American announced changes in the programme on Monday under which consumers will earn more miles based on how they purchase travel and how much premium options they buy.
Under the changes, AAdvantage will pay more reward miles based on whether the purchase, by individuals or select travel agencies, is made directly with American, as well as the fare category and how it is purchased. BLOOMBERG
