First Free Story (1 of 3)Join Skift Pro
American Airlines should finally at least match its two main competitors in credit card revenue, announcing Tuesday it has reached deals with Citibank and Barclays that likely will produce more than $1.5 billion in pre-tax revenue during the next two and a half years.
Credit card deals remain highly lucrative for airlines, and American was the only one of the big three U.S. global network carriers that had not finalized a massive new one after its merger, putting the airline at a slight fiscal disadvantage. Before the merger, Barclays handled US Airways cards, while Citibank issued American cards. Both banks kept relationships with American after the airlines combined.
For the long term, airlines typically only choose one bank, and many expected American to pick Barclays or Citibank. But American said in an SEC filing that two likely would spur “higher growth and [more] innovative solutions,” than a single issuer. Barclays will have exclusive rights to market its cards in airports and planes, while Citibank will have rights to aa.com – mobile, direct mail, and Admirals Club lounges.
All American-related cards will be branded as Mastercards. The banks will begin issuing cards under the new deal starting in January 2017.
American told investors the new agreements will be worth an additional $200 million in revenue in the second half of this year, $550 million in 2017 and $800 million in 2018. In subsequent years, the deals should produce “continued modest improvement,” compared to American’s current credit card arrangements, the airline said.
In American’s most recent annual report, the airline outlined several “revenue elements,” included in its agreements with credit card issuers. In addition to having the right to award AAdvantage miles to customers, credit card issuers also win the ability to use the American brand, which gives them access to loyalty program member lists. They can also offer checked baggage waivers, and free Admirals Club memberships.
United reached a new credit card deal with Chase Bank last September, saying the agreement would generate $200 million in extra revenue in 2015 alone. Meanwhile, in December 2014, Delta announced a new agreement with American Express that the airline said would double the benefits the airline received over a five-year period.