Southwest lags behind some of its competitors in credit card revenue. But it is working on fixing that.
Southwest Airlines is the most consistently profitable U.S. airline, but it significantly lags behind its major competitors on credit card revenue. It wants to close the gap, and it’s moving aggressively to win new customers.
This has become apparent in the past couple of months, as the airline offered an usually lucrative promotion for new customers who signed up for its co-branded credit card with JP Morgan Chase. Customers approved for it by Feb. 11 could receive a companion pass — it entitles the passenger to bring a guest on board for free — for the remainder of the year.
It could be a costly promotion for Southwest, depending on how many customers apply and how often they use the pass. But long-term, Southwest may earn major revenue from these new cardholders.
Card relationships are highly profitable for big airlines. In the first half of last year, Stifel analyst Joseph DiNardi estimated American Airlines generated about about $1.15 billion from its relationships with two banks, which pay American for each point they give customers. In the same period, Southwest earned about half that amount from its relationship with Chase.
There are some reasons Southwest can’t match American. The best programs are aspirational, and American can dangle free business-class flights to Europe, Asia, or Hawaii in front of customers who dream of a once-in-a-lifetime vacation.
Southwest doesn’t have premium cabins, or a global network, but it has one product many passengers covet: the companion pass. It makes sense the airline is using it to try to win new credit card customers.
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Skift Senior Aviation Business Editor Brian Sumers [[email protected]] curates the Skift Airline Innovation Report. Skift emails the newsletter every Wednesday. Have a story idea? Or a juicy news tip? Want to share a memo? Send him an email or tweet him.
Photo credit: A traveler looks out over Southwest planes at Fort Lauderdale-Hollywood International Airport last year. Southwest is trying to broaden its credit card base. Hannah Sampson / Skift