An American Airlines Embraer E175LR (front), an American Airlines Boeing 737 (center) and an American Airlines Boeing 737 parked at LaGuardia Airport in Queens, New York City on May 24, 2024.
Charlie Triboreaux | AFP | Getty Images
American Airlines Under negotiation Citigroup Becoming an exclusive credit card partner and forcing rival issuers out Barclays The partnership has been in place since the airline acquired US Airways in 2013, according to people familiar with the negotiations.
American Airlines has been working for months to institute new long-term agreements with banks and card networks as it seeks to consolidate the business under a single issuer to boost revenue from its loyalty program, according to people familiar with the matter.
Talks are ongoing and the timing of a deal is unclear as it requires regulatory approval, the people said, asking not to be identified discussing the confidential process.
Co-branding deals between banks and airlines, retailers and hotel chains are some of the most hotly negotiated in the industry: issuing banks get monopoly on millions of loyal customers who spend billions of dollars a year, but the details of the deal can make a big difference in profits for both sides.
Big brands have negotiated harder in recent years, demanding a bigger share of revenue from interest rates, fees and other sources, while banks have resisted or retreated from the sector altogether, citing tight margins due to rising card losses, scrutiny from the Consumer Financial Protection Bureau and rising capital costs.
Airlines rely on card programs to stay afloat, earning billions of dollars a year from banks in exchange for miles that customers earn when they use their cards. Such partnerships have been crucial during the pandemic, when consumers continued to spend and earn miles on their cards even as travel demand dried up. Airlines say growth in card spending in recent years has far outpaced growth in passenger revenue.
American Airlines claims to have the largest loyalty program. delta So the company American Express Last year, card partnerships totaled $5.2 billion, with American Airlines partnering totaling $5.2 billion.
“We continue to work with all our partners, including our credit card partners, to explore opportunities to improve the products and services we offer to our joint customers and add more value to the AAdvantage program,” American Airlines said in a statement.
Delays, regulatory risks
There may still be opposition from U.S. regulators. include The Transportation Department could further delay or scrap the deal between American Airlines and Citigroup while leaving intact the current arrangement involving Barclays, according to one of the people familiar with the matter.
If the deal between American and Citigroup goes through, it will mark the end of one of the most unusual partnerships in the credit card industry.
Most brands have contracts with a single issuer, but when American Airlines merged with US Airways in 2013, Retained Citigroup, a longtime card issuer, joined the group, along with Barclays, which is a card partner for US Airways.
American Updated The relationship between the two banks was dissolved in 2016, giving each bank specific channels to sell its own cards: Citi was allowed to promote its card online, through direct mail and in airport lounges, while Barclays was limited to in-flight solicitations.
“Actively working”
When relationships come up in conversation Renewal Even last year, Citigroup had the advantage to beat out smaller Barclays.
Citigroup, led by Chief Executive Jane Fraser since 2021, runs the more profitable side of the AA business, and Citigroup clients tend to spend much more than Barclays' clients and have lower default rates, one of the people said.
The renewed deal is likely to be for seven to 10 years, giving Citigroup time to recoup transition fees for Barclays customers and other necessary investments, the people said.Banks tend to get most of their profits from such deals late in the agreement.
Mr. Fraser has been pushing Citigroup to set higher targets for making its cards more profitable through this and other big deals, according to people familiar with the matter.
“We are always proactively working with our partners, including American Airlines, to explore ways we can jointly enhance customer offerings and drive shared value and growth,” a Citigroup spokesperson told CNBC.
Meanwhile, Barclays executives told investors earlier this year that the bank was looking to diversify its portfolio of non-airline co-branded cards, including by strengthening partnerships with retailers and technology companies.
Barclays declined to comment for this article.
