Key Points
- American Airlines is in talks to make Citigroup its exclusive credit card partner, potentially ending its partnership with Barclays.
- Co-branded credit card partnerships are essential for airlines, generating billions in revenue annually.
- American’s AAdvantage program earned $5.2 billion last year, trailing behind Delta’s earnings from its American Express partnership.
- Citigroup, led by CEO Jane Fraser, is expected to secure the deal due to its more profitable customer base.
American Airlines is negotiating with Citigroup to become its exclusive credit card partner, potentially ending its long-standing partnership with Barclays. According to insiders, the discussions, which have been ongoing for months, are part of American’s strategy to consolidate its business with a single issuer to maximize revenue from its AAdvantage loyalty program.
While the timing of a final agreement remains uncertain, and regulatory approval would be required, the move could significantly reshape the airline’s credit card operations. Co-brand deals between airlines and banks are fiercely competitive, with both parties vying for larger revenue shares from fees and interest rates. In recent years, airlines have sought more favorable terms, while banks have become more selective, citing concerns over rising card losses and regulatory scrutiny.
Credit card partnerships are a crucial airline revenue stream, generating billions annually. These programs were essential during the pandemic when travel demand plummeted, but consumers continued using credit cards to earn miles. American, which claims to have the largest loyalty program, earned $5.2 billion from its card partnership last year. However, it trailed behind Delta, which earned $7 billion through its relationship with American Express.
The potential agreement between American and Citigroup would end an unusual dual partnership that emerged after American’s 2013 merger with US Airways. After the merger, American maintained relationships with Citigroup and Barclays, with each bank having exclusive marketing channels. Citigroup was allowed to promote its cards through online channels, direct mail, and airport lounges, while Barclays was limited to in-flight solicitations.
Citigroup, led by CEO Jane Fraser since 2021, is poised to secure the deal due to its stronger customer base. This base tends to spend more and have lower default rates than Barclays customers. A new contract would likely span seven to ten years, giving Citigroup time to recoup the costs of transitioning Barclays customers and making necessary investments.
Barclays, meanwhile, has been shifting focus away from airlines. It aims to diversify its co-branded credit card portfolio by partnering with retailers and tech companies. Earlier this year, Barclays executives told investors they were working to reduce their reliance on airline partnerships.
The deal’s outcome depends on ongoing regulatory reviews, and the current arrangement with Barclays could continue if any objections arise.
