American Airlines to Renew Credit-Card Deals -- Update
July 12 2016 - 4:59PM
Dow Jones News
By Robin Sidel and Susan Carey
American Airlines Group Inc. said it is renewing credit-card
relationships with Citigroup Inc. and Barclaycard US, taking the
unusual step of sticking with two card issuers following a big
merger.
The deal calls for Citi, which has been American's partner for
three decades, to offer its co-branded airline cards to new
customers through mobile channels like American's website, direct
mail and airport lounges. Citi also recently became the co-brand
partner for Costco Wholesale Corp., which ended a 16-year
relationship with American Express Co.
As part of the deal, Citi will give up the ability at the end of
the year to offer its cards to new American Airlines customers in
airports and on American flights. That right will shift to
Barclaycard, a unit of British bank Barclays, which was the
co-brand card issuer for US Airways Group Inc.
US Airways merged with American in 2013.
"Given the price for exclusivity and the channels that were most
important to us, we felt this was the right decision for Citi,"
said Ralph Andretta, head of U.S. branded cards, at Citi, in an
interview.
The move underscores the intense competition among financial
institutions to win such "co-brand" card arrangements, which are
often highly profitable and aimed at creditworthy high-spending
consumers.
American also said Tuesday that it is renewing its longtime
arrangement with card-processing network MasterCard Inc.
In a securities filing Tuesday, American estimated that the new
card deals would add $1.55 billion to its pretax income over the
next 2 1/2 years, compared with what would have been the case under
the prior credit-card arrangements.
Companies that go through big mergers typically choose one
credit-card partner. That was the case in 2008 when Delta Air Lines
Inc. acquired Northwest Airlines Corp. and retained its longtime
partner American Express Co. over U.S. Bancorp, which had issued
Northwest's cards.
The American credit-card deal, which has been months in the
making, is designed to promote "higher growth" than in traditional
single-issuer relationships, said Fort Worth, Texas-based American,
the largest U.S. carrier by traffic. Neither of the previous
arrangements was about to expire, but the airline moved ahead with
negotiating the new deals anyway.
"These long-term relationships.... provide our customers with
the best ways to enhance their travel experience," said Andrew
Nocella, chief marketing officer for American Airlines, whose
loyalty program, called AAdvantage, has about 100 million
members.
The deal is especially meaningful to Barclaycard, which had kept
its US Airways customers after the merger, but had been prevented
from soliciting new ones. Both Citi and Barclaycard are expected to
retain the portfolios of the new cards that they each
originate.
Barclaycard last year also wrested the JetBlue Airways Corp
co-brand card program from AmEx.
The American deal "gives us access to great customers who are
traveling and thinking about their next vacation and their next
destination," Matt Massaua, managing director of Barclaycard's
airline partnerships, said in an interview.
Write to Robin Sidel at robin.sidel@wsj.com and Susan Carey at
susan.carey@wsj.com
(END) Dow Jones Newswires
July 12, 2016 16:44 ET (20:44 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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