To become the exclusive issuer of the airline’s co-branded credit cards, American Airlines is in advanced negotiations with Citigroup, which might mean the end of the airline’s long-standing relationship with Barclays. American Airlines aims to increase the profitability of its AAdvantage loyalty program and streamline its credit card operations, which is why it made this calculated strategic move.
American has had both Citigroup and Barclays since its merger with US Airways in 2013 but, according to sources close to the talks, is now keen to have all of its credit card program under one issuer.
Citigroup should be well-placed to win this premium deal owing to the gigantic spending customer base which makes the partnership more profitable for American Airlines than that involving Barclays. Sources said that Citigroup’s cardholders have low default rates, and the bank aggressively markets American Airlines credit cards through online channels, direct mail, and airport lounges. For its part, promotion of Barclays’ cards has largely been kept to in-flight marketing.
Such an agreement would be part of a larger industry trend, as airlines increasingly find credence in tapping co-branded credit cards to drive crucial revenue. Credit card spend has been the lifeline of an airline financially during lull periods for travel, such as in the COVID-19 pandemic period. In 2022, Delta Air Lines received nearly $7 billion of its profit from the program with American Express, while American earned approximately $5.2 billion from the partnership with Citigroup and Barclays.
This move would also align with the strategy of Citigroup’s Chief Executive Jane Fraser in growing the bank’s credit card business by leveraging more value through its partnerships. Citigroup has been very aggressive recently in seeking larger deals, and the American Airlines partnership would further bolster its position in the airline co-branded card market, which is a valuable and lucrative one.
However, Barclays has been stepping out of airline partnerships and is moving into retailers and tech companies. The primary reason for this move will probably be rising card loss, additional regulatory pressures, and narrower profit margins in the competitive co-branded card industry.
The agreement would establish Citigroup as the exclusive credit card partner of American Airlines for the next seven to ten years, while it may even assume a portion of Barclays’ cardholders. Regulatory approvals are still pending, but industry observers caution that U.S. agencies such as the Department of Transportation could delay or modify the final agreement in store.
