(Bloomberg) -- American Airlines Group Inc. chose to make Citigroup Inc. the exclusive issuer of all of its credit cards, pushing out Barclays Plc from a three-way deal the companies long had in place.
New York-based Citigroup will purchase Barclays’ portion of the cards and begin transitioning customers to its platform in 2026, according to a statement Thursday. Holders of the Barclays cards will continue to receive the same benefits they currently have, the companies said.
Airlines are among the most sought-after partners in the world of credit cards because of the way consumers flock to the products to earn miles and points that can translate into free flights or travel credits. The cards have become crucial for airlines, many of which now make billions of dollars every year selling miles to big banks.
“We’re now excited to take this relationship to greater heights through an expanded customer base and a series of new loyalty and reward offerings,” Citigroup Chief Executive Officer Jane Fraser said in the statement.
For American, the new deal along with an announcement that it’s raised its profit expectations for the final months of the year, helped push shares up as much as 15%, the biggest increase in intraday trading since early 2021.
American was unusual for relying on two credit-card partners, and analysts have long said that the arrangement held it back from achieving the results that rivals Delta Air Lines Inc. or United Airlines Holdings Inc. have been able to achieve with their programs.
For instance, last year American recorded $5.2 billion in cash payments from co-branded credit-card and other partners. While that was up from $4.5 billion in 2022, it was a far cry from the $6.9 billion that Delta commanded from its tie-up with American Express Co.
Delta believes it’s on track to achieve $10 billion in remuneration annually in the long term. With its latest deal, American Airlines said it now expects the cash remuneration it receives from its credit-card program to grow 10% a year.
Barclays Hit
American’s decision deals a blow to Barclays, which has been seeking to expand its credit-card business in the US. The British bank last year won a deal to provide Breeze Aviation Group’s credit cards and it wrested away Gap Inc.’s portfolio from Synchrony Financial in 2022.
“We will continue to provide cardmembers with the high level of service they’ve come to expect until we transition the program to the new issuer in 2026,” Barclays said in a statement.
American Airlines has been looking to shake up its credit-card offerings as it navigated a rocky time with some customers. Earlier this year, it abandoned a push for companies and individual customers to purchase directly from the carrier through its app and website instead of going through a corporate travel manager or online travel agency.
The airline’s sales department was cut back as part of the switch, angering some companies and travel-management firms. Chief Executive Officer Robert Isom has said the failed shift and loss of corporate business would reduce revenue by about $1.5 billion this year.
That mishap could impact American Airlines’ ability to get better economics in its new deal with Citigroup, Daniel McKenzie, an analyst at Seaport Research Partners, said in a note to clients.
“Improved credit-card economics were a missing source of revenue that management didn’t discuss,” McKenzie said. “It’s admittedly tough to negotiate when you’re losing $1.5 billion of corporate revenue — and thus corporate travel spend on credit cards — to competitors. Improved economics this morning are unclear, but we’re now comfortable that lost revenue returns slowly, which, in turn, represents upside to our forecast.”
--With assistance from Mary Schlangenstein.
(Updates with company comments, additional details beginning in fourth paragraph.)
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