According to a CNBC report, American Airlines is in advanced talks to name Citigroup as its sole credit card issuer, potentially ending its partnership with Barclays, a relationship that began after American’s merger with US Airways in 2013.
The airline has been negotiating with banks for months to streamline its loyalty program, aiming to consolidate credit card partnerships and increase revenue from its AAdvantage program, sources familiar with the matter told CNBC.
The goal of this initiative is to simplify operations and increase revenue generated through the loyalty program.
American Airlines, like many other airlines, relies heavily on revenue from its credit card partnerships to remain financially stable.
These programs allow banks to offer loyal customers miles for their purchases, which in turn generates billions of dollars for airlines.
During the pandemic, as air travel plummeted, credit card spending has been a lifeline for airlines. Even as travel demand has recovered, growth in card spending has outpaced passenger revenue in recent years.
This makes co-branded card deals essential to an airline’s financial strategy, and American is pushing for more profitable deals through exclusive partnerships.
American Airlines said in a statement:
We continue to work with all of our partners, including those who operate co-branded credit cards, to explore opportunities to improve the products and services we offer to our joint customers and to bring even more value to the AAdvantage program.
Airline credit card offerings are an extremely competitive industry, with banks vying for the opportunity to attract millions of frequent flyers who generate billions of dollars in spending each year.
In recent years, major brands like American Airlines have engaged in more heated negotiations, demanding a larger share of the revenue from these partnerships.
At the same time, banks have faced rising credit card losses, tighter controls from regulators and higher capital costs, which have squeezed profit margins.
Some banks have moved away from this sector, while others, like Citigroup, have positioned themselves for long-term agreements that can generate significant returns over time.
American Airlines and Citigroup Partnership: What Does It Mean for Barclays?
American Airlines’ partnership with Citigroup and Barclays was an anomaly in the credit card industry, where most companies prefer to work with a single issuer.
Since the 2013 merger, the airline has maintained relationships with both banks, renewing their agreements in 2016. Under that agreement, Citigroup was allowed to market its cards through online platforms and airport lounges, while Barclays was limited to in-flight promotions.
Now, Citigroup appears poised to secure a more lucrative exclusive deal. Chief Executive Jane Fraser has led Citigroup since 2021, and the bank owns a profitable portion of American Airlines’ credit card business.
According to a CNBC report, Citigroup customers tend to spend more and default less than Barclays customers.
If the deal goes through, Citigroup would likely sign a seven- to 10-year contract, allowing it to recoup the costs of acquiring Barclays customers and making the necessary investments.
Regulatory Challenges and Change at Barclays
However, this deal still requires regulatory approval, and there is a possibility that U.S. regulators, including the Department of Transportation, could delay or even block the deal.
If that were to happen, American would likely keep intact its dual partnership agreement with Citigroup and Barclays.
Barclays, for its part, has diversified its portfolio, abandoning co-branded airline cards.
Earlier this year, executives revealed that they are focusing on partnerships with retailers and technology companies rather than airlines.
Citigroup, on the other hand, is aggressively pursuing larger partnerships, aiming to increase the profitability of its card business.
“We are actively working with our partners, including American Airlines, to look for ways to jointly improve products for customers and drive shared value and growth,” a Citigroup spokesperson was quoted as saying by CNBC.
As negotiations continue, American Airlines is preparing for a significant shift in its credit card business that could reshape the competitive landscape for co-branded airline credit cards.
