American, US Airways merger could launch credit card battle
Combined frequent flier network would be world's largest
American Airlines and US Airways struck notes of love and harmony on Thursday,
their merger could set up a battle between two major banks over who can offer
credit cards to customers of the world's largest airline.
In announcing the
deal, the airlines affirmed that consumers should see no changes for
months: Customers can continue to book travel on the airlines, and frequent
fliers can continue to earn and spend miles as usual. The airlines would not be
integrated until after the deal closes, which is expected in the fall of 2013,
subject to approval by regulators, shareholders and American's bankruptcy
The merger between American, the fourth-largest U.S. carrier,
and US Airways, the fifth-largest, would create the world's largest airline,
with more than 100,000 employees, 1,500 planes and 6,700 daily flights to 336
destinations in 56 countries.
US Airways' frequent fliers would be moved from the Dividend
Miles program into American's AAdvantage scheme. A presentation to investors promised
the program would provide "improved opportunities to earn and redeem miles."
There are few details yet on what that means, but the combined program -- the
largest in the world -- would continue in the oneworld alliance (dropping US
Airways' participation in Star Alliance).
One open question, though, is what will become of the credit
cards affiliated with each of the airlines: Citi offers several variations of
American Airlines cards, while Barclays offers a menu of US Airways cards. Both
banks have exclusivity agreements with their respective airlines that expire in
2017, according to regulatory documents. At stake is the right to market lucrative
credit cards to tens of millions of desirable customers: American alone has
roughly 69 million members in its frequent-flier program, according to
"It is a delicious tidbit for a bank to grab," says Jay
Sorensen, president of IdeaWorks Co., a Wisconsin-based airline consulting firm.
"The ability to have a relationship with the world's largest airline is a
airline mergers, banks have tussled over the right to offer cards:
Delta Air Lines and Northwest Airlines merged in 2009, American Express (which
offered the Delta card) and US Bank (which offered the Northwest card) traded
barbs touting their superiority via billboards, full-page newspaper ads and
letters -- and offering enticements for customers to sign up. Ultimately, the
merged airline stayed with American Express in a five-year, $1 billion deal,
and US Bank offered its customers a replacement card not linked to any
particular airline. Northwest sued US Bank because the replacement card, called
FlexPerks, sounded like the old Northwest-affiliated
WorldPerks card, in a case eventually settled out of court.
US Airways and America West Airlines merged in 2005, Bank of America (which
offered the US Airways card) and Barclays (which offered America West's)
battled for the right to market a card to the merged airline's customers. The
new airline chose Barclays -- and was promptly sued by Bank of America. The
case was settled a few years later, but for a few years, both banks offered US
Airways cards, increasing options for consumers.
2010 merger between United Airlines and Continental Airlines was smoother,
since Chase offered both cards.
about the future of the cards, Barclaycard US spokesman Kevin Sullivan declined
to speculate, saying "it's business as usual" for the program. A Citi spokeswoman said there would be no immediate changes
for cardholders, and that the company "looks forward to the enhanced
possibilities the new American Airlines will bring."
also possible that both banks -- and maybe even others -- could offer cards if
the new airline doesn't want to promise exclusivity to any one bank. In
Australia, for example, 15 banks offer credit cards linked to the country's
leading airline, Qantas. In the
United States, the battle for airline customers is heating up, as bank cards
with travel rewards unaffiliated with any one airline are gaining traction,
Frequent fliers are already looking for ways to cash in on the merger. Some travel bloggers have been recommending that
consumers interested in travel rewards apply for US Airways and American cards,
on the theory that miles earned from sign-up bonuses will eventually be
combined -- as has been the case in previous mergers. The sign-up bonus for the
US Airways Premier World MasterCard is 30,000 miles after the first purchase,
plus 10,000 points if you transfer a balance within the first 90 days; for the Citi
Platinum Select AAdvantage Visa Signature card, it's 30,000 after spending $1,000
in the first three months.
holders of US Airways- or American-affiliated cards, one thing is certain:
you'll be receiving many more letters and offers in the months ahead, as the
battle for your credit-card allegiance heats up.
going to try to grab all the business they can before they lose that very
important, attention-grabbing brand name," Sorensen says. "The more cards they
are able to sign up, the more leverage they have in terms of negotiating."
See related: American Airlines clarifies elite boarding perk, Taxes, tuition can rack up rewards, for a fee, Which cards can you churn for multiple rewards bonuses?
Published: February 14, 2013
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