American Airlines is reportedly in talks to make Citigroup its exclusive credit card partner, ending its partnership with Barclays. The negotiations are part of American’s efforts to consolidate its business with a single issuer and boost revenue from its loyalty program. Co-brand deals between banks and airlines are highly contested negotiations, with the details of the arrangements impacting profitability for both parties. In recent years, big brands have been demanding a larger share of revenue, while banks have been facing challenges such as rising card losses and higher capital costs. Airlines rely on card programs to generate revenue, especially during the pandemic when travel demand was low. American Airlines, despite having the largest loyalty program, was out-earned by Delta due to its American Express card partnership. However, objections from U.S. regulators could potentially delay or cancel a contract between American Airlines and Citigroup. If the deal goes through, it would end the unusual partnership between American Airlines, Citigroup, and Barclays. Citigroup has a more profitable side of the business, with customers who spend more and have lower default rates. The renewal contract is expected to be seven to ten years in length. Citigroup has been aiming to improve the profitability of its card business under CEO Jane Fraser. On the other hand, Barclays has expressed its intention to diversify its co-branded card portfolio away from airlines.
