FWAERJ From United States of America, joined Jun 2006, 3172 posts, RR: 1 Posted (2 months 4 days 6 hours ago) and read 1804 times:
One major decision that AA/US will have to make is what co-branded credit card partner to choose. Right now, AA uses Citi, while US uses Barclaycard USA.
Let's take a look at how past airline mergers have affected airline co-branded credit cards:
-PMUS Dividend Miles used Bank of America, PMHP FlightFund used Barclaycard (then Juniper Bank) - Barclaycard won the US Dividend Miles contract, as HP management was leading the show
-PMDL SkyMlles used American Express, PMNW WorldPerks used US Bank - American Express won and strengthened the new DL SkyMiles card contract, adding features like the free checked bag
-sUA Mileage Plus used Chase, as did sCO OnePass - UA stuck with Chase for MileagePlus and combined the sUA and sCO portfolios with new products like the Explorer and Club Visa Signature cards
-PMWN Rapid Rewards used Chase, and PMFL A+ Rewards used Barclaycard - Chase also won this one, and is now issuing both WN Rapid Rewards and FL A+ Rewards cards until WN/FL integration is done
There is a lot of history behind the AA/Citi relationship, as the Citi AAdvantage card (initially in Citi Visa and MasterCard form, with a Citi AAdvantage American Express added in 2005) was the first co-branded airline mile credit card over 25 years ago. As we all know, AA pitched the idea to American Express first, but AmEx declined, so AA went to Citi and the rest is history. And the AAdvantage contract is worth a lot to Citi: it is their largest co-branded card contract, and unlike most US carrier card contracts, even extends many places outside the US. But I could also see Barclaycard USA making a big pitch for the account - they are in growth mode, their parent Barclays wants their name bigger in the US (for proof, look at the new Barclays Center in Brooklyn), and they lost the FL partnership to Chase and probably wants to grow their business with the AA/US merger.
As you can tell, the chances that both Citi and Barclaycard can split the AA contract are slim to none unless Barclaycard gets the US AA business and Citi gets to keep the non-US AA cards. But at the same time, I think that the AAdvantage cards are far too lucrative and profitable for Citi to lose. Still, with Doug Parker in charge at the new AA, I could see it going either way depending on who offers more cash (remember the time when American Express offered to buy $2 billion in DL SkyMiles, which was game over for US Bank's bid).
777STL From United States of America, joined Dec 2004, 3033 posts, RR: 3 Reply 1, posted (2 months 4 days 6 hours ago) and read 1724 times:
This is probably a discussion for Flyertalk, but since AAdvantage is going to obviously be the surviving rewards program, that certainly gives Citi a leg up on Barclays. I went ahead and got the US card assuming that the plans will be merged and my Dividend miles will then become Advantage miles at some point.
LDVAviation From United States of America, joined Dec 2008, 751 posts, RR: 5 Reply 2, posted (2 months 4 days 5 hours ago) and read 1712 times:
Quoting FWAERJ (Thread starter): As you can tell, the chances that both Citi and Barclaycard can split the AA contract are slim to none unless Barclaycard gets the US AA business and Citi gets to keep the non-US AA cards. But at the same time, I think that the AAdvantage cards are far too lucrative and profitable for Citi to lose. Still, with Doug Parker in charge at the new AA, I could see it going either way depending on who offers more cash (remember the time when American Express offered to buy $2 billion in DL SkyMiles, which was game over for US Bank's bid).
Thoughts?
Since there is no hint that AA will ask Citi for DIP or exit financing, AA is in a better position than Delta was when it had to negotiate with Amex. So, whatever the outcome of any behind the scenes maneuvering between Citi and Barclay, one of them (bidding against the other) is bound to end up paying a premium for the miles it buys under a new contract. More dollars, fewer miles.
That wasn't the outcome of the Delta - American Express deal. That's how SkyMiles became SkyPesos.
FURUREFA From United States of America, joined Feb 2004, 762 posts, RR: 2 Reply 4, posted (2 months 4 days 4 hours ago) and read 1573 times:
US has a pretty deep relationship with Barclays; in fact, Barclays Investment Bank is US's "house bank", and was the airline's chief advisor in the run up to the merger, helping to arrange crucial financing.
Not that is a guarantee, but it does illustrate a strong relationship.
FWAERJ From United States of America, joined Jun 2006, 3172 posts, RR: 1 Reply 5, posted (2 months 4 days 4 hours ago) and read 1566 times:
Quoting FURUREFA (Reply 4):
US has a pretty deep relationship with Barclays; in fact, Barclays Investment Bank is US's "house bank", and was the airline's chief advisor in the run up to the merger, helping to arrange crucial financing.
Not that is a guarantee, but it does illustrate a strong relationship.
If that is the case, I'd say that Citi's chances of keeping the merged airline's credit cards is slimmer than I thought. 27 years of the Citi/AA partnership may turn out to be nothing when most of the management comes from the US side.
panam330 From United States of America, joined Mar 2004, 2601 posts, RR: 10 Reply 6, posted (2 months 3 days 8 hours ago) and read 1058 times:
Quoting FWAERJ (Thread starter): -PMUS Dividend Miles used Bank of America, PMHP FlightFund used Barclaycard (then Juniper Bank) - Barclaycard won the US Dividend Miles contract, as HP management was leading the show
I'm pretty sure that pre-merger, HP used BofA. I remember seeing the HP debit card available for quite some time, alongside the US and AS ones.
I wouldn't expect a shift away from Citi - though stranger things have happened. And as noted above, money talks.
vhtje From United Kingdom, joined Jan 2009, 306 posts, RR: 0 Reply 7, posted (2 months 3 days 7 hours ago) and read 992 times:
I do not want to sound parochial, but I would have thought it would be, at worst, odd, and at best, an anomaly, for an airline so boldly branded "American" to opt a card from a British-owned bank in preference to a card from an American-owned bank.
A bit like British Airways serving hot dogs for afternoon tea.
Josh32121 From United States of America, joined Apr 2008, 325 posts, RR: 1 Reply 8, posted (2 months 3 days 7 hours ago) and read 964 times:
Quoting panam330 (Reply 6): I'm pretty sure that pre-merger, HP used BofA. I remember seeing the HP debit card available for quite some time, alongside the US and AS ones.
I wouldn't expect a shift away from Citi - though stranger things have happened. And as noted above, money talks.
The debit card and credit card affinity relationships aren't necessarily with the same institution. DL's SkyMiles debit card is issued by SunTrust. US' debit card was issued by BofA until last year when the entire program was discontinued (but well after the US-HP merger).
Interestingly, I discovered the other day that AmEx has a American Express® / Business ExtrAA® Corporate Card product, so there's clearly a relationship there despite AmEx having passed on the consumer affinity card arrangement with AA a generation ago.
And of course, outside the U.S., many airlines have relationships with various issuers. DL's Latin American SkyMiles cards are issued by Citi. Canadian ones issued by CapitalOne. Etc. Etc.
I wager that AA's U.S. consumer and small business cards stay with Citi.
phxa340 From United States of America, joined Mar 2012, 624 posts, RR: 1 Reply 10, posted (2 months 3 days 6 hours ago) and read 902 times:
Citi has a retail branch network that covers the US ... Barclays does not which will bode well for Citi. In fact, about 30% of new cards are issued at a branch so unless Barclays figures out a way to offer their card in a brick and mortar branch I see this staying with Citi.
cha747 From United States of America, joined Dec 2003, 763 posts, RR: 7 Reply 11, posted (2 months 3 days 6 hours ago) and read 888 times:
Having just spoken to a friend who is in the industry and has ties to one bank (I can't say which), both sides (Citi and Barclays) are going to have to bid it out and whoever presents the best package will win. Plain and simple.
That being said, the bankers at Barclays (and Juniper before that) and Mr. Parker do have a business relationship that goes back a ways so it is really anybody's guess. I know that this contradicts what I wrote above but bids have been known to sway one way or another if you can catch my drift.
You land a million planes safely, then you have one little mid-air and you never hear the end of it - Pushing Tin
Josh32121 From United States of America, joined Apr 2008, 325 posts, RR: 1 Reply 12, posted (2 months 3 days 5 hours ago) and read 819 times:
Quoting phxa340 (Reply 10): Citi has a retail branch network that covers the US ... Barclays does not which will bode well for Citi. In fact, about 30% of new cards are issued at a branch so unless Barclays figures out a way to offer their card in a brick and mortar branch I see this staying with Citi.
What are you talking about? In 15 years and dealings with probably a dozen different issuers, I've only ever been issued a credit card in person by my credit union. All others have been through the mail. In fact, credit cards are one financial service where bricks-and-mortar presence has very little relevance. MBNA was one of the largest issuers in the country before it was acquired by BofA, and it had virtually no branches anywhere. Same with Discover in its heyday. Where did you hear that 30% figure?
30% of credit cards are issued through brick and mortar locations per Chase and Bank of America , sorry but your personal story about a credit union has no relevance. Since Frank-Dodd retail banks have had to cross sell credit cards to compensate for lost debit card fee income , thus the increase. And your facts are completely wrong. Chase and Citi have long been the largest issuers of credit cards in the US - because of their retail presence. After MBNA and BofA combined they were still a distant third. Thanks but yes I do know what I'm talking about
EaglePower83 From United States of America, joined Oct 2011, 135 posts, RR: 0 Reply 14, posted (2 months 3 days 3 hours ago) and read 722 times:
Quoting vhtje (Reply 7): I do not want to sound parochial, but I would have thought it would be, at worst, odd, and at best, an anomaly, for an airline so boldly branded "American" to opt a card from a British-owned bank in preference to a card from an American-owned bank.
Hahaha!
Honestly.........I can't think of anything "more" American.
We're such sell-outs for the highest bidder.
Josh32121 From United States of America, joined Apr 2008, 325 posts, RR: 1 Reply 15, posted (2 months 3 days 3 hours ago) and read 689 times:
Quoting phxa340 (Reply 13): 30% of credit cards are issued through brick and mortar locations per Chase and Bank of America , sorry but your personal story about a credit union has no relevance. Since Frank-Dodd retail banks have had to cross sell credit cards to compensate for lost debit card fee income , thus the increase. And your facts are completely wrong. Chase and Citi have long been the largest issuers of credit cards in the US - because of their retail presence. After MBNA and BofA combined they were still a distant third. Thanks but yes I do know what I'm talking about
You still didn't quote a source to back up anything you've said. As a "distant third," yes MBNA was indeed "one of the largest issuers in the country before it was acquired by BofA" like I said. Chase wouldn't be nearly as big had it not acquired BankOne's portfolio, which was only as large as it was because of its acquisition of First USA, another massive non-bricks-and-mortar card issuer.
Barclays (the current issuer of US' card) hasn't had any bricks-and-mortar retail banking presence in the U.S. since the 1990's. It's all investment banking and a recent foray into online-only retail banking.
And how about the largest card issuer in dollar volume of transactions processed called American Express? Where are all their branches?
And issuing 30% of credit cards in branches is considerably different than saying 30% of depository accountholders have credit cards issued by the same institution, which is perhaps what you're trying to say (?).
This has nothing to do with AA/US card programs other than that branch presence clearly doesn't have much (if anything) to do with a successful relationship between airline and card issuer. AA will go with whichever issuer will give them the biggest bang for their buck with respect to co-branding opportunities and ultimately making the AAdvantage program more profitable.
Ok source police, I am not sure why you are so passionate about this but the point is that a credit card that can be offered in a retail branch and online is always going to be better than just online. It simply has a wider audience as many customers who come into a branch never go online or look at junk mailers. Thus I believe Citi has an advantage. I would keep going around circles with you but March Madness comes on soon so adios
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In 15 years and dealings with probably a dozen different issuers, I've only ever been issued a credit card in person by my credit union. All others have been through the mail. In fact, credit cards are one financial service where bricks-and-mortar presence has very little relevance. MBNA was one of the largest issuers in the country before it was acquired by BofA, and it had virtually no branches anywhere. Same with Discover in its heyday. Where did you hear that 30% figure?
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