Airlines No Longer Content with Single Cobrand Partner
Lee, W. A., American Banker
New alignments in airline partnerships with credit card issuers have challenged the notion that airline cobrands were a fixed universe.
Despite the travel slump, major and regional airlines alike remain a catch for the card industry. And in what could be a trend, airlines' demands for corporate cards and other segmented products have resulted in deals with more than one issuer.
Monday's announcement by American Express Co. that it will issue a corporate card for American Airlines Inc., which is already Citigroup Inc.'s partner, is the latest example. On May 15, General Motors Corp. said that it had signed J.P. Morgan Chase & Co. to issue a business card because its longstanding partner, Household International Inc., could not provide one fast enough. (That was before Household became a unit of HSBC Holdings PLC.)
Last week Amex found a new consumer and corporate charge card partner in Air Canada, whose exclusive contract with Canadian Imperial Bank of Commerce was opened up by a court overseeing the airline's bankruptcy protection. Amex's major airline partner in the United States is Delta Air Lines Inc.
"Looking at cobrand relationships globally within American Express, you have individual markets and segments that are very different" from one another, said Anre Williams, a senior vice president at American Express in charge of corporate services for middle-market clients, the group handling the new American Airlines card.
Issuers keen to tap certain hard-to-reach segments often look to cobrand partnerships, Mr. Williams said in an interview Tuesday. Amex's corporate services operation, including its travel group, makes it particularly attractive for reaching the business segment, he said.
Even though two banks issue cards for the same airline, the segmented approach avoids any branding or marketing difficulties, Mr. Williams said. Citibank and Amex are not in conflict over American because the customer segments are different, he said.
Amex's American Airlines card, the American Express Business ExtrAA Corporate Card, targets midsize companies with annual revenue of around $25 million to $50 million. Citi, meanwhile, markets its AAdvantage cards to consumers and small businesses. (Incidentally, Amex and Citi both issue cards for Hilton Hospitality Inc.; two years ago the hotel company, a longtime Amex partner, bought a hotel chain that had a deal with Citi and has kept both contracts.)
Hugh Bleemer, an executive vice president at Chicago's Bank One Corp. in charge of cobranded card portfolios, acknowledged that airlines have been asking for more products. "It's something we need to respond to," he said in an interview Wednesday. "If an airline partner thinks there is a product in terms of customer segment they want to have, it's on us to deliver it," he said.
Bank One, which issues consumer and business cards for United Air Lines Inc., expects to add business cards for its other consumer card partners, British Airways PLC and Southwest Airlines Co. …