Juniper Paying $480M to Snag US Air Business from B of A

By Kuykendall, Lavonne | American Banker, August 10, 2005 | Go to article overview

Juniper Paying $480M to Snag US Air Business from B of A


Kuykendall, Lavonne, American Banker


Juniper Financial Corp. has lured away Bank of America Corp.'s only national airline cobranded credit card partner -- US Airways Group -- by agreeing to pay almost $500 million.

After it merges with America West Airlines Inc., US Airways also plans to move its merchant card processing business from B of A to JPMorgan Chase & Co. US Airways disclosed the plans in a securities filing Monday.

Both US Airways and America West have cobrand credit card deals with Bank of America. In January, America West signed a deal to move its cards business to Juniper, a Wilmington, Del., unit of Barclays PLC. Once the merger closes, US Airways will do the same. That could increase Juniper's accounts by millions.

B of A will continue issuing cards for both airlines until its contracts with them expire. The US Airways contract runs until the end of 2007, and the contract with America West, of Tempe, Ariz., expires at the end of this year.

Juniper's payments to US Airways, of Arlington, Va., will include a $130 million one-time bonus on the closing of the merger, which is expected to take place in October. It will also prepurchase $325 million worth of miles from the merged airline.

In addition, Juniper will pay an annual bonus of $5 million to the new US Airways Group, "subject to certain exceptions" each year once Juniper becomes the exclusive issuer of the card. Neither Juniper nor US Airways would discuss the deal. One source said Bank of America was rumored to have offered less than Juniper -- $300 million to $400 million -- to keep the business. A spokeswoman for B of A said it does not talk about its business discussions.

Analysts called the deal a bigger win for Juniper than it was a loss for the $1.25 trillion-asset Bank of America.

"It is not a positive for Bank of America, obviously," said Jeffery Harte of Sandler O'Neill & Partners LP. "But Bank of America's less dependent on cobranding relationships" than other large issuers that have these types of deals, such as JPMorgan Chase and Citigroup Inc. "Bank of America markets cards through retail branches rather than relying on cobrands."

He also said that Bank of America might prefer its own non-airline-specific airline miles cards, which allow cardholders to accumulate miles that can be redeemed for flights on any one of a number of airlines. …

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