Citi wants to remove Barclays from American Airlines cards: What cardholders could lose

Citi wants to remove Barclays from American Airlines cards: What cardholders could lose

from Gary Leff on 20 September 2024

American Airlines has two issuers of its US credit cards: Citibank and Barclays. Barclays can sell cards on board and in airports (but no closer than 100 feet to an American Airlines lounge), while Citibank owns the remaining channels for purchasing cards.

Most importantly, this allowed Barclays to retain its very lucrative base of customers and replenish its cardholder base as even long-time customers cancel their cards. Barclays had been awarded the contract to issue US Airways cards when America West acquired US Airways, and essentially financed that transaction. Eventually, they also purchased the inventory of 10,000 remaining US Airways card customers from Bank of America.

Barclays simply isn't big enough to effectively bid for the entire American AAdvantage card portfolio. Citibank had the chance to take over the whole business and also offer points transfers to AAdvantage as part of their ThankYou card product line. But they balked at the price. Ultimately, American got the biggest deal possible by keeping two card issuers in the fold.

Now CNBC is reporting that American is again negotiating exclusivity with Citi, although Barclays would be left out. It is not clear what such a deal would look like.

• Barclays could maintain a contract to continue offering existing benefits and mileage credits to its existing cardholders and simply stop issuing new AAdvantage cards.
• Citibank could buy up Barclays cardholders' old stocks.
• Or Barclays AAdvantage cardholders could lose their AAdvantage cards – either by switching to a Barclays-branded product or having access revoked entirely (the latter seems the least likely).

As customer I like the current arrangement.

1. Remember that you both Citibank and Barclays AAdvantage card products today. Flight attendants aboard American Airlines frequently remind passengers. That means more miles than with a single issuer.
2. There continues to be some competition for better products, not only compared to other co-brands and bank cards, but also within the AAdvantage offerings.
3. The Barclays Aviator Silver I own is unique in that one of the federal tax payment processors treats at least a subset of the cards as debit cards for fee purposes. I can pay provisional federal taxes and any amounts due for a flat rate of $2.50 instead of ~1.9%.

I hope my Aviator Silver survives this deal if Citi does indeed get the exclusivity (so hopefully just the exclusive right to issue new cards). And ultimately, I prefer two issuers. But the question for American will be which will bring you more sales This depends not only on how much Citibank is willing to pay this time, but also on the terms of the contract and which arrangement is likely to lead to more card spending and thus more miles purchased from the bank issuer.

When the recent co-branding deals were negotiated, American Airlines' card portfolio generated higher annual spend volume than Delta and United's. That's no longer the case – Delta's Amex deal has the largest spend volume and Chase's United deal outperformes American, which the airline admitted at its investor day. Both United (202) and Delta (2019) have increased their card deals more recently than American.

Two months ago, during a second-quarter earnings call, American described negotiations as “in the fifth inning” rather than near the finish line, but also noted that “Citi wants to be more deeply and deeply involved.”

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