Airlines See Increasing Income From Card Loyalty Programs

Airlines are reportedly seeing a greater share of revenue from co-branded credit cards.

That’s according to a report Friday (March 13) from Reuters, which says this trend is becoming apparent in the way loyalty programs reward travelers.

The report cited examples of changing rewards policies at high-profile airlines such as Delta and United, the latter of which recently said it would let cardholders earn more miles on eligible flights than nonmembers.

American Airlines, Reuters added, has ceased giving AAdvantage miles and Loyalty Points on basic economy tickets, while Delta lets travelers use spending on its co-branded American Express cards to help earn elite status.

The report said an examination of filings by the airlines over the last four years shows why this trend is happening. Banks pay billions each year to the airlines for miles and other payments connected to loyalty programs. In some years, these payments rival the carriers’ operating income, Reuters added.

This has left airlines reworking their loyalty-program rules to focus on credit card spending, making rewards tougher to earn on the lowest fares, the report said.

The report noted that the credit card-driven loyalty model is facing pressure from merchants and lawmakers. A bill before Congress known as the Durbin-Marshall proposal would require more competition in payment-network routing, which supporters say would lower merchant costs.

But trade group Airlines for America warned the bill could jeopardize airline credit card rewards, citing the impact that a similar regulatory change had on debit cards. The group also argued that consumers value airline loyalty programs.

In related news, PYMNTS wrote last week about the way banks are using AI to make card rewards feel more personal.

“I think the real AI revolution in credit cards isn’t necessarily happening at checkout,” Jeanniey Walden, chief marketing and executive adviser at Rakuten Rewards, said in an interview with PYMNTS. “It’s happening in the offers feed.”

Rewards programs traditionally relied on broad categories, like travel, groceries or dining. Those structures were simple, but designed for a hypothetical “average” cardholder whose spending patterns rarely matched reality, Walden said.

AI is starting to change that by analyzing large volumes of transaction and behaviorial data to determine what merchants, discounts or promotions are most relevant to individual cardholders.

“For years, merchant-funded offers have tried to match what merchants want to promote with what consumers actually want to buy,” Walden said. “AI is starting to close that gap.”