Airlines offer deals for miles in credit card arms race

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Delta’s American Express SkyMiles Platinum card offers new members 80,000 points for charging $3,000 in the first three months and 20,000 points upon the one-year anniversary.
Delta’s American Express SkyMiles Platinum card offers new members 80,000 points for charging $3,000 in the first three months and 20,000 points upon the one-year anniversary.

Airlines and their bank partners are continuing to sweeten offers as they compete for new co-branded credit card customers. 

“It’s a very competitive space,” said Gary Leff of the website View From the Wing. “On the whole, I think we’ve seen elevated upfront offers, more than we have and bigger than we have in a long time.” 

Just last week, for example, Delta introduced an enhanced suite of SkyMiles American Express cards, including two with which users can earn 100,000 bonus points. Both the SkyMiles Platinum card, which has a $250 annual fee, and the SkyMiles Reserve card, which has a $550 annual fee, offer 80,000 points after spending a relatively modest $3,000 in the first three months plus 20,000 additional points upon the cardholder’s first anniversary. 

Those offers join the United Explorer Business Card and United Club Explorer Business Card Visa offers, which also feature 100,000 bonus miles. In the case of the former, the annual fee is just $99, though the spend to get the award must be $10,000 in three months. A late summer Explorer Business Card offer was the first 100,000-point offer by a U.S. airline in five years, according to Leff. 

Other airlines are also making generous offers. New holders of American’s AAdvantage Aviator Mastercard, issued by Barclays, get 60,000 points after making their first purchase and paying the $99 annual fee within three months. They also get a $99 companion certificate.

Southwest, meanwhile, is offering 75,000 bonus points on three versions of the Chase Rapid Rewards Visa card after new users spend $5,000 in the first six months. The cheapest of those cards costs just $69 per year, while the most expensive version still costs only $149 and includes a $75 annual travel credit and up to four upgraded boardings per year, among other perks. 

Many other cards at various airlines also have stepped-up perks, including offering lounge passes, free Global Entry, no foreign transaction fees and double or triple miles on certain categories of purchases, even for low-fee or sometimes zero-fee cards. Those accompany more standard offerings, such as first checked bag flies free, better boarding positions and one frequent-flyer point for every dollar charged on the cards.

Airlines and banks are offering these generous perks for a simple reason: The cards are exceptionally lucrative. For example, last April, when Delta and American Express extended their SkyMiles credit card partnership through 2029, Delta said it expected the exclusive agreement would boost partnership revenue to $7 billion by 2023, up from $3.4 billion in 2018. 

More broadly, American, United, Delta, Southwest, Hawaiian and Alaska reported a combined $18.6 billion in frequent-flyer revenue in 2018, according to the annual CarTrawler Ancillary Revenue Yearbook produced by the consulting firm IdeaWorksCompany. 

IdeaWorks president Jay Sorensen estimated that 90% of that revenue, or $16.7 billion, came from co-branded credit cards. 

IdeaWorks hasn’t completed its analysis for 2019, but Sorensen recently estimated that combined credit card revenue for those six airlines reached $18 billion. The carriers earn income from the co-branded cards by selling reward miles or points to the issuing bank. Those are the points that banks offer to customers as sign-up bonuses and for card purchases.

The slew of generous airline credit card offers appears to be serving their intended purpose. On an earnings call in January, American president Robert Isom said that the carrier ended 2019 with a record number of co-branded card members, record card spending and record flight redemptions. 

Similarly, Delta president Glen Hauenstein reported that the carrier set a record last year by signing up 1.1 million new co-branded card members. 

With airlines offering so many generous sign-up offers, choosing cards can be challenging for consumers. While the best card will vary by individual, depending upon his or her travel habits, Leff said he contemplates three categories when considering cards: the upfront bonus; perks such as free checked bags, lounge access and loyalty status qualifying points; and how many points the card offers per dollar spent.

For spending accruals and more flexible point redemption, he suggested travel cards that are not co-branded with airlines. 

For example, the American Express Gold Card is currently giving new members four points for every dollar spent on dining or at supermarkets and three points per dollar of flight purchases. Amex points can be redeemed with 19 airlines and three hotel companies.

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