American Airlines’ decision to make Citigroup its exclusive credit card partner might be seen as a setback for the partner it’s dropping, Barclays. However, despite Barclays’ ambitions to grow its U.S. presence, the departure from American makes sense for several reasons.
The partnership between American and Barclays traces back to the airline’s 2013 takeover of US Airways, which had been using Barclays to handle its credit card business. Since then, Barclays has consistently played a secondary role to Citi, which has been allied with American for decades.
For instance, when American renewed both partnerships in 2016, Citi was given the ability to market its cards through online channels, direct mail, and airport lounges. By contrast, Barclays’ marketing options were limited: its cards could only be promoted through in-flight soliciting and were forbidden from being advertised within 100 feet of an American Airlines airport lounge.
Barclays has been expanding in other ways. In October, it took over the General Motors card business from Goldman Sachs. Barclays CEO C.S. Venkatakrishnan has made U.S. credit card expansion a priority, with a focus on co-branded partnerships.
In 2022, Barclays replaced Synchrony as The Gap’s credit card partner, launching a suite of co-branded cards for the retailer and its affilaited brands, Banana Republic, Athleta, and Old Navy. This marked Barclays’ first standalone private-label credit card offering in the U.S. Additionally, Barclays has co-branding deals with JetBlue, Breeze Airways, and XBox.
“A Modest Hit”
American will not begin transitioning its Barclays cardholders to Citi until 2026. While the loss of American may be a mild setback, it’s unlikely to significantly impact Barclays’ overall strategy.
“Barclays will have its hands full integrating the GM card acquisition from Goldman Sachs,” said Brian Riley, Co-Head of Payments at Javelin Strategy & Research. “The loss of the American Airlines co-brand, which Citi has been the primary lender on for more than 40 years, is a modest hit. But if Barclays executes well on GM, there will be a minimal transaction impact.”
Airline credit cards are a cash cow for the industry and its partners. For the 12 months ending September 30, American reported earning $5.6 billion from its co-branded credit cards and other partnerships, with expectations for these payments to grow by 10% annually.
Similarly, Delta CEO Ed Bastian reported that the company generated $6.8 billion in 2023 from its co-branded card partnership with American Express. He noted that spending on Delta cards now accounts for 1% of total U.S. GDP, which would peg it at more than $200 billion annually.