US airlines' loyalty and profits are reshaped by credit-card cash

Since years, the fortunes and success of U.S. Airlines have been determined by fuel costs, fares, and how full their cabins are. A growing portion of their cash is now coming from co-branded cards. This trend can be seen in the way loyalty programs reward travellers.

United Airlines announced last month that regular members who do not have its card would earn 3'miles per dollar spent on eligible flight, while cardholders earn 6'miles. The airline said that regular members would need to have a United card in order to earn miles for basic economy tickets.

American Airlines no longer offers AAdvantage Miles and Loyalty points on basic economy flights. Delta Air Lines allows customers to use their co-branded American Express card to qualify for elite status.

The reason is evident from a review of the filings made by major U.S. Airlines between 2021 and 2025. Banks pay airlines billions in payments for loyalty points and other rewards tied to the programs. In some years, this money is equal to operating income. This money is not tied to ticket sales. It's a distinction that has a new relevance, as the Middle East conflict has pushed jet-fuel prices up and squeezed airline margins. It also makes airlines more vulnerable to changes in bank strategy, credit conditions, and political decisions.

CHEAPEST FARES, FEWER REWARDS

The airlines are changing the loyalty program rules to focus on credit card spending, which makes it harder to earn rewards for low-cost fares.

The value of frequent flyer membership has declined over the years, according to Jay Sorensen. He is the head consultant at IdeaWorks. Its 2025 U.S. Domestic Reward Report shows that reward "payback", which links cash fares with award prices, has fallen by half since 2019. This is because several airlines have reduced or eliminated mileage earning on their cheapest tickets.

David Robertson, of the Nilson Report, said that some consumers might abandon airline cards if they feel that redeeming miles is out of their reach. This could lead to pressure from banks who buy miles in bulk.

The airlines reject the notion that cards will replace flying as the primary way to earn rewards. Alaska Airlines' loyalty chief Kevin Scott stated that non-cardholders continue to "earn meaningful value by flying." He said that co-branded cards are meant to enhance the program and not replace traditional earning.

BILLIONS? FROM BANKS

Although the amounts are different across the industry, the totals are high.

Delta will receive $8.2 billion from American Express by 2025, which is roughly 14% of its adjusted operating revenue. This cash amount is 1.4 times the adjusted operating income. Delta's spokesperson confirmed that some of the cash received is immediately recognized as revenue, while other amounts are deferred until all miles have been redeemed. American reported receiving $6.2 billion from partners and co-brands in cash by 2025, which is roughly four times the adjusted operating income. The airline is expecting its new cobranded credit card agreement to Citi to help it narrow its profit gaps with rivals Delta & United.

Alaska's loyalty revenue accounted for about 16% total revenue. CFO Shane Tackett said that the co-branding partnership helped stabilize results during demand fluctuations.

The?business' also links airlines closer to their bank partners and credit cycle. Delta Airlines claims that nearly all its marketing agreement cash comes from American Express. Southwest Airlines, on the other hand, says that most of the points it sells are sold to JPMorgan Chase.

Brian Riley, payments analyst, says that banks tighten lending in times of recession and reduce co-branded marketing. This slows new account growth, and can affect airline earnings over the next two to three quarters.

POLITICAL PRESSURE

Merchants and legislators are also putting pressure on the credit-card loyalty model to change the fees that help fund rewards. A bipartisan bill known as the Durbin Marshall proposal in the U.S. Congress would require more competition for payment-network routing. Supporters say this would lower merchant costs.

Airlines for America, a trade group, warned that the bill could threaten airline credit-card benefits, citing a similar regulatory shift which affected debit-card incentives. They also said that consumers valued airline loyalty programs.

Merchants and consumer group disagree. Dylan Jeon, of the National Retail Federation, said that premium reward cards have the highest interchange rate, and that merchants pass those costs onto consumers.

Researchers say that high interchange fees in the U.S. help to fund generous rewards. Research shows that caps in Europe, Australia and other countries have reduced rewards and increased annual fees, leading some cards disappear. Separately President Donald Trump proposed a 10% cap on credit card interest rates for a year, which banks and airline groups said could harm rewards programs.

SCRUTINY REGULATORY

The regulatory scrutiny of airline rewards programs has also been a topic of discussion. The U.S. Department of Transportation spokeswoman said that the department had asked American, Delta Southwest, and United for information in 2024 about their reward programs and policies. The Department of Transportation is reviewing the responses from all four airlines.

John Breyault is vice president for public policy at National Consumers League. He said that a stronger disclosure was needed, as airlines could change the earning and redemption value without giving clear notice to customers.

Breyault stated that "the modern airline is just a huge rewards program which happens to fly planes." (Reporting and editing by Matthew Lewis in Chicago, with Rajesh Kumar Singh reporting from Chicago)

(source: Reuters)