It has been a rough few weeks for Barclays co-branded credit card division with a second departure from the portfolio. How will the bank change its approach?
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Hawaiian Leaves Barclays Due To Alaska Airlines’ Acquisition
Alaska Airlines announced intention to buy Hawaiian Airlines about a year ago and has since closed that deal with minimal adjustments by the DOJ following its review period. Alaska Airlines maintains a relationship with Bank of America while Hawaiian had partnered with Barclays for its co-brand credit card. In just July of 2024, Barclays announced it had renewed the contract with Hawaiian while the deal with Alaska was under review by regulators.
Still, the obvious choice was to continue the larger relationship with Bank of America and offer all of Alaska’s business to one bank rather than split the two. Gary Leff of View From The Wing noted in an interview with an Alaska Airlines VP, Brett Catlin, that the two cards will be offered until the loyalty programs merge likely in mid-2025.
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“There will be two separate card issuers, Barclays (Hawaiian) and Bank of America (Alaska) until they move to a single loyalty program – which they “intend to happen pretty quickly” since that will let them market more broadly and with less complexity.
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Legacy Hawaiian Airlines cardmembers – the “back book” – will transfer over to the Alaska card. However there is “no immediacy for that to transition” and is something that will “happen over a period of time.” – VFTW
While the Hawaiian credit card business might not have been a substantial portion of the bank’s portfolio, it was a reasonably large airline with long haul flights and one that could have put Barclays in a position to grow had it made a play for the Alaska business. It’s unknown whether Barclays made a compelling offer to sway Alaska to consider a broader a relationship either split (as it had with Citi for American Airlines business) or to win the entire book of business. It’s probable that Alaska Airlines would have felt more comfortable limiting changes given the other myriad moving pieces in the deal.
American Airlines Makes Citi Sole Credit Card Issuer
This week, just seven weeks after the interview mentioned above, American Airlines announced it will sunset its Barclays credit card offers next year. Barclays was the issuer for US Airways prior to its merger with American Airlines almost 11 years ago on December 9th, 2013. Barclays was unlikely to hold the relationship for so long, but as incoming management was predominately US Airways, that left an opportunity for Barclays to remain in the game. That’s now changed:
“American Airlines has completed a long-awaited credit card deal with Citigroup, dropping its other partner, Barclays.
The airline said Thursday that it expects payments it receives from its co-branded credit card and other partners to grow 10% a year. In the 12 months through Sept. 30, American brought in $5.6 billion from these deals.
American said it would start transitioning its Barclays cardholders to Citi in 2026 but didn’t provide details.
Citi will take over credit card sign-up promotions such as those on flights and at airports, American said.” – CNBC
The AAdvantage Aviator Red World Elite Mastercard filled a unique market position for American Airlines with its 60,000 bonus miles available from the very first purchase rather than a spending target. It also offered an annual $99 companion fare, and a $25 rebate on wifi purchases unique to other common benefits on Citi.
This loss, which was only for a share of the American Airlines $5.6bn credit card profile (2023), is likely to be a larger loss. This was a major US flag carrier, by some measures, the largest airline in the world, and at an entry point that welcomed the widest number of customers.
Shift In Strategy?
Both the loss of Hawaiian and American might have been obvious and slow moving train wrecks visible from far away. But was Barclays helpless in both cases or did it opt to shift its strategy. The bank could have gone aggressively after either to keep the status quo or pitch for the whole business. Visa went aggressively after Costco and it seems to have worked out for Visa, customers, and Costco:
“Visa charges the lowest processing fee of most well known credit cards, such as MasterCard, Discover and American Express. The credit card company knows a good deal when it sees one, too. For the exclusivity of Costco only taking its credit cards, Visa is giving Costco a significant discount on its processing fees to less than 0.4% — an unbelievably low rate.” – Yahoo! Finance
However, Barclays did not make either airline an offer it couldn’t refuse. The issuer continues to offer low adoption co-brand cards for Emirates, Lufthansa, Frontier, and Breeze Airlines with its JetBlue partnership now the shining city on the hill. Does this reflect a shift in strategy?
Capital One entered the conversation with its Venture card, an easy-to-use travel rewards currency years ago but over the last few years have been more aggressive, adding transfer partners, premium cards, business offerings, and building its own airport lounges. Chase led the group of challengers to American Express’ Platinum card dominance and was the first to build its own airport lounge network, the Centurion Lounge.
Could this be the opportunity for Barclays foray into the premium card space? Will Barclays add its own airport lounge network or will it look for other opportunities? Putting the lounges to one side, Citi Thank You Rewards, Chase Sapphire, Capital One Venture, American Express Membership Rewards, all have base consumer and premium versions of their offerings. Barclays may want to join that space rather than cede premium customers to rivals. It now has the marketing budget available between the two lost products to create something homegrown and already has some airline partners for transfers in its current co-brand cards.
ANA and Japan Airlines both have incredibly weak credit card sign up bonuses and low engagement offered by First National Bank of Omaha – and as much as I would love to cheer for my former hometown team – the business is probably ripe for a coup. ANA is well known by US travelers, yet its offer is just 5,000 points, JAL only marginally better at 10,000.
Thinking of other carriers that serve the US market, Lifemiles joined Cardless earlier this year as did Qatar; Singapore Airlines doesn’t have a co-brand product in the US (at least as far as I could find), but few foreign options will fill the void.
Conclusion
I have to imagine that if Barclays put together offers that either airline couldn’t walk away from, they wouldn’t have. But there’s only so many marketing dollars to go around, and if the future for Barclays is to put together its own card, these might be the right time to do it. I can also appreciate that the bank doesn’t want to play second fiddle to peers and if it were to stay with American or in a similar capacity to the new Alaska Airlines it would have been exactly that. It’s also possible that the deals weren’t lucrative enough for the bank and it will focus on a pocket of deals where terms are favorable and the products are profitable. Regardless, the next 12 months should be interesting at Barclays whether it announces a new product, a new co-brand partner, or nothing at all.
What do you think? Will Barclays find a new co-brand partner or invest in a more premium product?
Foolish people use credit cards as a merry-go-round of spending and debt .
Ditto debit cards .
No debt. CC save $5000 yr in travel through their points system. All spending personal and business with CC now. Now 2-5%+ in spending goes to off set travel costs. Its an opportunity out there. Just pay off all monthly.
@alert, is that you Dave Ramsey?
@Sancti … Jack Benny :
“Your money or your life.”
“I’m thinking … I’m thinking.”
Bank of America does not operate in Hawaii. A slap in the face to Hawaii customers of HA.
Where does Barclays operate in the mainland other than investment banking and credit cards?
So solo Barclays card holders need to sign up for Citi cards and get the bonus miles before being switched over for nothing.
FYI, Barclay’s has a pretty good Jetblue Plus credit card that, promo expired, gave me 80000 points with only $1000 spending in 3 months, free baggage, and $99 fee.
For quite some time now, Barclays seems to have very limited appetite to be aggressive in the affinity credit card space. So I would have been surprised if they would have even dared to run very aggressively against Citi, Chase or even Capital One under the circumstances.
Barclays already tried this with the Arrival Plus World MasterCard and the Arrival MasterCard. I’ve had the card for many years but they discontinued offering it to the public, but still service it and leave it as it was.
I’m not sure Barclays is interested in the US market much these days. Perhaps there’s money to be made going after the underdog affinity cards?
P.S. It will be pretty interesting to see what Walmart does since dumping Capital One.
My Hawaiian Barclays card has been my absolute go to for international travel. When other cards including Amex aren’t accepted or Visa debit doesn’t work, the world Mastercard always works, always. From Nepal to Colombia, the Philippines, New Zealand, Laos, everywhere. I wonder if the BOA will be is reliable.