United’s Answer To Failing Credit Cards Is Coupons, Fees

United Airlines raised their credit card fees, added some coupons, and removed a benefit. This is their fix for a credit card relationship that lags all competitors?

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United Airlines Adjusts Its Credit Card Offering

United Airlines has adjusted its credit card offering for all of its co-brand Chase credit cards. Here’s a guide to each of those changes:

United Gateway Card

United Explorer Card

United Quest Card

Matthew outlined the biggest change which was that it’s now possible to charge your way to Premier 1K status by racking up $420,000 in charges. The largest benefit of reaching the top with any of the three network flag carriers is in their upgrades from coach to business class for the best flight experiences. Assuming that it’s equally difficult to clear long haul systemwide upgrades on Delta, American, and United, equivalent spending is just $250,000 on American and Delta.

United Credit Cards Shift To Coupon Earning

American Express, regrettably, paved the way for making credit card fee increases the norm and offsetting them with asterisked benefits. Chase and United are following the script with an attempt to increase revenue and sign-ups through headline value but caveat substance.

For example, a JSX credit of $150 could be truly worth every penny but only for those that are already flying JSX from it’s fewer than 20 airports. I have never flown JSX despite working in Texas for a couple of years, how could I possibly consider that value above zero?

Credits for the travel bank (something I use) require renting Avis rental cars (I do not.) Value = zero. United Club passes were something I liked to give away to friends and family that might get stuck in O’Hare, for example, but when I fly United for long haul trips, I am usually in Polaris so taking this benefit away removes all value of the passes for me.

For the lower tier cards, especially like the Gateway card, requiring $10k in annual spend to receive any benefits at all is a true stretch for those who are targeted for the card.

Some of the benefits have a more dynamic value structure. For example, when I am in cities like New York for a weekend, I am inclined to use ridesharing, but when I am at home and have my car, I really have no use for a $5-8 credit. Does this actually return some value to cardholder like me, sure, but it’s nowhere near the full amount and every month I don’t use it, it feels like I threw money away.

Peer Credit Cards Return More Revenue

Delta Air Lines is on a path to $10bn in annual revenue from its American Express co-brand relationship though it’s about $6.8bn in full year 2023, last year’s numbers are not yet in. American Airlines is on its way too with its new co-brand deal with Citi valued at considerably less, but still a few billion dollars annually with 10% annual increases. United, now the world’s largest airline by fleet and offering more trans-Atlantic traffic than Delta earns less than half what Delta earns.

“[In 2023], Delta Air Lines received $6.8 billion in revenue from American Express on its co-branded Delta Amex card. American Airlines reported revenue of $5.2 billion from co-branded cards and other partnerships. United reported a mere $3.2 billion on its other operating line that came primarily on payments to its frequent flyer program.” – CNN

When considering that United should stand shoulder-to-shoulder with its flag carrier peers, it doesn’t. The cards haven’t been compelling, they haven’t driven revenue or incremental growth and loyalty programs are so important to the bottom line of major carriers. In terms of overall revenue, in 2024 the carriers earned:

•Delta Air Lines: $61.6 billion 

• United Airlines Holdings: $57.1 billion 

• American Airlines Group: $54.2 billion 

For that, Delta’s credit card revenue was 11% of its overall revenue, American was at 10.3%, but United lagged far behind at half with just 5.6% of total revenue stemming from its card partnership.

It’s not even close, United under performs for its size and market position.

Will Extreme Couponing Grow Credit Card Revenue For United?

Though I despise the coupon model, it does work. I maintain my American Express Platinum cards in part because those benefits are significant and represent real value to me. However, my business American Express Platinum pays for itself much quicker and easier than the the consumer version I had before I started my business. That card will be cancelled this year without a doubt and so too will my United Explorer card.

The real question is how many will be asleep at the wheel and not notice the annual fee changes and the lost benefits. How many will look behind the headline of $60/year in rideshare credits and realize what’s required to achieve them? I don’t think this is a lasting plan simply because the benefits are too caveated to glean true value.

A valid counterpoint would be that United’s current model is failing exceptionally when compared to the rest of the market so any change should be more beneficial. Delta, from a credit card standpoint, is clearly the leader and they have a similar coupon style approach, but when they cut benefits and increased status requirements last year customers came out with pitchforks and Delta had to walk those changes back.

However, Delta has more of a fortress hub model in many of their focus cities. It competes somewhat with Southwest in Atlanta but Delta owns 70% of traffic into the busiest airport in the world compared with less than 10% of Southwest. In Salt Lake City, and Detroit Delta owns most of the traffic and all of the premium traffic. United splits Chicago with American and Southwest, Houston with Southwest, Newark they own but as a share of New York metro traffic it’s at 28.9%. It owns San Francisco but LAX is split by everyone. United is the largest carrier at Denver with 47% seems strong but Southwest holds 31% and another 10% with Frontier.

Even though the thought: something new has to be better than what wasn’t working before, I believe that this will be a case of a limited short term upside and then a plateau if not drop off. Even if United is able to grow its credit card revenue by 10%, Delta and United are growing by that already with larger numbers. That means United continues to fall behind.

Conclusion

The United Explorer credit card, which is likely to be the broadest segment for its annual fee position, increases its annual fee by 57.8% but adds caveats and qualifiers to its principal benefits and removes others replacing them with conditional, limited value perks. The Gateway card adds an annual spend requirement that some won’t be able to achieve eliminating all value from the card. It also seems unlikely that American Express Platinum and Chase Sapphire Reserve cardholders will drop their cards to pick up the Quest. Ultimately, I intend to downgrade my own United card to a free version and I can’t see this repositioning effort delivering growth.

What do you think?

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