American Airlines is currently in discussions to switch its exclusive credit card partner from Barclays to Citigroup. The negotiations aim to consolidate the airline’s business with a single issuer in order to increase revenue from its loyalty program. This move comes after months of working with banks and card networks to secure a new long-term deal.

Co-brand deals between banks and airlines are highly contested negotiations, as they provide the issuing bank with access to millions of loyal customers who spend billions of dollars annually. These partnerships are crucial for airlines, especially during times of low travel demand, as they generate significant revenue from banks in exchange for miles earned by customers using their credit cards.

American Airlines, despite having the largest loyalty program, was out-earned by Delta in terms of payments from their credit card partnership last year. This has prompted American to explore opportunities to enhance the products and services offered to customers through its AAdvantage program.

However, the potential agreement between American Airlines and Citigroup is not without challenges. Regulatory objections from entities such as the Department of Transportation could delay or even prevent the partnership from materializing. If successful, this deal would mark the end of an unconventional partnership in the credit card industry, where most brands typically work with a single issuer.

Citigroup’s strong financial standing and track record with American Airlines customers position them favorably to secure the partnership over Barclays. The new contract, likely to span seven to ten years, would provide Citigroup with the opportunity to recoup investments made in transitioning Barclays customers and other necessary expenditures.

With Citigroup CEO Jane Fraser leading the charge, the bank aims to drive profitability in the card business by enhancing customer products and driving shared value and growth with partners like American Airlines. On the other hand, Barclays is looking to diversify its co-branded card portfolio by exploring partnerships beyond airlines, such as with retailers and tech companies.

In conclusion, the potential shift in credit card partnership from Barclays to Citigroup reflects American Airlines’ strategic efforts to maximize revenue from its loyalty program. As negotiations continue, both parties are focused on ensuring a seamless transition that benefits customers and drives profitability for the airline and its financial partner.