Airlines Warn Credit Card Legislation Could End Frequent-Flier Rewards

Several major airlines and planemakers have written to U.S. senators, expressing opposition to proposed credit card legislation that could severely impact airline loyalty programs.

The amendment, part of the proposed GENIUS Act, could force airlines to stop offering rewards credit cards, which would result in a significant loss of revenue. According to airlines, this financial hit could lead to “a contraction in airline activity and jobs.”

Among the signatories of the letter sent on Monday are United Airlines, American Airlines, Southwest Airlines, Airbus, and Boeing, all voicing concerns over the potential damage to the aviation industry. The letter is part of a campaign led by the trade group Airlines for America, aimed at blocking legislation introduced by Senators Roger Marshall and Dick Durbin.

The amendment seeks to increase competition among credit card providers and reduce swipe fees, a move that has been supported by retailers, including the National Retail Federation. However, it has drawn significant backlash from financial institutions and the airline industry, where co-branded credit cards play a crucial role in driving customer loyalty and generating revenue.

In the letter, airlines highlight that co-branded credit cards are a major source of income, with customers using them to accumulate frequent-flier miles or points. “A lot of people call airlines credit card companies with wings,” said TJ Dunn, a points expert and editor-in-chief at the Prince of Travel, in a prior interview with Business Insider.

Research from Airlines for America cited in the letter shows that over 31 million Americans currently hold airline travel reward cards, generating approximately $25 billion in economic activity in 2023. The letter further states that 57% of all frequent-flyer miles or points issued last year were generated through credit card usage.

“Americans value and enjoy credit card rewards programs because they reward consumers for dollars they would be spending anyway,” the letter reads. “Many consumers could be unpleasantly surprised if Congress disrupts these programs.”

The proposed legislation could force airlines to cease offering rewards credit cards, which would significantly reduce revenue and impact their ability to meet existing commitments to workers, airlines say. Labor unions representing pilots, flight attendants, and Boeing workers have also signed the letter, warning that the disruption of loyalty programs could result in fewer flights and a potential decline in airline activity and jobs.

The letter also raises concerns about the potential impact on future collective bargaining negotiations and the financial strain it could place on airlines, limiting their ability to purchase new planes.

Senator Dick Durbin, one of the bill’s sponsors, has argued that the legislation could save merchants and consumers an estimated $15 billion annually, as businesses currently pay over $100 billion in swipe fees each year.

This legislation has sparked an ongoing debate about the balance between reducing costs for consumers and merchants, and maintaining the revenue models that sustain critical industries such as aviation.

Related News: https://airguide.info/category/air-travel-business/airline-finance/

Sources: AirGuide Business airguide.info, bing.com, yahoo.com