2014/5: JetBlue and credit cards (AMEX)
Nov 1, 2014, 8:14 am
#1
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2014/5: JetBlue and credit cards (AMEX)
Per Bloomberg:
The airline is soliciting bids from banks. It's unclear if AmEx is among the bidders. The current contract runs through the end of 2015.
http://www.bloomberg.com/news/2014-1...d-partner.html
The airline is soliciting bids from banks. It's unclear if AmEx is among the bidders. The current contract runs through the end of 2015.
http://www.bloomberg.com/news/2014-1...d-partner.html
Nov 1, 2014, 8:36 am
#2
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I was waiting for this news to break. Should be an interesting few months as they work towards getting the new contract figured out.
Nov 1, 2014, 11:40 am
#3
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What are they bidding on? How much they should pay for TrueBlue points?
Nov 1, 2014, 11:50 am
#4
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The process of building a co-brand card portfolio is pretty involved. The CC company has to buy the points, obviously, but there are a lot of other things which go in to it with the branding.
Nov 1, 2014, 11:57 am
#5
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Is a co-brand card portfolio a hot item to bid on, or do many banks scoff at it?
Nov 1, 2014, 4:33 pm
#6
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Depends on the airline, of course, but the banks don't get in to the CC space to lose money. So the bank has to figure out what their costs (customer acquisition, ongoing cost of points, other benefits) are compared to what volume of transactions they can figure to drive on the card, hopefully not at the multiplier earning levels (e.g. 2x points at grocery stores).
I expect that JetBlue will be talking to a number of banks about this opportunity and that a few will submit responses to the RFP. Less likely that it will be Chase/Citi than US Bank or some of the other smaller ones, but I expect there will be a few in play.
Also keep in mind the logistics of converting from AmEx to a V/MC product and what that potentially means for the existing customers. JetBlue will need to keep that in mind as they make the decision.
I expect that JetBlue will be talking to a number of banks about this opportunity and that a few will submit responses to the RFP. Less likely that it will be Chase/Citi than US Bank or some of the other smaller ones, but I expect there will be a few in play.
Also keep in mind the logistics of converting from AmEx to a V/MC product and what that potentially means for the existing customers. JetBlue will need to keep that in mind as they make the decision.
Nov 1, 2014, 5:01 pm
#7
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Hopefully they will look at what happens when you go with a lower tier issuer (like what VX did), and factor in quality of the bank not just the bottom line.
Nov 2, 2014, 6:19 pm
#8
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Assuming AmEx renews the contract for another decade, would it be wiser to wait and see what the new contract brings in terms of signup bonuses?
Nov 2, 2014, 7:48 pm
#9
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I was wondering the same thing as zippy. I'm thinking it may be better to wait, because if jetblue goes with someone new Amex may increase their bonus in 2015 before the contract runs out. Or even jetblue stays with Amex, they may increase the bonus to make the card more competitive since jetblue has one of the worst sign up bonuses for airline credit cards. Thoughts?
Nov 3, 2014, 7:19 pm
#10
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Comparing the 10-K filings from Jetblue and Southwest, it seems that i) Jetblue Trueblue members are less likely to redeem points for flights, and ii) Southwest's Rapid Rewards redemptions are growing, whereas Jetblue's Trueblue redemptions do not appear to be, or at least nowhere near as fast. Emphasis is mine.
I stumbled upon an interesting analysis of the costs & benefits provided by airline co-branded credit cards, but without more information, it's hard for me to read this situation.
An interesting excerpt:
The emphasis is mine; in Jetblue's 2013 Annual Report they mention closing a major line of credit with American Express and opening one with Citibank [page 34]. A sign of things to come?
Originally Posted by B6 2012 & 2013 Annual Reports excerpts
"There were over 931,000 TrueBlue award miles travel segments flown during 2013, representing approximately 3% of our total revenue passenger miles. There were approximately 753,000 travel segments flown during 2012. TrueBlue award miles flown represent approximately 3% of our total revenue passenger miles."
Originally Posted by WN 2013 Annual Report excerpt
"For the Company’s 2013 consolidated results, Customers of Southwest and AirTran redeemed approximately 5.4 million flight awards, accounting for approximately 9.5 percent of revenue passenger miles flown. For the Company’s 2012 consolidated results, Customers of Southwest and AirTran redeemed approximately 4.5 million flight awards, accounting for approximately 9.0 percent of revenue passenger miles flown. For the Company’s 2011 consolidated results, which include AirTran results from May 2, 2011, through December 31, 2011, Customers of Southwest and AirTran redeemed approximately 3.7 million flight awards, accounting for approximately 8.6 percent of revenue passenger miles flown."
An interesting excerpt:
Originally Posted by A Report from IdeaWorks
"Co-branded credit card activity is certainly not limited to the seven [major] airlines included in this
analysis. Smaller airlines and low cost carriers in the United States also enjoy the benefits of
this ancillary revenue activity. AirTran Airways, Frontier Airlines, Hawaiian Airlines, JetBlue,
Midwest Airlines, and Spirit Airlines all feature frequent flier programs that include co-branded
credit cards.
Frontier Airlines, a US-based low cost carrier that carried more than 9 million passengers
during fiscal year 2007, offers a MasterCard through Barclays Bank. For the fiscal year ended
March 31, 2008, Frontier received total fees of $44.3 million from its co-branded credit card.
That amount is up more than 20% from Frontier’s 2007 fiscal year revenue of $36.9 million.
The airline does not regularly reveal the number of members enrolled in its EarlyReturns
frequent flier program. However, a program manager at the airline indicated EarlyReturns had
more than 2 million members at the end of 2006. That's more than $18 per program
member for fiscal year 2007. This is very similar to the per-member results likely achieved by
American Airlines; smaller airlines can achieve results comparable to major carriers.
This analysis is not intended to discount the loyalty benefits provided by frequent flier
programs. IdeaWorks believes the power of a well-run loyalty program lies in its ability to
identify the highest revenue-producing travelers, establish regular customer communication,
and enhance brand loyalty. But today’s senior management needs the certainty of the ancillary
revenue generated through the sale of miles to program partners. Co-branded credit card
programs are simply unmatched in the ability to generate significant financial activity.
But even beyond this revenue, carriers can realize additional benefits from a co-branded credit
card. Major airlines have learned how to leverage these relationships into oh-so-necessary cash
flow during difficult times. Banks have demonstrated a willingness to extend millions of dollars
to airlines - - perhaps not so much to prop up the airline, but rather to ensure the survival of
the frequent flier program and its co-branded credit card."
analysis. Smaller airlines and low cost carriers in the United States also enjoy the benefits of
this ancillary revenue activity. AirTran Airways, Frontier Airlines, Hawaiian Airlines, JetBlue,
Midwest Airlines, and Spirit Airlines all feature frequent flier programs that include co-branded
credit cards.
Frontier Airlines, a US-based low cost carrier that carried more than 9 million passengers
during fiscal year 2007, offers a MasterCard through Barclays Bank. For the fiscal year ended
March 31, 2008, Frontier received total fees of $44.3 million from its co-branded credit card.
That amount is up more than 20% from Frontier’s 2007 fiscal year revenue of $36.9 million.
The airline does not regularly reveal the number of members enrolled in its EarlyReturns
frequent flier program. However, a program manager at the airline indicated EarlyReturns had
more than 2 million members at the end of 2006. That's more than $18 per program
member for fiscal year 2007. This is very similar to the per-member results likely achieved by
American Airlines; smaller airlines can achieve results comparable to major carriers.
This analysis is not intended to discount the loyalty benefits provided by frequent flier
programs. IdeaWorks believes the power of a well-run loyalty program lies in its ability to
identify the highest revenue-producing travelers, establish regular customer communication,
and enhance brand loyalty. But today’s senior management needs the certainty of the ancillary
revenue generated through the sale of miles to program partners. Co-branded credit card
programs are simply unmatched in the ability to generate significant financial activity.
But even beyond this revenue, carriers can realize additional benefits from a co-branded credit
card. Major airlines have learned how to leverage these relationships into oh-so-necessary cash
flow during difficult times. Banks have demonstrated a willingness to extend millions of dollars
to airlines - - perhaps not so much to prop up the airline, but rather to ensure the survival of
the frequent flier program and its co-branded credit card."
Last edited by zippy the pinhead; Nov 3, 2014 at 7:37 pm
Nov 4, 2014, 8:59 am
#11
Join Date: Jan 2013
Posts: 413
There's no question that co-branded credit cards are important to airlines. The difference in redemptions between JetBlue and Southwest seems to be in line with how much each leverages their co-branded credit cards. Southwest's standard sign-up bonus is 25,000 and is upped to 50,000 several times a year. Compared to JetBlue's 20,000 offer, there a many more points flowing for Southwest which would naturally result in more redemptions. Add in Southwest's frequent double point promos and relationships with complimentary companies (e.g. Rapid Reward points for hotel stays) and there are many more opportunities for Southwest customers to earn points. Given Southwest's consistent positive financial results, it is clear that this strategy pays off in the long run.
The note about JetBlue closing a line of credit with American Express and opening one with Citibank is particularly interesting. Guess we will see in the coming month's what is in store.
The note about JetBlue closing a line of credit with American Express and opening one with Citibank is particularly interesting. Guess we will see in the coming month's what is in store.
Nov 4, 2014, 2:03 pm
#12
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The partnership with AMEX has deteriorated over time and there is very little benefit to using the jetblue AMEX outside of direct purchases from jetBlue.
The Virgin America card has actually worked much better for me and as a result I have been earning a ton of points on VX and taking them more often.
The Virgin America card has actually worked much better for me and as a result I have been earning a ton of points on VX and taking them more often.
Nov 4, 2014, 8:20 pm
#13
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Location: Left Coast
Posts: 862
Well, I'm thinking to watch this issue and see what additional news comes out. I already have the AmEx card, so I will continue to use it as circumstances warrant. My annual fee is due in May, 2015, and my travel schedule on Jetblue will likely be ended by that time, so I will probably cancel and see what 2016 brings.
Nov 5, 2014, 6:47 am
#14
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AMEX recently lost Costco Canada to (Capital One) Mastercard
Nov 5, 2014, 8:15 am
#15
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Interesting about the redemption numbers.. JetBlue is the only airline I ever accumulated enough miles to actually redeem anything. Got 2 r/t tickets BOS-LGB for a nice California vacation last year and I still had points left over (up to nearly 60K now). Almost all these points are accumulated via channeling my bills through the AmEx card via Auto-Pay schemes.