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How Strained Is the Relationship Between JPMorgan Chase and United?

A Wall Street Journal report suggests that the gap between United Airlines and credit card partner JPMorgan Chase is getting strained due to internal competition. FlyerTalkers are also noticing the changes, forcing them to make careful decisions about their credit cards.

For years, airline credit cards offered the best benefits when flying with the respective carriers. Although they came with annual fees of around $95, spending with the right card could yield free checked bags and improved position for boarding. But at what point does a credit card no longer offer value?

That question is bothering many regular travelers as a schism grows between United Airlines and their credit card issuing partner, JPMorgan Chase. First reported by The Wall Street Journal, those close to the matter say United executives are frustrated because “the [Chase] Sapphire Reserve card is competing directly with the airline’s cards and siphoning off customer spending.”

A Comparison of Benefits

The concern is rooted in the benefits offered by each card. For a $95 annual fee starting after the first year of holding the card, the United Explorer credit card offers two United MileagePlus miles per $1 spent on United purchases, spending at restaurants and hotel stays, a $100 statement credit for Global Entry or TSA PreCheck every four years and a free first checked bag for the primary cardmember and one companion on the same itinerary. The benefits package is good for those who exclusively fly United, or are stuck in a United hub.

Comparatively, for an annual fee of $450, the Chase Sapphire Reserve offers much broader benefits. This includes a $300 annual travel credit immediately applied to travel purchases, complimentary airport lounge access through Priority Pass Select membership, and 3X points on all travel and dining worldwide. More importantly, the Ultimate Rewards points earned on the credit card can transfer into MileagePlus miles – possibly making the card more rewarding overall.

Both entities have directly felt the cost of doing business over the past two years. In July 2018, JPMorgan Chase told USA Today they needed to reserve $330 million between April and June of the year for travel and cash-back related perks – including travelers who converted Ultimate Rewards points to United MileagePlus points. Meanwhile, United is frustrated by the discount on the price of MileagePlus miles given to JPMorgan Chase, which will be up for renegotiation in 2025.

Frequent Flyers Make a Choice

FlyerTalkers are also drawings lines in the sand when it comes to which cards to hold. According to an informal poll on the forums taken in June 2019, over one-fourth of responding FlyerTalkers said they would cancel their United co-branded credit card in favor of a credit card that earns Ultimate Rewards. Another fourth said they would keep their Ultimate Rewards-earning card, but would not open a United co-branded credit card in the future. The reason for either not opening a United cobranded card or canceling one came down to benefits.

“Unless you value the benefits (free bag, priority boarding), there’s no reason to have the [United] card over the Reserve or Sapphire,” FlyerTalker danpeake explains. “And if you’re elite, there’s no reason to value those benefits.”

“The United cards offer poor value after all the devaluations, with possible exception of [United Club] membership (which UA is also devaluing with cuts to the product),” notes Kacee. “[United] management needs to look in the mirror. Consumers are more savvy than they think.”

“It appears UA’s overall strategy is minimizing point liability instead of driving incremental revenue from increased reward value,” Sightsee MC writes in a separate FlyerTalk thread. “The reason transferable points are gaining value so rapidly (and thus tilting the balance of value between bank cards and co-branded cards) is the rapid devaluation of individual award currencies.”

A Solution to Consider for United

Credit card partnerships can provide incredible value for airlines. Take Delta Air Lines’ relationship with American Express: in 2018, the bank provided $2 billion in value for the Atlanta-based carrier, leading to a program renewal through 2029. In turn, American Express cardholders who earn Membership Rewards can transfer their miles to Delta, and neither party seems unhappy with the relationship.

In order to regain value, United must find a happy balance between their loyalty program and partner offerings with JPMorgan Chase. Unless flyers live in a hub city or battleground airport, the benefits of the United MileagePlus card may be useless, making the Chase Sapphire line a better value. To gain back customers, United must find a way to improve their card benefits and make them competitive, offering a strong value proposition for future benefit.

If they can’t, then it may be more than half of all FlyerTalkers walking away from their United co-branded credit cards.


[Featured Image: Shutterstock]

Comments are Closed.
am1108 July 5, 2019

Then United shouldn't be thinking about getting rid of PQM waivers or changing to an AA style PQM credit.... Also as a Explorer card member they should have an annual choice of either a companion fare, United Club Membership discount (like $150 off) or even a percentage off coupon in lieu of United Club passes. This looks to me like a United problem instead of a Chase problem that could be solved by making it more appealing.

topman July 3, 2019

United got greedy and now are reaping the benefits of their greed.