Dreyfus Corp. is close to teaming up with AMR Investments to offer mutual funds and other banking services to frequent fliers on American Airlines.
The New York-based mutual fund unit of Mellon Bank Corp. has reached a preliminary agreement with AMR Investments, a sister company of the Fort Worth-based airline, to offer an investment account jointly.
The account would be similar to Dreyfus' Lion account, which combines brokerage and investment services with bill paying and financial planning advice for investors of $10,000 or more.
Dreyfus and AMR have reached "an agreement in principle to research to see how we could leverage the Lion account," a Dreyfus spokeswoman said. She declined to disclose details.
Bart Roberson, an AMR vice president and director of marketing, said that one possibility the companies are considering is offering customers round-trip tickets or extra travel miles as rewards for opening accounts.
The cost of tickets would be an expense to Dreyfus and AMR, not to owners of their mutual funds, he added.
AMR Investments, American Airlines' pension fund manager, has about $18 billion of assets under management, including $6 billion in nine proprietary AAdvantage mutual funds.
Some American passengers have been sent direct mail about specific AAdvantage funds since 1993. But Dreyfus, which has $100 billion of assets under management, could bring AMR a full-service brokerage account as well as a household name.
Like existing direct mail about individual AAdvantage mutual funds, a campaign for a Lion-like account would go out only to select prospects-not all 30 million customers in American's AAdvantage data base.
Mr. Roberson said that for the mail campaign to get more than a passing glance it "needed to be cobranded with another mutual fund company" and be "as broad and comprehensive as possible."
American's AAdvantage passengers are also offered deals with MCI Telecommunications for long-distance calls, and with Citicorp for credit cards.
Pittsburgh-based Mellon has joint ventures with other investment firms, but a deal between Dreyfus and American would be more of an affinity arrangement. The banking company has a similar alliance with the American Dental Association under which it offers financial services, including credit cards, medical savings accounts, and Dreyfus funds, to association members.
Frequent-flier and other affinity promotions are common in the credit card business but more rare in investment management.
Star Bank Corp., Cincinnati, and Charles Schwab & Co., San Francisco, each started miles-for-investments programs in August 1996.
Star Bank's capital management division buys tickets with any airline for customers once they invest at least $50,000 in its proprietary mutual funds that carry sales loads. Clients' fund statements keep tabs for them on the deal-one mileage point for each dollar invested.
"It's done the things we wanted it to," said Randy Bateman, chief investment officer of Star Bank's capital management division. "A greater proportion of people are periodically investing, and the average ticket of investments went from about $7,500 to about $12,500."
He said other factors had contributed to the increase, including the movement of assets from trust accounts into the funds, an expansion of the family to 13 funds, and the hiring of more salespeople.
The division has $9.6 billion under management, including $2.7 billion in its proprietary Star Funds.
So far, Star has bought 38 tickets at an average cost of $337.08. Other customers with more than $50,000 invested have accrued enough points to get 288 plane tickets.
Under Schwab's deal with Atlanta-based Delta Airlines, customers who open brokerage accounts with $10,000 or more are rewarded with 1,000 frequent-flier miles.
Schwab allows a maximum of 50,000 miles per year for Delta customers, who get the points automatically posted from their brokerage accounts to their Delta Skyline cards. Under the arrangement, customers get 1,000 miles for each $10,000 invested, according to a brokerage spokesman.
