The top executives of Delta Air Lines and United Airlines are warning that legislation pending in Congress would devastate popular loyalty programs.
The bipartisan proposal aims to save consumers money by forcing more competition in the lucrative credit card payments processing business. If enacted, it would result in "unbelievable" consumer backlash from its effect on rewards programs, Delta Chief Executive Officer Ed Bastian said in an interview.
"Those cards could no longer receive the funding to be able to invest in rewards-back opportunities," he said in an interview. "It's something that we're watching, obviously."
The processing payments system is currently dominated by Visa and Mastercard, which collect billions each year from swipe fees. The fees, typically about 2% of a transaction, are paid by retailers but are often passed on to consumers through higher prices.
Major banks that issue credit cards co-branded with airlines buy loyalty program miles or points from the airlines to distribute to cardholders. The airlines also are paid each time the cards are used. Delta expects to receive $7 billion from its program with American Express this year.
"This would kill rewards programs," United CEO Scott Kirby said on an Oct. 18 conference call. "It would not exist anymore. It'll kill debit card rewards programs" as well.
The Delta CEO knows how powerful a potential backlash to altering loyalty programs can be. The airline
Advocates contend the legislation would have only a modest impact on rewards programs and would save retailers like Walmart, Target and their customers $15 billion annually. U.S. retailers are charged far higher swipe fees than counterparts in many other countries, where regulations are tighter.
They also argue the fees result in higher prices at a time when inflation is a top voter concern.
The bill faces an uphill battle. The banking industry has powerful allies in the Senate, and Republicans on the House committee with jurisdiction have mostly resisted new regulations on banks.
