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Annual fees have ceased to exist for the majority of rewards-based cards. However, for co-branded airline cards, such fees remain prevalent and are rising.
A recent study of 38 co-branded airline cards offered by American Express Co., Bank of America Corp., Barclays US, JPMorgan Chase & Co., Citigroup Inc. and U.S. Bancorp found co-branded airline cards continue to have the card industry's highest annual fees.
The study, conducted by Corporate Insight Inc., a New York-based research company, found that 53% of co-branded airline cards carry an annual fee of at least $55. The average annual fee among all cards that impose such fees is $48, C&P research shows (C&P's Exclusive 2008 Bankcard Profitability Study and Annual Report, May).
The recent wave of airline bankruptcies and consolidation has not shaken issuers' commitment to airline co-branded rewards cards, which analysts say tend to be more profitable than other cards thanks to their ability to attract more-affluent customers who drive sales volume.
"Co-branded airline cards are prized by issuers because they are lucrative," says Doug Miller, Corporate Insight senior analyst. And airline-industry consolidation seems to be making co-branded cards even more valuable to issuers because it reduces the number of airlines available for partnerships, he says.
AmEx and Delta Air Lines in April unveiled the most-expensive among airline co-branded cards to date, Delta Reserve, which carries a $450 annual fee. The card enables cardholders to earn mileage points at a faster rate than Delta's other co-branded credit cards by awarding bonus miles for higher levels of spending, plus it provides cardholders at least one free first-class or coach round-trip ticket per year.
The card also offers priority airplane boarding, supports 24-hour concierge services and enables cardholders to gain access to Delta's members-only Crown Room Club airport lounges. And it offers AmEx cardholders for the first time the opportunity to transfer Delta's elite-status Medallion Qualification Miles to family members, friends and colleagues.
Delta Reserve is the sixth in AmEx's portfolio of co-branded Delta SkyMiles credit cards. Others are classic, gold, platinum, Options and Pay With Miles.
AmEx acknowledges that Delta Reserve suits a much smaller niche of prospective customers than do the other cards.
"Delta Reserve is for the serious traveler–the affluent spender who wants a card rewarding that behavior," says David Rabkin, AmEx vice president of Delta co-branded products. "This is part of our broader strategy of building more card products geared to specific customer segments."
Rolling out yet another Delta co-branded card may be a salvo in AmEx's bid to remain the dominant co-brand partner following Delta's proposed acquisition this year of Northwest Airlines. U.S. Bancorp issues Northwest's WorldPerks co-branded Visa card.
At press time, none of the parties would comment on which issuer's co-branded card might prevail. CP
