- Key insights: Barclays renewed its co-brand credit card agreement with Frontier Airlines, which it has been running for more than 20 years, for another decade.
- What's at stake: The co-brand and value airline spaces are evolving rapidly, and the long-term renewal of its contract with Frontier will allow the U.K.-based bank to continue investing in the program.
- Expert quote: "There's a lot of things now that are more experiential, I would say, as part of the card product than just the value that the card product provides," Doug Villone, head of U.S. cards and partnerships at Barclays, told American Banker.
Barclays and Frontier Airlines have added another decade to their 20-year, co-branded credit card tie up, allowing the U.K.-based bank to continue its investments in the program.
The two companies extended the co-brand credit card partnership — which is Barclay's longest tenured co-brand program — until June 30, 2037. Barclays hopes that it will be able to grow its credit card portfolio and burgeoning digital banking platform in tandem with Frontier Airlines, which is also looking to expand its market share in the value airline space following the shuttering of Spirit Airlines.
The deal is significant and a win-win for both companies, Eric Grover, principal at Intrepid Ventures, told American Banker.
"The U.S airline
For Frontier, the 10-year extension represented an immediate lifeline because Frontier relies on ancillary revenue provided by its co-brand credit card, Grover said, noting that Frontier increased its pre-purchased miles facility with Barclays to $375 million, up from $200 million.
Barclays will also be able to cross-sell its other digital banking products such as savings accounts and certified deposit accounts to Frontier cardholders, Doug Villone, Barclay's head of U.S. cards and partnerships, told American Banker.
"We've started to market those products to some of our other co-brand partners, most notably AARP," Villone said. "We've seen that our consumers, especially because we've invested in a more digitally integrated experience, want to take advantage of some of those products." Barclays also counts Jet Blue, Emirates, Wyndham, General Motors, Gap and Old Navy, among others, as co-brand partners.
The extension comes as Frontier's business model and the value-airline space evolves, Villone said.
"What we've seen, not only in the airline space but in other segments, is that what used to be a product that was essentially, 'You got miles and you could redeem for tickets,' has now evolved into many other things," Villone said.
For budget airlines, which price their tickets a la carte, rewards such as free checked bags, early boarding and lounge access are important hooks to get consumers to spend on the card.
"There's lots of things now that are more experiential, I would say, as part of the card product than just the value that the card product provides," Villone said.
Barclays intends to continue rolling out new perks for cardholders as Frontier looks to reshape its business model from being an ultra-low-cost airline to a value carrier that provides amenities. Frontier, for example, introduced first-class seating earlier this year.
"A long-term extension allows us to continue to make very significant investments in the program around its products, its features, and its functionality," Villone said.
