Airline-branded credit cards work hard to entice new customers with frequent flyer points, increased loyalty status, free hold luggage and even expediated security checks.

However, the battle to offer the leading airline-branded credit card reached boiling point recently, when Southwest Airlines unveiled its new Rapid Rewards Plus Credit Card, incorporating a unique benefit for their cardholders.

Southwest 737 MAX 8. Boeing 10,000th 737 Guinness World Record. PHOTO: Brandon Farris.

Those that spend a minimum of $4,000 within the first few months of opening their Southwest Rapid Rewards Plus Credit Card will be given the option to choose a companion to fly with them on Southwest flights for the remainder of 2019 absolutely free of charge.

This particular deal is all the more astounding when you consider that Southwest has been notoriously rigid with its Companion Pass loyalty perks, which stipulated that all cardholders must generate at least 110,000 points annually via credit card transactions and flights.

Getting a handle on the airmiles credit card “arms race”

Samuel Engel, aviation industry analyst for consultancy firm ICF, believes “there is an arms race going on” in the airline-branded credit card market. A leading airmiles credit card will generate income for an airline when the carrier sells off its reward points or miles earned on co-branded cards to the issuing bank.

The issuing bank also benefits from co-branding credit cards with airlines by funding the point purchases out of the transaction fees generated from merchants worldwide.

In 2018, IdeaWorksCompany forecasted that all airline carriers in the U.S. would earn $15.6 billion in combined revenue based on sales of airmiles credit card points and commission from the sale of partner products (e.g. travel insurance and vehicle hire). The vast majority ($14bn) would derive from credit card airmiles.

Although airlines are not duty bound to report their credit card revenues, it is possible to get an indication of their earnings based on points sales.

In 2017, American Airlines earnt over $3 billion from sales of its AAdvantage loyalty points, while Delta ($3bn) and United ($2.3bn) enjoyed equally fruitful points sales.

Are airlines making more on their frequent flyer points revenue than their flights?

An expert in airline loyalty programs, Gary Leff, recently discussed the importance of credit card revenue for carriers.

Leff revealed that American Airlines’ overall operating income in 2018 ($2.66bn) was less than the amount the carrier made via its frequent flyer points revenue – thought to be $3.1 billion.

In a recent email conversation with Travel Weekly, American Airlines spokesman, Josh Freed did not refute these figures and admitted that “the credit card business is an important part” of the airline’s revenue.

The so-called “arms race” is set to continue in the airmiles credit card sector with Delta bringing out their new SkyMiles American Express card, committing to rewarding their cardholders with a staggering 70,000 air miles providing they spend at least $2,000 on their card within their first three months of ownership.

There are also some banks issuing airmiles credit cards that are not co-branded with an individual airline, giving cardholders freedom and flexibility over the carriers they wish to use their airmiles with.