Is the Chase-United partnership on shaky grounds?

Frequently Changing Programs

Frequent flyer programs have been undergoing a lot of changes of recently. Delta removed its award chart and then we saw a trend. United airlines was the most recent airline to announce changes to the United MileagePlus program. While discussions around the future of frequent flyer programs tend to stir up a fair bit of consternation and argument, there’s no denying that a majority of the recent changes have been negative for consumers.

Given the breadth of coverage that these recent program changes have received, this piece from Skift caught my attention. I am of the opinion that as we see a gradual reduction in value of US frequent flyer programs, co-branded cards may be the first ones to suffer. I also think that the more these devaluations occur, the more they tend to strengthen the value of flexible points programs.

Co-brand Credit Card Partnerships

Delta and American Express recently announced the renewal of their co-branded partnership until 2029. However, Skift is reporting that everything may not be as rosy with the Chase-United partnership. This article comes in one week after they previously reported that the relationship may be a bit shaky.

The Chicago-based airline is deep in the process of renegotiating its contract with Chase, the bank that manages all of the carrier’s co-branded credit cards. United wants a better deal like Delta has with American Express. Chase may not be willing to budge. Ultimately, the scenario that may shake out could be similar to the model employed at American. That carrier has a multi-level agreement with both Barclays and Citi for a wide spectrum of credit card products. For consumers, this means that it will be easier to reap the benefits of either bank and all of the ancillary services that each affords — some Mastercard products, for example, have unique hotel benefits while Amex is well known for its insurance policies. Competition breeds innovation.

What the numbers say

While this may seem like an immediate concern, both Chase and United have understandably stayed mum about this issue. I tried to look at United’s latest 10k report to see if I could find any clues. Based on these excerpts below, it looks like things would probably not change a lot in the upcoming months with regards to the relationship.

• Approximately 5.6 million and 5.4 million MileagePlus flight awards were used on United in 2018 and 2017, respectively.
• In addition, excluding miles redeemed for flights on United, MileagePlus members redeemed miles for approximately 2.4 million other awards in 2018 as compared to 2.3 million other awards in 2017. These awards include United Club memberships, car and hotel awards, merchandise and flights on other air carriers.
• In the year ended December 31, 2018, 2017 and 2016, the Company recognized, in Other operating revenue, $2.0 billion, $1.8 billion and $1.7 billion, respectively, related to the marketing, advertising, non-travel miles redeemed (net of related costs) and other travel-related benefits of the mileage revenue associated with our various partner agreements including, but not limited to, our Chase co-brand agreement.

The Pundit’s Mantra

As seen in the figures above, the co-brand partnership still seems to be a very profitable relationship for both Chase and United. While there may be disagreements about some details, my analysis is that I don’t see United switching a co-brand credit card partner in the near term.

What would be interesting to see though is what changes may happen to the Chase United co-branded cards once the partnership is renewed. It would only be sensible that United may seek to go through the RFP process as part of the contract negotiations. Given the recent changes to frequent flyer programs, I’m sticking to focusing on earning more American Express Membership Rewards and Chase Ultimate Rewards points as a hedge against a potential devaluation.

Do you still plan on renewing your Chase MileagePlus United card? Do you find great value in airline co-branded cards? Let us know in the comments section.