[Details in this post are no longer current.]

American Express has announced that their relationship with Continental will end on September 30, 2011.

Currently, the US Membership Rewards program offers the ability to transfer points into Continental Onepass. And the American Express Platinum and Centurion lounge benefit includes access to Continental clubs (when flying Continental same-day). Both of those benefits will cease.

Two months ago when American Express added US Airways to its roster of lounges providing access to Platinum and Centurion members, I said that it meant the Continental relationship was dead in the water.

When the United-Continental merger was announced, the end of the Amex relationship was almost a foregone conclusion. In many ways, United exists today in order to support Chase’s credit card business. The issuer of the United Visa provided debtor-in-possession financing for United’s bankruptcy, as well as its exit financing. And Chase pre-purchased about half a billion dollars of miles to provide the airline with liquidity. They hold substantial sway and would not have stood idly by while a combined United-Continental maintained an American Express relationship that allowed points earning in competition with their own products. Meanwhile, Chase is also the issuer of the Continental co-branded Mastercard already. And Chase offers premium cards that include lounge access at both United and Continental as well. It was unlikely that any Amex deal could continue.

Fortunately there’s a year left for the partnership, so members have plenty of time to transfer whatever Amex points they need in their Continental accounts (Which will ultimately be merged with United Mileage Plus accounts).

Continental has been one of my absolute favorite transfer partners in the American Express program. First, because they have quite reasonable redemption costs to some regions like the Middle East, India, and Northern Africa. Second, because they’ll allow you to hold an award without the miles in your account so that you can transfer in points after you’ve secured the reservation. And third because they have some of the absolute best routing rules in the industry (you can have a stopover and an open jaw on international awards, can transit either the Atlantic or the Pacific from North America to Asia, they don’t restrict mileage flown in an award, and permit Asia routings to Australia).

So that’ll be missed.

Of course, Amex retains Aeroplan, Singapore, and All Nippon as Star Alliance members in their US Membership Rewards transfer program. That’ll work. Aeroplan has great routing rules as well, and many of their awards are quite reasonably priced. They don’t allow awards to be held pending points transfer though (you can set up an award on the phone and then transfer points instantly while still on the call). Singapore allows one-way awards which is nice, but they add fuel surcharges and their chart isn’t cheap on the whole plus they can be simply a pain to deal with. All Nippon is great, their distance-based chart is useful in some situations, but they add fuel surcharges to most redemptions. So overall losing Continental as a transfer partner is a blow.

American has announced some sweeteners to try to make up for the loss.

Though not in the announcement, it’s only been two months since they added Star Alliance member US Airways to their lounge access program. So they’re out adding airlines and retaining program value.

And concomitant with the announcement is the introduction of a couple of new benefits for Platinum and Centurion cardholders (but not other Amex cardholders with Membership Rewards).

• 20% rebate on ‘pay with points’ redemptions. You can use Amex points to pay for travel directly, they points are worth a penny apiece. Now they’ll rebate back 20% of the points you use for this option. It makes pay with points more valuable than before, and in general better than gift card redemptions. Still, pay with points is only a decent option compared to say spending double (or triple!) miles for a Delta reward. It’s never even close to as good as the value you’ll get on a reasonable premium cabin international award via transfer of miles to a decent frequent flyer program.

• Up to $200 rebated annually in airline incidental fees, such as baggage charges or inflight meals. Details yet to emerge, but could be a nice benefit for those without status especially or buying on board in coach. Not huge, but still a sweetener. (Still I long for the days when Amex offered domestic companion tickets four times annually, though their vendor was a huge pain to work with.)

Since those sweeteners are for Platinum and Centurion cardholders only, and are quite modest at that, the loss of Continental as a lounge and points transfer partner is a real blow. But a thoroughly expected one, and it doesn’t materially diminish my view of the American Express Membership Rewards program or the value proposition of their cards.

(Via Wandering Aramean.)