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American Express has been issuing Delta co-brand credit cards since 1996. Of course their relationship with Delta dates back farther than that. They introduced Membership Miles (now Membership Rewards) in 1991, and three years later offered 3x on Delta spend.
The two partners announced a renewal of their relationship at the end of 2014. It was a record-setting deal with American Express paying Delta more than ever before, which the card issuer was motivated to do to lock in their largest remaining co-brand partner after Costco’s decision to break up.
While card companies often protect us from devaluations — they’re the mileage program’s biggest customer, and don’t want to see the value of their portfolio diminished so contracts often include provisions to preserve a program’s value — Delta has had American Express over a barrel because losing Costco meant losing 10% of their card business.
Now Delta and American Express have announced an extension of their relationship with Delta is touting as furthering their favorable economics even more.
- New deal runs through 2029
- Continues Membership Rewards points transfers and American Express premium Delta co-brand and Platinum/Centurion access to SkyClubs
Delta is projecting – what seems to me – unlikely growth in top-line revenue from this deal. Much of this comes from increasing consumer spend on cards, not just new acquisition or higher prices paid by American Express at a time when there’s some question about the direction of the overall economy:
As the two companies work together, Delta expects its benefit from the relationship to double to nearly $7 billion annually by 2023, up from $3.4 billion in 2018, strengthening Delta’s increasingly diversified revenue stream.
We don’t know what sorts of provisions might be included in the contract to adjust for things like interchange risk (whether driven by competiton or future regulation) but two things strike me,
- This isn’t a five or seven year deal. It’s cementing even further a long term relationship which both parties are betting will be a winner based on their respective needs.
- In any 50-50 deal, Delta takes the hyphen. That Delta is willing to do this deal tells me it’s a stronger win for them than for American Express.
Warren Buffett of course is a major investor in both American Express and Delta.
I view Delta cards as strong, of course for their initial bonus and for the benefits they convey to passengers (especially those without elite status) flying the airline semi-regularly. I do not view them as a strong tool for spending, independent of weakness in the SkyMiles program itself.
That’s because even if you want to earn SkyMiles through credit card spend, American Express offers cards that earn Membership Rewards points faster than Delta miles, and Membership Rewards points will continue to transfer to Delta as well as having the option of being moved to other programs as-needed.