Before the pandemic the American Airlines co-brand portfolio had the largest charge volume, but American, United and Delta were all over $100 billion annually. Delta now says they’re “approaching 1% of U.S. GDP” on their co-brand cards, which would be ~ $255 billion.
Inflation helps, but it’s reasonable to think they’re suggesting they’re around $200 billion in annual charge volume on Delta Amex cards. Even if American and United are lagging Delta’s growth surely then these three airline co-brands are now taking a slice out of more than 2% of U.S. GDP.
The total number of cobrand card accounts is up 25% since 2019 while spending is up 60%.
They’re acquiring about 1 million new SkyMiles members per month. That’s up from 700,000 last year. Giving free internet on board to SkyMiles members helps drive this but the sharp turn of the hockey stick in the graph below happened before this. I suspect they’re just smoothing the graph.
They’ve previously claimed to convert about 1 in 8 new SkyMiles members to co-brand cardholders. And there are now around 7.5 million Delta Amex customers. We know this because Delta says,
- They have 25 million active SkyMiles members (active is not defined)
- 30% of active members have a co-brand card with them.
They previously disclosed adding 1.2 million cardmembers in 2022.
While they’re doing well, they aren’t doing quite as well as they’d like you to think. Here’s why. When Delta and Amex re-upped their deal in 2019, with American Express paying Delta more, it was supposed to hit $7 billion in 2023 without the inflation we’ve seen over the last couple of years. And they’re only on track to hit $6.5 billion.
So what happened? Cardmembers are spending more, some of that driven by inflation, and that wasn’t in the 2019 projection. That’s offset, then, by a smaller co-brand portfolio than expected. That’s not surprising. Customers were cancelling cards during the pandemic, as they always do, and they weren’t acquiring as many customers as they normally would have.
This is one big reason you see such big card bonuses. It’s aggressive acquisition to make up for the shortfall.
Delta has been uniquely positioned to earn ever more money off of SkyMiles even as they provide ever less value. That’s not something other airlines have been able to replicate to the same extent. (When airlines like United and American have devalued that’s impacted co-brand card charge volume).
Delta’s hubs in Atlanta, Minneapolis, Detroit and Salt Lake City are less competitive. Travelers there see themselves as Delta customers. And they have offered by far the best service options in New York for anyone that sees Newark as ‘not New York’. (That’s why Delta hates the American Airlines-JetBlue alliance so much, and why they lobbied so hard for the Biden administration to try to kill it.)
And Delta’s success derives from its brand. They’ve been a more premium carrier, and a more reliable one, although both of those pillars have taken significant hits over the past few years. Whether their card success is sustainable, as they continue to gut the SkyMiles program, is an open question. And whether it’s sustainable with operational performance that still lags 2019 is an open question.
Moreover, if they’re already putting cards in the hands of 30% of active SkyMiles members, how many more signups can they do? They need new members. That’s why they have to give away free wifi with program signup. If they can continue to add 1 million members a month, and they can continue converting 1 in 8 new members to cardholders, that would be 1.5 million cardmembers per year or about 20% more than last year. But people signing up just to get wifi may not convert at the same rate.
Even a 20% increase in annual cardmember acquisition from new members, and addition by continue to market to SkyMiles members they’ve been pitching to who haven’t signed up yet, has to net out against cancellations, and doesn’t seem to get them to $10 billion in revenue per year (around a 50% increase) without a lot of inflation.