I’ve argued for years that American Airlines was making a strategic mistake – and thinking about their accounting wrong – by not aggressively building in New York, San Francisco and Seattle.
Their co-brand credit card revenue accounted for the entirey of profit in many quarters before the pandemic. When the airline said they were losing money in New York, that was the wrong way to look at the business.
- They were losing money flying period
- They should have looked at New York and other big city markets as credit card opportunities. Because gaps in their flying meant lack of relevance for the credit cards, and meant walking away from credit card acquisitions and spend in those markets.
- Credit card revenue needs to be part of the profitability equation for a market. Indeed, the primary card acquisitions channel for co-brand partner Barclays is onboard aircraft.
During the American Airlines earnings call on Thursday morning Chief Revenue Officer Vasu Raja pointed out, in response to a question by J.P. Morgan analyst Jamie Baker, that the fastest growing markets for AAdvantage signups are in their JetBlue and Alaska partnership cities.
By becoming more relevant in cities of strength for those airlines, which represented weakness for American previously, they make the AAdvantage program relevant and create opportunities for more card signups and spend in some of the most important spend markets in the country.