Chase and United have extended their credit card agreement into 2029. United will remain a Chase Ultimate Rewards transfer partner. And Chase and Visa are, it seems, paying United more for the the value they already bring to the table – the airline says its bottom line will improve $400 million in 2020 alone.
United says the deal “continues the more than 30-year relationship” with their card issuer. In 1987 First Chicago issued the Mileage Plus First Card Visa. In 1998 First Chicago merged with Banc One Corporation, which is now part of Chase. (The very first airline co-brand card was the Continental TravelBank Mastercard, issued by Marine Midland Bank, which became HSBC.)
MileagePlus Revenue Has Lagged The Industry
Frequent flyer program revenue – and in particular the sale of miles to banks – is the biggest driver of US airline profitability. However United MileagePlus revenue growth has underperformed. In fact the biggest driver of increased revenue has been points transfers from Chase Ultimate Rewards. As Chase Sapphire Reserve gained popularity that meant more points earned which could be transferred to United.
To United’s leadership, though, the problem is their deal with Chase — and has nothing to do with making the program worth less to members indeed United’s President believes the airline’s presence in a market dictates card adoption rather than the value proposition of the program itself.
What Scott Kirby realized – and it infuriated him – was that even if a customer wanted to earn United miles they could earn more United miles for the same spending with a Chase Ultimate Rewards card (plus have the flexibility to spend points directly for travel or transfer to a different airline or hotel program) than with a United card.
United Has Been Agitating For A New Deal With Chase
United re-upped its credit card co-brand deal with Chase in September 2015, extending out to 2025. However the airline has been talking up how their deal with Chase lags what other airlines – American and Delta – have.
For three years United has been having conversations with Chase. They re-launched the card product changed benefits and started pitching the card to customers inflight.
New Deal Starts Paying United More Money Today
United has been agitating for Chase to pay more for its miles. However Chase had a deal locked in for 5 more years. Chase gets about four more years tacked onto the back end of their deal, but starts paying more for miles right away. The cards remain Visa products as well.
According to United’s SEC 8-K filing on this deal, they will continue to participate as an Ultimate Rewards transfer partner and will see significant revenue lift under the terms of the new agreement.
The Company currently estimates that the new commercial terms, anticipated portfolio growth and participation in Chase Ultimate Rewards will increase the annual cash contribution to the Company by approximately $400 million in 2020 from the combined impact of the Agreement and the amendment to the agreement with Visa.
Whether there are other changes coming to the United card portfolio remains to be seen, but should come out shortly.