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.
And in other news, int’l saver business inventory will continue to be next to nothing and Everyday pricing reaching into the hundreds of thousands of miles one way
$400 million more to UA in 2020? What I want to know is this: “how and how much are Chase customers going to end up paying for UA to get that additional revenue from this revised deal between UA and Chase.
Marine Midland Bank is Key Bank, which bought First Niagara, which had purchased HSBC’s US retail banking operations.
Maybe Ultimate Rewards no longer transfer 1:1?
What is Chase getting out of the deal? I really doubt 4-5 years of exclusivity is worth over $400M+/year; they could have gotten that but just waiting the deal to near its end and negotiate at that point.
What UA really hates about Ultimate Rewards is they don’t immediately get paid for UA miles that customers earn when spend is on a UA card. When customers put spending on Sapphire/Reserve, UA only gets paid if the customer chooses to transfer the points to United.
In general, the earn rage for a non-transferable currency needs to be higher than a transferable currency to get anyone on the hook (or the same with lower/no fees).
Until a United co-brand card out earns CSR at 3x for travel/restaurants….why would I get 2x for United spend only? Chase is making it a no-brainer which card to choose.
@daniel I couldn’t agree more, and with United’s awards inventory drying up / pricing at ‘more than’ cash prices, I typically transfer UR points to hotels and flights at cash tickets (1.5x). I’ve been skipping United entirely, and have had some great flights on KLM, Air France and Austrian into Europe over the past few years. All in discounted business, using my UR points. I ditched the Chase United cards a long, long time ago. A dumpster fire.
Domestically, it’s discounted first on a nonstop or SWA for me.
Anyway, while it feels good to vent, the spreadsheets of the beancounters don’t lie, so don’t ever believe that they’re not manipulating those formulas in the customer’s favor.
I really hope as part of the deal they give free bags if you hold a United Airlines credit card on any flight associated with your frequent flyer number. It is so infuriating to not be able to pay with Amex Platinum at 5 points per dollar or Chase Sapphire at 3 points per dollar and not be able to get a free bag. And sometimes I buy United flights using another currency like LifeMiles or Singapore Krisflyer and I can’t get a free checked bag because I didn’t buy it through United. Both American and Delta don’t require that ridiculous policy. As long as you have their cards, any flight with your frequent flyer number gets you a free bag
And I’ve even had issues with using Chase Pay on United’s own website where it didn’t code properly and even though I used my United card, it didn’t give me free bags and it was such a hassle to track down a repayment and they even ended up blaming me!
@Gary – If Chase had five more years on the current agreement, why ink a new deal that’s so much more costly rather than wait a few more years?
I can confirm that they are pitching the cards throughout the flights….sometimes more than once. Just had a flight to Singapore where they announced it at the beginning of the flight and then again along with the first drink drink offering.
@Christian -that is the question, and why i figure there has to be more here than has been shared
I hope all the additional details become known before I have to make a final decision on whether or not to renew my Chase Sapphire Reserve at the new, higher annual fee this summer and my Chase United Explorer on the same date..
“@Christian -that is the question, and why i figure there has to be more here than has been shared”
Maybe United threatened to devalue their mileage program Venezuela style, unless Chase agreed to pay more ransom money, stat.
@Luke Vader – wait, isn’t that what they did? I stopped collecting united miles the minute they went dynamic.
There is no “guarantee” of the $400 millions extra. The only thing United says is that they are “”anticipating” as much.
In other words: United wants to sell even more miles to Chase then they already do (worth $400 M) and hope there are a lot of credit card suckers to do so. I assume Chase will just up the multiplier on the UA credit cards and pump the annual fee into the stratosphere.
Can I assume that this means either more expensive or lower benefits for the Chase Club card?
5/24 seems like a big reason United lags behind AA and DL. Amex will approve most anyone over 680. AA has two banks offering cards.