BCS Barclays PLC

By Robin Sidel and Susan Carey 

American Airlines Group Inc. said it is renewing credit-card relationships with Citigroup Inc. and Barclaycard US, taking the unusual step of sticking with two card issuers following a big merger.

The deal calls for Citi, which has been American's partner for three decades, to offer its co-branded airline cards to new customers through mobile channels like American's website, direct mail and airport lounges. Citi also recently became the co-brand partner for Costco Wholesale Corp., which ended a 16-year relationship with American Express Co.

As part of the deal, Citi will give up the ability at the end of the year to offer its cards to new American Airlines customers in airports and on American flights. That right will shift to Barclaycard, a unit of British bank Barclays, which was the co-brand card issuer for US Airways Group Inc.

US Airways merged with American in 2013.

"Given the price for exclusivity and the channels that were most important to us, we felt this was the right decision for Citi," said Ralph Andretta, head of U.S. branded cards, at Citi, in an interview.

The move underscores the intense competition among financial institutions to win such "co-brand" card arrangements, which are often highly profitable and aimed at creditworthy high-spending consumers.

American also said Tuesday that it is renewing its longtime arrangement with card-processing network MasterCard Inc.

In a securities filing Tuesday, American estimated that the new card deals would add $1.55 billion to its pretax income over the next 2 1/2 years, compared with what would have been the case under the prior credit-card arrangements.

Companies that go through big mergers typically choose one credit-card partner. That was the case in 2008 when Delta Air Lines Inc. acquired Northwest Airlines Corp. and retained its longtime partner American Express Co. over U.S. Bancorp, which had issued Northwest's cards.

The American credit-card deal, which has been months in the making, is designed to promote "higher growth" than in traditional single-issuer relationships, said Fort Worth, Texas-based American, the largest U.S. carrier by traffic. Neither of the previous arrangements was about to expire, but the airline moved ahead with negotiating the new deals anyway.

"These long-term relationships.... provide our customers with the best ways to enhance their travel experience," said Andrew Nocella, chief marketing officer for American Airlines, whose loyalty program, called AAdvantage, has about 100 million members.

The deal is especially meaningful to Barclaycard, which had kept its US Airways customers after the merger, but had been prevented from soliciting new ones. Both Citi and Barclaycard are expected to retain the portfolios of the new cards that they each originate.

Barclaycard last year also wrested the JetBlue Airways Corp co-brand card program from AmEx.

The American deal "gives us access to great customers who are traveling and thinking about their next vacation and their next destination," Matt Massaua, managing director of Barclaycard's airline partnerships, said in an interview.

Write to Robin Sidel at robin.sidel@wsj.com and Susan Carey at susan.carey@wsj.com

(END) Dow Jones Newswires

July 12, 2016 16:44 ET (20:44 GMT)

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