Airlines and planemakers warn that credit card legislation could end frequent-flier rewards

Major airlines, including United, American, and Southwest, along with Airbus and Boeing, are lobbying against a proposed Senate amendment to the GENIUS Act, arguing it could cripple airline loyalty programs by reducing credit card swipe fees. The industry warns that the Durbin-Marshall amendment, aimed at increasing competition among credit card providers, could force airlines to discontinue rewards credit cards, leading to a potential $25 billion reduction in economic activity and job losses due to decreased flight activity and plane orders. Airlines for America reports that 57% of all frequent flyer miles were generated by credit card use in 2023 and that over 31 million Americans have airline travel reward cards.

Analysis

A coalition of major airlines, including United Airlines, American Airlines, and Southwest Airlines, alongside aircraft manufacturers Airbus and Boeing, are actively opposing the Durbin-Marshall amendment to the GENIUS Act. This proposed legislation aims to increase competition among credit card providers and lower swipe fees, a move supported by retailers. However, the aviation industry argues this could critically undermine their lucrative loyalty programs, as co-branded credit cards are a significant revenue source, with Airlines for America research indicating these programs generated approximately $25 billion in economic activity in 2023 and that 57% of all frequent flyer miles or points issued that year stemmed from airline credit card use. The letter from the industry group warns that the amendment could compel airlines to discontinue these rewards cards, potentially leading to 'a contraction in airline activity and jobs,' difficulties in meeting labor commitments, and reduced capacity to purchase new aircraft. This development is viewed with 'strongly negative' sentiment (score -0.7) for the sector, and specifically carries a -0.6 sentiment score for UAL, AAL, LUV, and BA, reflecting concerns over the potential erosion of a vital income stream. Conversely, proponents like Senator Durbin suggest the legislation could save merchants and consumers an estimated $15 billion annually from the over $100 billion currently paid in swipe fees.

Key Decisions for Investors

• Investors in airline stocks such as United Airlines (UAL), American Airlines (AAL), Southwest Airlines (LUV), and aircraft manufacturer Boeing (BA) should closely monitor the legislative progress of the Durbin-Marshall amendment due to its potential to significantly disrupt a key revenue stream from loyalty programs.
• A detailed assessment of individual airline financials is recommended to understand the specific materiality of revenue and profit derived from co-branded credit card partnerships, as the impact of the proposed legislation could vary across carriers.
• Consider the potential for reduced airline profitability, which could lead to operational cost-cutting, delays in fleet renewal programs, and more contentious labor negotiations if the amendment is enacted, thereby impacting long-term growth prospects and valuations for these companies.