* Airlines rewrite loyalty programs to favor credit-card

spending

* Banks pay billions for airline miles, helping steady

earnings

* Political and regulatory pressures pose risks to the

loyalty model

By Rajesh Kumar Singh

CHICAGO, March 13 (Reuters) - For years, the fortunes of

U.S. airlines have been dictated by fares, fuel bills and how

many passengers fill their cabins. Now, a growing share of their

cash comes from co-branded credit cards, and that is

increasingly showing up in how loyalty programs reward

travelers.

United Airlines said last month that, starting April

2, 2026, regular members without its card will earn only 3 miles

for every dollar spent on eligible flights, while cardholders

will earn at least 6. The airline also said regular members will

need a qualifying United card to earn miles on basic economy

tickets.

American Airlines ( AAL ) has stopped giving AAdvantage

miles and Loyalty Points on basic economy tickets. Delta Air

Lines ( DAL ), meanwhile, lets customers use spending on its

co-branded American Express ( AXP ) cards to help qualify for elite

status.

A Reuters review of filings by major U.S. airlines from 2021

through 2025 shows why. Banks pay carriers billions of dollars a

year for miles and other payments tied to their loyalty programs

- in some years rivaling operating income.

That money is less tied to ticket sales, a distinction with

fresh relevance as the Middle East conflict sends jet-fuel costs

sharply higher and squeezes airline margins. But it also leaves

airlines more exposed to bank strategy, credit conditions and

political decisions that could change how rewards programs are

funded.

CHEAPEST FARES, FEWER REWARDS

Airlines are rewriting loyalty-program rules to emphasize

credit-card spending, making rewards harder to earn on the

lowest fares.

"The value provided to frequent-flyer members has decreased

over time," said Jay Sorensen, head of consultancy IdeaWorks.

Its 2025 U.S. Domestic Reward Report found reward "payback" -

linking cash fares to award prices - has fallen by about half

since 2019, as several airlines cut back or eliminated

mileage-earning on their cheapest tickets.

David Robertson of the Nilson Report said that if redeeming

miles feels out of reach, some consumers may abandon airline

cards, potentially prompting pressure from banks that buy miles

in bulk.

Airlines reject the idea that cards are replacing flying as

the main path to rewards. Alaska Airlines loyalty chief

Kevin Scott said non-cardholders "continue to earn meaningful

value through flying." Co-branded cards, he said, are meant to

enhance the program, not replace traditional earning.

BILLIONS FROM BANKS

Airlines report credit-card partner payments differently,

but the sums are large across the industry.

Delta received $8.2 billion in cash from American Express ( AXP )

in 2025 - about 14% of adjusted operating revenue and

roughly 1.4 times adjusted operating income. A Delta

spokesperson said part of that cash is recognized as revenue

immediately, while some is deferred until miles are redeemed.

American reported $6.2 billion in 2025 cash payments from

co-brand and other partners, roughly four times its adjusted

operating income. The airline expects its new co-brand credit

card agreement with Citi to help narrow its profit gap

with rivals Delta and United.

At Alaska, loyalty revenue made up about 16% of total

revenue, and CFO Shane Tackett told Reuters the co-brand

partnership helps stabilize results through demand swings.

But the business also ties airlines more closely to bank

partners and the credit cycle. Delta says nearly all of its

marketing-agreement cash comes from American Express ( AXP ), while

Southwest Airlines ( LUV ) says most points it sells go to

JPMorgan Chase ( JPM ).

Brian Riley, a payments analyst, said banks in a downturn

tighten lending and cut co-branded card marketing, slowing

new-account growth and affecting airline earnings within two to

three quarters.

POLITICAL PRESSURE

The credit-card-driven loyalty model also faces pressure

from merchants and lawmakers seeking to overhaul the fee system

that helps fund rewards. A bipartisan bill in the U.S. Congress

known as the Durbin-Marshall proposal would require more

competition in payment-network routing, which supporters say

would lower merchant costs.

Trade group Airlines for America warned the bill could

jeopardize airline credit-card rewards, citing the hit taken by

debit-card rewards after a similar regulatory change, and said

consumers value airline loyalty programs.

Merchants and consumer groups disagree. Dylan Jeon of the

National Retail Federation said premium rewards cards carry the

highest interchange rates, and merchants often pass those costs

on to consumers, meaning non-users help subsidize users.

Analysts say high U.S. interchange fees help fund rich

rewards, and research shows caps in Europe and Australia reduced

rewards, raised annual fees and led some cards to disappear.

Separately, President Donald Trump has proposed a one-year cap

on credit-card interest rates at 10%, a move banks and airline

groups say could hurt rewards programs.

REGULATORY SCRUTINY

Airline rewards programs have drawn regulatory scrutiny as

well. A U.S. Department of Transportation spokesperson said the

department asked American, Delta, Southwest ( LUV ) and United in 2024

for information about rewards programs and policies. All four

responded, and their replies are under review.

John Breyault, vice president of public policy at the

National Consumers League, said stronger disclosure is needed as

airlines can change earning and redemption values without giving

customers clear advance notice.

"The modern airline is a gigantic rewards program that just

happens to fly airplanes," Breyault said.