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The-New-Wave

Air travel is picking up again. What does that mean for Airline cards?

After the devastating economic impact of the global pandemic on the airline industry, the future of air travel is just about beginning to look brighter. As more international borders open to air traffic, customers are looking ahead towards their next business trip or family vacation. Come this November, the U.S is set to relax all travel-related restrictions for vaccinated air travelers.

Going by conventional wisdom, many months of travel restrictions imposed by the COVID-19 pandemic were expected to sound the “death knell” for airline credit cards, which primarily depend on regular travel for air travelers to earn their “miles” and rewards. However, that did not happen. The 2021 JD Power credit card shopping study found that 11% of all credit cards issued to American citizens during the pandemic were in fact, airline travel cards.

What are the main factors that are driving customer expectations from their airline credit cards? Let us first look at them.

The “New” wave of Airline cards

How did the 2020 pandemic still manage to drive the new wave of airline cards? Here are some factors that influenced their decision:

  • Return to normal

While it was never accurately projected, air travelers still expected the return of regular travel. The JD Power study found that this factor influenced 22% of all airline card shoppers during the pandemic. Further, 28% of those who opted for travel cards did it to earn valuable rewards, along with the chance of earning a cashback.

  • Revolving credit

Nearly one-fourth of credit card appliers say their primary reason was the income uncertainty created by the COVID-19 pandemic. As more Americans faced employment uncertainty and worsening credit scores, they purchased new cards that offered a better “revolving” credit facility as a kind of supplement to their income.

How do airline brands and credit card issuers adapt to the new “normal” and offer higher value to their customers? And what is the future of airline cards in the post-pandemic world? Let us discuss that in the next sections.

What do customers look for in Airline cards?

A significant set of consumers select credit cards influenced by the way they are promoted through extensive brand marketing, along with wide reward offerings and low fees. They get convinced about the features and the value that they hope to be able to secure when the time comes.

When it comes to airline cards, consumers have a host of cards that they can choose from. This includes international airline card brands like the Iberia Visa, Emirates Skywards, and Miles & More.

What do air travelers look for in their airline cards? Here are a few pointers:

Better air mileage

Recent changes in frequent flyer programs have made it harder for air travelers to earn and redeem their air miles. Airlines like Delta and American Airlines have switched from the previous distance-based mileage to the ticket fare-based mileage, where travelers earn their air miles based on how much they spend on their travel.

Other airline brands have increased the miles required to award free travel. In the new normal, travelers are looking for airline cards that can offer better air mileage. For instance, the British Airways Avios brand requires just 13,000-mile points to travel between the U.S west coast and Hawaii, in place of 15,000-22,000 mile points needed by some other card brands.

Higher welcome bonus

To encourage their frequent travel, air travelers are looking for a higher welcome bonus in the form of “free miles” or elite status. One example is that of the Emirates Skywards Rewards card program, which offers its new customers the “Silver” elite status for the first year.

Similarly, airline credit cards like the Iberia Visa and Aer Lingus Visa allow flyers to earn up to 100,000 Avios in three months after signing up.

More number of transfer partners

Air travelers also look for airline card brands that have a larger partner network, where they can transfer the rewards points earned on the card program. One example of this is the SkyTeam network that includes Amex and Marriott Bonvoy, which allows the transfer of points to its airline partner, Delta airlines. Similarly, United and Singapore Airlines are part of the Star Alliance, as are many other hotel and shopping partner brands.

To tap into this potential, airline card brands must look to add and diversify their partner network, so that customers have a greater number of transfer options when they want to redeem their points.

Designed for beginners

While older customers prefer airline cards with lesser interest rates or higher limits, younger consumers (or first-time flyers) prefer airline cards with attractive sign-up benefits. For instance, the Chase Sapphire Preferred airline card is best designed for beginners for a variety of reasons including:

  • It is not branded with any particular airline in its name.
  • Its points can be easily redeemed through the Chase portal.
  • It offers a 1:1 ratio meaning 1,000 airline miles for 1,000 Chase points
  • It has an affordable annual fee of just $95 (that provides travel insurance and other sign-up benefits)

Next, what is going to be the future of airline cards? Let us discuss this in the next section.

What is the future of Airline cards?

As is evident, reports of the “death” of airline cards are exaggerated. Following the uncertainties at the beginning of the pandemic, credit cards have made a positive return in the latter part of 2020 and through 2021. Going by a recent survey, 85% of Americans are planning on a vacation, hence the market for airline cards will continue to be strong in the future.

At the same time, airline loyalty programs are gaining more importance, and airline brands are looking for ways to sell more air miles through branded credit cards. Further, U.S-based airlines are now attracting more customers through “lucrative” card promotions including welcome and temporary spending bonuses.

For Americans impacted by job losses or high debt, credit cards that can offer minimum interest rates, feasible revolving credit, or balance transfer facilities will continue to dominate. On the other end, airline card issuers should also look at air travelers who are “flush” with unspent cash (due to the imposed travel restrictions) and customize their offerings to attract these customers.

Conclusion

Post the pandemic effect, the airline industry is slowly limping back to normalcy, with governments doing away with travel-imposed restrictions. Having said that, airline companies must learn to adapt to the new normal of air travel along with changing customer behavior.

With its credit processing platform, CoreCard has been successful in designing and implementing customized solutions for its airline card issuers. Our modern technology provides agility to brands and banks as they look at adapting to changing consumer behavior and tapping new trends.

Do you need professional help in getting your “new and improved” credit card program up and flying? It is time you contact us.

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