United’s Credit Card Performance is Still Lagging, According to the Airline’s Chief Commercial Officer

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There may be a very good reason that the UnitedSM Explorer Card has its best-ever public signup offer, a $0 annual fee the first year (then $95) and the ability to earn 65,000 miles: 40,000 bonus miles after you spend $2,000 on purchases in the first 3 months your account is open. Plus earn an additional 25,000 bonus miles after you spend $10,000 total on purchases in the first 6 months your account is open. (Earning the full bonus requires just an average of $1667 per month in spend.)

I’ve argued for a long time that as profitable as airline frequent flyer programs are the era of 50% or better margins is coming to an end.

  • Eventually we’ll see interchange rates fall, the fees merchants pay for accepting cards. Maybe we won’t see regulation like Europe or Australia, but we’ll see competition from new payment technologies competing down cost. Indeed we’re seeing interchange falling from American Express which is fighting to get small merchants to sign up. That will mean lower revenue for frequent flyer programs.
  • Airlines need to spend more money to satisfy customers. In order to defend their credit card revenue stream customers need to value the miles they’re earning. In an era where planes are full airlines either raise mileage prices or tell customers nothing is available. That’s not how you keep customers on the treadmill. So they need to improve availability, even trading off with revenue seats. That erodes margins.

United’s President said their credit card program was lagging. United and Chase made improvements this year to both benefits and points-earning of the UnitedSM Explorer Card.

That’s their attempt to ‘keep up with the Joneses’ of other credit cards becoming ever more rewarding.

The airline’s financials suggest stagnation in MileagePlus’ growth. I believe they’ve largely been flat outside of revenue from Chase for Ultimate Rewards points transfers.

Apparently United’s efforts aren’t working here, according to United Chief Commercial Officer Andrew Nocella (who came with Kirby over from American) reports Brian Sumers at Skift. Speaking at the Credit Suisse 6th Annual Industrials Conference in Palm Beach, Florida he said,

[T]he program has not be as successful as United has hoped. Jose Caiado, the Credit Suisse analyst questioning Nocella, said he understood card acquisitions were “solid” in the first half of the year, but spending lagged, an assertion Nocella did not dispute.

“We haven’t seeing that same momentum at the level that some of our competitors are talking about in this space,” Nocella said. “And so that is a conversation we are having with Chase. We’d like to see it better. They’re committed to making it better.”

He was vague on the problems, calling it a “a structural issue that can be fixed.”

It does not, therefore, surprise me to see them now offering to let you earn 65,000 miles as an initial bonus on the UnitedSM Explorer Card. You should get the card (if you haven’t had 5 or more new credit cards in the last 24 months). You should keep the card for its travel benefits. But put your everyday spend on more lucrative cards.