Issue #14: Cobrand is Winning. Is Loyalty?

Last week, United Airlines made significant updates to its loyalty program. Members will now earn fewer miles per dollar on flights across every tier (yes, even 1k and Globalist) when paying with any method other than the cobrand card.

At the same time, United expanded value for cardmembers: higher earn rates at each tier, more award seat availability, and discounted redemption pricing.

Should anyone be surprised? Not really. Airlines have made no secret that their most profitable business line isn’t the seat in 12A or heck even in 1A. It’s the cobrand credit card. Not just profitable for the loyalty P&L — profitable for the airline overall.

In fact, just about every US airline would be in the deep red without their Cobrand card.

So the financial logic is obvious: protect and grow the profit engine. But here’s where the tension begins. While airlines are racking in record revenue from cobrand portfolios, the underlying loyalty programs are not meaningfully improving. Not for non-cardmembers. And, I would argue, not for cardmembers either (more on this in a bit). And that’s a problem for our industry.

Cobrand growth does one thing exceptionally well: it floods the system with points. Millions of cardmembers earning miles daily on groceries, gas, dining, and utilities means point issuance has never been higher. But airline seat capacity (or in hotels, room capacity) hasn’t expanded at the same pace. Inventory remains fixed. Upgrades remains constrained.

That imbalance creates the conundrum. When point supply increases too fast, brands counteract with increasing the redemption rates and shrinking the award inventory. This also has led to dynamic pricing and the death of award charts. Upgrade inventory has disappeared over time.

United’s announcement of “more availability for cardmembers” sounds generous. But there is still no published award chart. No fixed promise. No structural commitment to availability.

The second new benefit is 10% discount on fares (both paid and point based). This is better— it’s a confirmed benefit. But airline rates (again, both paid and points based) are so inflated this discount feels less like extra value and more of a partial give-back.

Listen, we are a long way from the era of Starwood Hotels & Resorts and its “no blackout dates” promise. The bold, inventory-backed commitment was what the program was known for and grew on, yet no major travel brand has dared to replicate. (Note: I used to work on the SPG program from ‘07-’14).

Today, “discounted awards” are framed as this big win for the consumer, signaling how far the industry has changed.

Do I give United kudo’s for giving more value to Cardmembers? Yes. They are at least providing better benefits and value to (in their eyes) their most important P&L line. But it still leads to the next question…

Cobrand cards were not always the core of travel loyalty. Originally, they were supplemental, a way to extend engagement beyond brand purchase frequency, and monetize the occasional customer. The loyalty program was still anchored in the brand experience: flying, staying, earning, status, recognition.

That is no more. Banks want scale. They want as many active accounts as possible and top-of-wallet spending. That scale requires appealing to more than road warriors.

At Starwood, our Cobrand with Amex was a cash cow. But the typical cardmember was not a weekly traveler or heck, even a monthly traveler. Most traveled a handful of times per year at best. They used the card to accumulate points because they didn’t have the travel capacity to earn them any other way. I suspect the same profile exists across Delta, United, Hyatt, and others: high card spenders, relatively low travel frequency.

That isn’t a flaw. It’s the economic model. The banks only make money on swipes OFF the brand. But it forces a harder question.

Who is the truly “loyal” customer? The one who swipes daily but flies once a year?
Or the one boarding a plane every week, even if in business class paying premium fares? The airline ideally would want the person who does both. But United’s announcement skews to the former.

Zoom out beyond travel. Retail Cobrands don’t face the same inventory constraints. A retailer can manufacture more product. And yet, even in retail, we’ve seen programs increasingly stack value under the cobrand and reduce baseline earn for everyone else. Gap, Bloomingdale’s, Nordstrom and others often deliver roughly 1% back without a cobrand — pushing meaningful value into the credit card tier.

Across industries, we are conflating “profitable cardholder” with “loyal customer.” Sometimes those overlap. Often they don’t.

I’m not anti-cobrand. I have two in my wallet. My spouse carries two others (including the United card 😁). Professionally, I’ve built part of my career on Cobrands — Costco’s at Amex, BJ’s Wholesale’s Cobrand business, helping pitch Cobrand partnerships at Mastercard. I’ve seen the economics up close. Cobrand cards are powerful. Consumers like them. Brands love them. They drive enormous profitability.

So what’s the concern? It’s twofold.

There is nothing wrong with financial optimization. But loyalty programs derive long-term strength when most directly tied to the essence of your brand.

If point inflation continues while program guarantees disappear, programs may remain profitable but they risk becoming even more transactional than they are today, and less tied to the brand love every marketer wants from their customers.

Cobrand cards are getting richer. The open question is whether loyalty itself is.

Do you worry the overemphasis on Cobrands is hurting the base program? Are you ok with the shift that loyalty IS the cobrand cardmember?