An American Airlines’ Embraer E175LR (front), an American Airlines’ Boeing 737 (C) and an American Airlines’ Boeing 737 are seen parked at LaGuardia Airport in Queens, New York on May 24, 2024.
Charly Triballeau | AFP | Getty Images
American Airlines is in talks to make Citigroup its exclusive credit card partner, dropping rival issuer Barclays from a partnership that dates back to the airline’s 2013 takeover of US Airways, said people with knowledge of the negotiations.
American has been working with banks and card networks on a new long-term deal for months with the aim of consolidating its business with a single issuer to boost the revenue haul from its loyalty program, according to the people.
Talks are ongoing, and the timing of an agreement, which would be subject to regulatory approval, is unknown, said the people, who declined to be identified speaking about a confidential process.
Banks’ co-brand deals with airlines, retailers and hotel chains are some of the most hotly contested negotiations in the industry. While they give the issuing bank a captive audience of millions of loyal customers who spend billions of dollars a year, the details of the arrangements can make a huge difference in how profitable it is for either party.
Big brands have been driving harder bargains in recent years, demanding a bigger slice of revenue from interest and fees, for example. Meanwhile, banks have been pushing back or exiting the space entirely, saying that rising card losses, scrutiny from the Consumer Financial Protection Bureau and higher capital costs make for tight margins.
Airlines rely on card programs to help them stay afloat, earning billions of dollars a year from banks in exchange for miles that customers earn when they use their cards. Those partnerships were crucial during the pandemic, when travel demand dried up but consumers kept spending and earning miles on their cards. Carriers have said growth in card spending has far exceeded that of passenger revenue in recent years.
While it says it has the largest loyalty program, American was out-earned by Delta there, which made nearly $7 billion in payments from its American Express card partnership last year, compared with $5.2 billion for American.
“We continue to work with all of our partners, including our co-branded credit card partners, to explore opportunities to improve the products and services we provide our mutual customers and bring even more value to the AAdvantage program,” American said in a statement.
Delays, regulatory risk
It’s still possible that objections from U.S. regulators, including the Department of Transportation, could further delay or even scuttle a contract between American Airlines and Citigroup, leaving the current arrangement that includes Barclays intact, according to one of the people familiar with the process.
If the deal between American and Citigroup is consummated, it would end an unusual partnership in the credit card world.
Most brands settle with a single issuer, but when American merged with US Airways in 2013, it kept longtime issuer Citigroup on board and added US Airways’ card partner Barclays.
American renewed both relationships in 2016, giving each bank specific channels to market their cards. Citi was allowed to pitch its cards online, via direct mail and airport lounges, while Barclays was relegated to on-flight solicitations.
‘Actively working’
When the relationship came up for renewal again in the past year, Citigroup had good footing to prevail over the smaller Barclays.
Run by CEO Jane Fraser since 2021, Citigroup has the more profitable side of the AA business; their customers tend to spend far more and have lower default rates than Barclays customers, one of the people said.
Any renewal contract is likely to be seven to 10 years in length, which would give Citigroup time to recoup the costs of porting over Barclays customers and other investments it would need to make, this person said. Banks tend to earn most of the money from these arrangements in the back half of the deals.
With this and other large partnerships, Fraser has been pushing Citigroup to aim bigger in a bid to improve the profitability of the card business, said the people familiar.
“We are always actively working with our partners, including American Airlines, to look for ways to jointly enhance customer products and drive shared value and growth,” a Citigroup spokesperson told CNBC.
Meanwhile, Barclays executives told investors earlier this year that they aimed to diversify their co-branded card portfolio away from airlines, for instance, through added partnerships with retailers and tech companies.
UnitedHealth Group saw some of its insiders step in and purchase declining shares this week.
Kristen Gil, a director at the firm, bought 3,700 shares worth roughly $1 million on Thursday.
Shares of UnitedHealth plunged nearly 11% to $274.35 on Thursday following a report in The Wall Street Journal that the Department of Justice is conducting a criminal investigation into possible Medicare fraud.
UnitedHealth Group , whose stock has been in a tailspin amid a tumultuous period for the health-care giant, saw some of its insiders step in and purchase declining shares this week. Kristen Gil, a director at the firm, bought 3,700 shares worth roughly $1 million on Thursday, while Timothy Patrick Flynn and John Noseworthy, also directors, scooped up about 1,500 and 300 shares , respectively, on Wednesday, according to InsiderScore, which tracks regulatory filings from corporate insiders. Shares of UnitedHealth plunged nearly 11% to $274.35 on Thursday following a report in The Wall Street Journal that the Department of Justice is conducting a criminal investigation into possible Medicare fraud. The stock rebounded 6% Friday, cutting its weekly losses to 23%. UNH 5D mountain UnitedHealth The reported investigation also follows the surprise exit of UnitedHealth Group CEO Andrew Witty, who will be replaced by the company’s former longtime chief executive Stephen Hemsley. Shares of UnitedHealth Group are down roughly 43% this year following a string of setbacks for the company. The company has been grappling with a historic cyberattack, higher-than-expected medical costs and a torrent of public blowback after the murder of UnitedHealthcare CEO Brian Thompson.
U.S. Federal Reserve in Washington, DC, on January 30, 2024.
Mandel Ngan | Afp | Getty Images
The Federal Reserve will look to reduce its headcount by 10% over the next couple of years, including offering deferred resignation to some older employees, central bank chair Jerome Powell said in a memo.
“Experience here and elsewhere shows that it is healthy for any organization to periodically take a fresh look at its staffing and resources. The Fed has done that from time to time as our work, priorities, or external environment have changed,” Powell said in a memo obtained by CNBC.
The central bank chief added that he has instructed leaders throughout the Fed “to find incremental ways to consolidate functions where appropriate, modernize some business practices, and ensure that we are right-sized and able to meet our statutory mission.” One method for shrinking the staff will be to offer a voluntary deferred resignation program to employees of the Federal Reserve Board who would be fully eligible to retire at the end of 2027.
The central bank said in its 2023 annual report that it had just under 24,000 employees. A 10% reduction would bring that number below 22,000.
The memo comes as the Trump administration has pushed for cost cuts across civil service agencies, spearheaded by Elon Musk and the so-called Department of Government Efficiency. Musk has previously called the Fed “absurdly overstaffed.” Powell’s memo did not mention Musk or DOGE as a factor in the decision to shrink headcount.
The planned staff cuts were first reported by Bloomberg News.
Check out the companies making headlines in midday trading. Applied Materials — Shares of the semiconductor manufacturer dropped 6% after Applied Materials posted disappointing fiscal second-quarter revenue. The company’s revenue of $7.10 billion was below the LSEG consensus of $7.13 billion. Semiconductor revenue of $5.26 billion also disappointed the $5.31 billion analysts were looking for. Take-Two Interactive Software — The stock slid 1.8% after the video game company gave weaker-than-anticipated guidance for full-year bookings, expecting the figure to come between $5.9 billion and $6 billion. That missed the $7.82 billion StreetAccount consensus. Take-Two also projected bookings of between $1.25 billion and $1.30 billion for the current quarter, while analysts had penciled in $1.28 billion. Vistra — Shares of the power producer gained 3% after the company purchased seven natural gas facilities from Lotus Infrastructure Partners for $1.9 billion. The gas plants are located in the PJM market, New England, New York and California. Constellation Brands — Shares of the Corona and Modelo importer climbed 1.4% after Berkshire Hathaway disclosed doubling its stake in the company, putting its position at around $2.2 billion in value. Galaxy Digital — The Mike Novogratz-led crypto firm began trading at the Nasdaq on Friday, opening at $23.50 per share in a direct listing. Galaxy Digital has traded in Canada since 2020 . Cava — The eatery chain’s stock dropped more than 2% after the company reiterated its full-year guidance for same restaurant sales, implying a slowdown from first-quarter results. Cava said it achieved 10.8% same store sales growth. However, it maintained a full-year projection of 6% to 8% improvement in that category. Cava’s earnings per share of 22 cents for the period was ahead of projections for 14 cents per share, according to LSEG. Fiserv — The financial services provider jumped more than 4% as the stock recovered some of its steep losses for the week. Fiserv is down more than 9% this week and is one of the most oversold names on Wall Street, with a relative strength index below 30. Coinbase — The crypto exchange jumped more than 9%, recovering losses from the previous session. Some Wall Street analysts called the sell-off overdone and a buying opportunity . On Thursday, the company confirmed the Securities and Exchange Commission has been investigating whether it has misstated its user numbers , sending the stock down 7.2%. Novo Nordisk — Shares stumbled 3% after the pharmaceutical company announced that CEO Lars Fruergaard Jørgensen would be stepping down from his position , citing recent market challenges. Jørgensen, who was in the position for the last eight years, will remain “for a period to support a smooth transition to new leadership” as Novo Nordisk searches for a successor. Doximity — The health care platform issued weak guidance, sending the stock down 11.8%. Doximity expects adjusted EBITDA for the first quarter to come in between $71 million and $72 million. That’s short of the $74 million expected from analysts polled by StreetAccount. Revenue guidance for both the first quarter and full year also missed expectations. — CNBC’s Tanaya Macheel, Lisa Han, Jesse Pound and Michelle Fox contributed reporting.
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