4 Predictions for the Future of Airline Rewards

The airline industry is always trying to find ways to stay profitable while flying millions of people safely around the world, and airline credit cards and travel rewards have become a big part of that picture. Travel rewards credit cards are big business -- not just for banks, but for airlines that sell frequent flyer miles and other travel perks to banks and their credit card customers.

Just in the past few months, there have been a few big developments in the world of airline credit cards. American Airlines and Delta Air Lines and their bank partners have made some eye-opening announcements about their future plans and intentions to make more money with airline credit cards. The future of air travel -- from booking flights to extra fees and in-flight extra experiences -- could be changing fast.

Let's look at a few predictions for what could be coming next to the world of airline frequent flyer rewards and airline credit cards.

1. More rewards and incentives for airline cardholders

In March 2024, American Airlines announced that it is renegotiating its airline credit card deals with its partner banks, and said that it wants to increase its revenue from credit cards to 10% of the airline's total revenue (up from 7% today).

We don't know exactly what American Airlines is going to do next as far as new rewards and incentives for its airline credit cards. But this announcement is a sign that airlines want to make more money from credit cards, and they're going to rely on their bank partners to get more creative and sweeten the deal.

This could be good news for airline credit card customers. You might start to see more rewards and better reasons to reach for your airline credit card when booking your next flight. But it could be bad news for anyone who doesn't have an airline credit card, and who isn't in a frequent flyer program.

2. Fewer good deals for "non-preferred" travel agencies

As part of its March 2024 announcement, American Airlines also said that, starting May 1, 2024, AAdvantage® miles and elite status Loyalty Points can only be earned by booking flights directly with American Airlines (or partner airlines or preferred travel agencies).

As of April 27, 2024, American Airlines has not announced specific details on what its "preferred" travel agencies are. But this is a warning sign that in the near future, not every cheap flight search engine or online travel agency might get you the best deals on flights. Airlines will want you to book your flights directly with them. They want to know more about their customers, they want to know your preferences, and they want to control when and how you get the best price on airfares -- rather than giving away that power to outside travel agencies.

3. Basic economy gets more "basic"

If you're (like me) still buying basic economy airline tickets, your life as an airline passenger might be about to get more complicated and expensive. My usual strategy over the years has been to just try to buy the cheapest ticket on whatever airline I can find -- I haven't been particularly loyal to any airline.

But airlines don't want to give away cheap deals on basic economy fares. Airlines are going to use "carrots and sticks" to try to get more customers to spend more money on higher-class airfares, not just basic economy. And if you're a basic economy customer, be prepared to take some financial risks and accept some inconvenience for that lower-priced ticket.

Just as airlines have eliminated little perks for basic economy like free seat selection and sometimes even free carry-on bags, the basic economy experience might soon feel more like a low-budget airline where you get nickel and dimed for every last thing. Is this a good business move for airlines? That's debatable, but the message seems to be clear: if you want a better airline passenger experience, be a more loyal, lucrative customer for the airlines -- and don't buy basic economy tickets.

4. A growing gap between premium airline credit cards and the rest

In its March 2024 announcement, American Airlines told investors that it is now earning approximately 80% of its revenue from AAdvantage® members and from airline tickets that cost more than basic economy. American Express also recently announced that it is making a bigger share of profits from premium credit cards, and not seeing any slowdown in customer demand.

According to Bloomberg, American Express customers' spending on air travel increased by 9% in Q1 2024, and much of that came from "front-of-cabin" tickets like first class and business class. Delta Air Lines and American Express also announced in February 2024 that they are expanding perks (and raising fees) for their premium Delta Air Lines cards.

These announcements could be a sign of a larger industry trend: higher fees for premium travel credit cards, and better perks for bigger spenders. This doesn't mean that lower-fee cards will get "worse," but the better deals on airline tickets are likely going to keep flowing toward premium cards that charge higher annual fees.

Bottom line

Airlines want to own more of your business -- from the site you use for booking to the credit card you use to pay. They want you to book your flight on the airline website or app, they want you to be an airline credit cardholder, and they want you to join their frequent flyer program.

The upside for customers: if you go deeper into your relationship with the airline, they will offer better deals and perks. The downside: it might get harder for non-frequent-flyer program members to find good deals.