Top European Airlines Face Some Headwinds, But Mostly Opportunities, in Co-Branding

Navigator Edition: April 2013
By: Erik Howell and Maria Popova

In Europe, as well as globally, airline co-brand cards are one of the most successful credit card products. In order to understand the challenges and opportunities for European issuers and their airline partners, First Annapolis Consulting examined the co-brand offerings of the top 25 European carriers, ranked by average seat kilometers.

Program coverage

Twenty one out of the top twenty five European airlines have at least one co-brand program (“program” defined as a partnership between an issuer and an airline in a given country). Not surprisingly, the lion’s share of the European airline co-brand market is attributable to the largest carriers, with the top five airlines comprising 44 out of the total of 85 programs. With the exception of a handful of airlines, notably Lufthansa, which together with its Miles & More partner airlines has 29 programs in 25 countries, most airlines outside of the top five only have co-brand partnerships in their home markets.

Figure 1: Distribution of Top 25 European Airline Co-brands by Payment Card Network
Source: First Annapolis Consulting research and analysis.
Scope: 25 airlines, 85 co-brand programs, 210 co-brand products. Airlines ranked by average seat kilometers.

Issuers and Networks

Most European airlines use a country-by-country approach to select issuers due to operational requirements and a lack of issuers with a pan-European presence. However, there are a few examples of airlines that have partnered with an issuer in more than one country (e.g., SAS with SEB and Lufthansa with Citibank and UniCredit), and we found that 33% of the top 25 airlines have more than one issuing partner in at least one country (e.g., Aeroflot has 7 different issuers in Russia). In terms of network relationships, seven airlines have multiple network relationships in the same country, and five programs are dual American Express and Visa/MasterCard programs, in which the cardholders receive both an American Express plastic and a Visa or MasterCard plastic (using the American Express plastic typically earns rewards at a higher rate).

Products and Value Propositions

Most of the top 25 European airlines’ co-brand products employ a traditional ‘miles per euro/dollar of spend’ value proposition structure with certain airline benefits. The typical earning structure is 1 mile per unit of currency spent, and only 19% of products offer extra miles for purchases on the airlines (significantly less than in the North American market). Seventy-one percent of the co-brand products surveyed offered bonus miles to new cardholders or as anniversary incentives, but the offered bonus was below 5,000 miles for 74% of products (also significantly less than in the North American market). Fifty-five percent of surveyed products offered some form of ancillary or “soft” airline benefit, such as lounge access, preferred seating, concierge services, frequent flyer program status upgrade, and priority class check-in.

Figure 2: Overview of European Airline Co-Brand Card Bonus and Ancillary Features
Source: First Annapolis Consulting research and analysis.
Scope: 25 airlines, 85 co-brand programs, 210 co-brand products. Airlines ranked by average seat kilometers.

The average amount of spending required to earn a rewards ticket within Europe (assuming 10% of spend is on the airline, and not adjusting for differences in rewards ticket values between airlines), averages around €24,000. On a normalized basis, the average spending required to earn 25,000 miles is very similar at €23,500. While 26% of the 210 products surveyed did not have annual fees, overall annual fees averaged €70 to €75 for the top 10 airlines, and between €40 and €60 for smaller airlines (in both cases, averages include cards with no annual fees). As illustrated in the chart below, there is not a direct correlation between annual fees paid and the mileage earning rate, and on average, cards with higher annual fees earn fewer miles. However, higher annual fee cards typically have better ancillary benefits, such as lounge access, etc.

Figure 3: Comparison of European Airline Co-Brand Card Mileage Earning Rates
Source: First Annapolis Consulting research and analysis.
* Reward ticket is defined as a free (before tax) ticket with the same region (i.e., the cheapest ticket in terms of miles. It is assumed that 10% of the spending is at the airline, and 90% is at other merchants.

Our survey also found that European airline co-brands extend beyond credit cards. In Russia, British Airways and S7 Airlines offer co-brand debit cards (with lower mileage earn rates than credit cards), and Ryanair recently launched a co-branded prepaid card program in seven European countries.


Despite attractive profitability and a high degree of issuer interest in the “crown jewels” of co-brands, airline co-brand programs face headwinds in an increasingly sophisticated European cards market.

  • Competition from Bank-Branded Premium Cards. European issuers are increasingly targeting affluent customers with bank-branded cards that offer attractive rewards programs (e.g., cash back with relatively high earn rates) and a collection of “soft” benefits, many of them travel related. To compete with these bank-branded products, airline co-brands can add unique and differentiated soft benefits available exclusively through a direct relationship with the airline, test changes in mileage earning structures, and explore “super premium” product versions targeting the most affluent clientele.
  • Competition from Simplified Bank Loyalty Programs. As frequent flyer redemption structures become more complex, airline co-brand cards also face competition from issuers’ simplified bank-branded loyalty programs. As issuers increasingly move towards cash back or offers-based loyalty programs, airlines co-brands may be perceived by customers as more complicated and with less redemption flexibility.
  • Perceived Devaluation of Miles. The perception of increasing redemption thresholds and more limited seat availability, coupled with annual card fees as well as taxes and surcharges on award tickets (in many programs), has decreased the perceived attractiveness of airline co-brand cards relative to many bank-branded rewards cards in some segments of the market. Offering cardholders higher earn rates in Europe’s generally low-interchange environment is often difficult, but potential options include offering customers two plastics (an American Express with a higher earn rate, and a Visa or MasterCard with a lower earn rate but broader acceptance), more flexibility in miles redemption options (e.g., the possibility to combine miles redemption with partial payment for the ticket in cash, merchandise, etc.) or facilitating usage of miles outside the frequent flyer program.


European airline co-brand programs also have several significant growth opportunities.

  • Pan-European Programs. As noted above, European airline co-brand programs are typically focused only on their home market, presenting the opportunity to expand programs to high-potential secondary markets. Local regulatory and operational requirements are barriers, as is the mixed geographic coverage of European issuers, but larger secondary markets present significant revenue and loyalty generation opportunities.
  • Second Issuers with Branch Marketing. For airlines that do not have contractual exclusivity with their primary issuer, establishing a second program with an issuer that will sell airline co-brands in a large branch network is an opportunity to expand reach and grow revenues (albeit likely at lower rates than the primary program).
  • Small Business Co-Brands. Many users of consumer airline co-brand products are likely owners of small businesses, offering the opportunity to introduce new products on a small business card platform that, depending on the market, may offer higher interchange rates and more favorable regulations than consumer cards.

Regardless of the challenges and opportunities described above, airline co-brand programs are a fundamentally attractive offering for both airlines and their bank partners. Co-brands offer the airlines the opportunity to make their brand visible to customers and build loyalty on a daily basis and for substantial revenue streams, while they offer issuers the opportunity to obtain cardholders that are typically lower-risk but have annual spending that is multiples higher than those of typical bank-branded cards. The high penetration of co-brand programs among the top 25 European airlines illustrates this core attractiveness, and the growth and expansion opportunities for most airline co-brand programs are greater than the short-term challenges, many of which can be addressed by product and marketing changes.

This article previously appeared in the February 2013 issue of Cards International.

For more information, please contact Maria Popova, Associate,; or Erik Howell, Senior Manager, Both specialize in Card Issuing.

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