The move to align the Southwest Airlines and AirTran frequent flier credit cards under the same issuing bank is just one stop in the route toward the eventual merger of the two carriers' affinity programs.
The decision to end AirTran's relationship with Barclays Bank, the former issuer of AirTran's A+ Rewards Visa, and maintain two separately branded credit cards with JPMorgan Chase, the issuer of Southwest's Rapid Rewards Visa—as opposed to simply migrating legacy AirTran card holders to the Southwest card—is reflective of deeper issues that Southwest has faced combining the two airlines' operations.
"A series of IT issues, fleet issues and other factors have conspired to cause the integration to go a lot longer than anticipated," says Robert Mann, an airline industry analyst and consultant who has previously served in executive roles at American Airlines, Pan Am and Trans World Airlines.
It's not uncommon for two merging airlines to consolidate their frequent flier credit cards under the same issuer, says Mann, who cited examples in the US Airways/America West, Delta/Northwest and United/Continental mergers. But the Southwest/AirTran merger has been complicated by disparities between the carriers' reservation systems—namely the inability of Southwest's system to incorporate AirTran's international routes, which has slowed down the integration of other operations, including the two frequent flier programs and their corresponding credit cards.
"We acquired AirTran a couple of years ago, but as we work through the integration of AirTran into the Southwest brand, we really are still operating as two separate companies," says Southwest spokesperson Katie McDonald. "Because the two [frequent flier] programs are still separate, it makes sense to have two separate credit cards."
The merger between Dallas-based Southwest Airlines and Atlanta-based AirTran was announced in September 2010 and closed in May 2011. The full integration of the two carriers is now scheduled to be complete by the end of 2014. Chase launched its AirTran card in October 2012 and will add the customer portfolio that it's acquiring from Barclays to its existing base of AirTran card holders.
For Barclays, losing the AirTran card comes at a time when many, including Mann, predict it will soon lose its US Airways card to Citi, the issuer of the American Airlines flier card. The Barclays-issued Spirit Airlines flier card was phased out and replaced with a Bank of America-issued card in 2012, but it still issues flier cards for China Airlines, Frontier Airlines, Icelandair, Lufthansa and Virgin America.
Mann says that while integration has taken longer than anticipated, moving the AirTran credit card to Chase shows that Southwest is taking whatever incremental steps it can while it works on the larger challenges.
"They can change what they can change and one of the easy ones is to get the same commercial partner involved in both versions of an affinity credit card that will eventually just be Rapid Rewards," he says.
It's a familiar position for Chase, which previously administered both the Continental and United frequent flier credit cards. After the carriers merged, Chase combined the two card products under the United banner.
"The fact that Chase has done this before puts them in a good position to understand the issues and move toward an expeditious solution," Mann says.
A Chase spokesperson declined to comment about the future of the AirTran and Southwest cards. McDonald, who has previously been involved with Southwest's card program, noted that Chase has strict policies in place to keep the affinity cards of competitors separate.
"Chase was very rigid about not sharing any kind of information at all, any learnings, anything, between their different card partners," she says. "What they do with United was completely different teams from the teams that worked on the Southwest account."
While the process of combining routes and scheduling systems, staff and equipment largely happens behind the scenes during an airline merger, the consolidation of frequent flier programs and their affiliated credit cards happens very much so in the public eye of a carrier's frequent customers. The parallel Chase cards are just one of many workarounds that have been put in place during the Southwest/AirTran transition.
In February, Southwest integrated its sales channels to allow fliers to buy Southwest flights from AirTran and vice-versa. In addition, consumers can schedule trips on flights that span the two carriers, with passengers earning loyalty currency (AirTran "A+ Credits" and Southwest "Rapid Rewards Points") on the carrier they bought their tickets from.
"We implemented the ability to convert loyalty currency between the two programs," McDonald says. "If I am a member of both AirTran's loyalty program and Southwest Rapid Rewards, I can go in and convert my Rapid Rewards points into AirTran credits in order to buy a flight through AirTran channels."
McDonald says Southwest is encouraging customers of both carriers to maintain accounts with both frequent flier programs, even though the two programs will soon merge.
"Yes, it is kind of counterintuitive to open up an account in a program that will be going away, but the benefits are great in that you can use your AirTran loyalty currency to purchase an international flight and we wanted our Southwest fliers to be able to do that," she says.
That position carries over to the credit card programs, as well. While McDonald acknowledged a "mitigated risk" by allowing consumers to double-dip and receive bonus offers from both affinity cards, she says there is no policy prohibiting consumers that qualify from holding both the Southwest and AirTran credit cards.
"We see benefit from anybody who has a card, so anything that they're earning on the card that they're getting points or credits for, we're seeing the reward just as much," she says. "We just want people to use our cards, so if they have both, then awesome."