Airline Loyalty Programs Face New Uncertainty as Visa–Mastercard Fee Settlement Evolves

A newly proposed third settlement in the nearly 20-year legal fight over Visa and Mastercard interchange fees is raising fresh questions about the long-term economics of airline loyalty programs, according to analysts at Barclays. While the bank expects the settlement process to drag on for years, it warns that the ultimate resolution could reshape how merchants handle high-cost rewards cards — and how consumers choose to use them.

The class-action case, which has persisted through two rejected settlements, continues to face strong opposition from major retailers, including Walmart. Still, Barclays notes that Visa and Mastercard may prefer a courtroom resolution rather than risk adding momentum to federal proposals targeting interchange fees.

Airline loyalty programs are especially vulnerable to changes in interchange economics. Co-brand credit card partnerships now represent more than 20% of revenue at Southwest Airlines and roughly 11–14% at Delta, American, and United. For the six largest U.S. carriers, loyalty revenue has surged more than 50% since 2019, supported largely by banks purchasing miles funded through higher-fee premium cards.

The proposed settlement could allow merchants to bypass “honor all cards” rules, enabling surcharges or selective rejection of high-fee rewards cards. Barclays analysts warn that greater price transparency around the cost of premium cards may push some consumers toward lower-cost payment methods, potentially slowing the growth of airline co-brand portfolios. A planned five-year reduction in interchange fees — mainly affecting basic card rates — would widen the cost gap between premium and standard cards by as much as 140 basis points in sectors like restaurants, possibly encouraging small businesses to steer customers toward cheaper options.

While large retailers may continue accepting premium cards, even slight friction could erode rewards value. Still, some travelers may remain loyal due to perks like elite status and airport lounge access. Barclays adds that Delta’s partnership with American Express will remain largely insulated from Visa–Mastercard developments until at least 2027. Overall, the bank believes the proposed settlement may ease political pressure for broader interchange legislation, including the bipartisan Credit Card Competition Act.