American Express and Continental to part ways

Continental Airlines and American Express’s Membership Rewards programs have been closely partnered for several years. From point transfers to lounge access for premium cardholders, the relationship was quite beneficial for both parties. At least it seemed to be. The partnership is coming to an end on September 30, 2011.

This move is not much of a surprise to most folks following the merger between Continental and United Airlines or even just the recent moves by Continental with respect to their credit card choices. Indeed, the Continental – American Express relationship has been softening for nearly five years at this point, with fewer promotions between the two programs during that time. Across the same time period the relationship with Chase has been strengthened significantly, with several new products launched. Chase is the issuing bank for both Continental and United’s affinity cards and both carriers recently launched cards that include many similar benefits to those of the premium American Express cards, including airport lounge access and a premium hotel program.

So no more lounge access to Continental Presidents Club lounges (they likely won’t be called that in September 2011 anyways given the merger) and no more transfers to the OnePass program from Membership Rewards. How will AmEx keep the value proposition up for the folks paying $450 or more every year for the card? The company has announced two significant additional benefits that will be added to their portfolio, effective December 1, 2010.

• $200 Airline Fee Credit — Cardmembers can check a bag or enjoy an in-flight meal on American Express. Every year American Express will cover up to $200 of incidental airline fees that are charged on the Cardmember’s enrolled Card on a selected airline. The $200 Airline Fee Credit can apply to fees such as baggage fees, flight change fees, in-flight food and airport lounge day passes.
• 20% Travel Bonus — When Cardmembers use Membership Rewards Pay with Points to pay for part or all of their travel including airlines, hotels, cruises and vacation packages, they will get 20% of those points credited back to their account. For example, if a Cardmember redeems 30,000 points to pay for an airline ticket, American Express will credit 6,000 point to the Membership Rewards Cardmember’s account.

While the Pay with Points program is often a poor value proposition, increasing the yield by 20% is a nice touch. It should be noted that the 20% credit will be issued after the fact rather than as a discount from the original purchase. Minor detail but it can make a difference if you’re just on the cusp of a redemption level.

The Fee Credit is a very nice offer, particularly given the broad range of things that it can be applied to. While some of the fine print remains to be seen (I’m particularly concerned with the “a selected airline” phrase) the idea looks to be pretty solid.

This was a change in the program that is not particularly surprising. And there is over a year to work out the details of how to handle points and annual fee renewal decisions. Plus AmEx came through with some additional benefits to offset the loss. Overall I’d say that both programs handled this about as well as could be expected in the situation.