U.S. credit-card interchange fee reforms proposed in a long-running Visa and Mastercard lawsuit are expected to unsettle the financial underpinnings of airline loyalty programs, Barclays analysts cautioned on December 5, 2025. The reforms, tied to a legal settlement addressing interchange pricing, could reduce the appeal and growth of co-branded rewards cards, which have become vital revenue sources within the aviation sector.

Potential Impact on Airline Loyalty Programs and Aviation Revenues

Barclays explained that the proposed settlement would overhaul the enduring “honor all card” rule. Going forward, merchants could refuse premium rewards cards or impose differentiated fees, including what Barclays identifies as a possible “rewards card surcharge.” The settlement would also cut interchange fees by an average of approximately 10 basis points over five years, mainly affecting basic cards, and cap basic card interchange rates at 1.25%.

For specific merchant categories such as restaurants, the gap between basic and premium card fees could widen up to 140 basis points. Barclays warned this spread might prompt smaller merchants to encourage customers toward lower-cost cards. These merchant practices could shift consumer payment preferences, indirectly impacting airline loyalty card usage and restricting expansion of co-branded card programs.

Loyalty and marketing revenue streams have surged over 50% since 2019 for the top six U.S. carriers. Southwest Airlines leads with loyalty revenues exceeding 20% of operating revenue, while Delta, American Airlines, and United Airlines report loyalty-related income accounting for 11% to 14% of total revenue. Delta’s loyalty program remains the largest in total revenue, largely due to its longstanding partnership with American Express.

Aviation Sector’s Dependence on Loyalty Revenues and Broader Market Effects

Barclays highlighted that loyalty-marketing revenue delivers high profit margins with relatively low operating costs. Most income arises from banks purchasing airline miles at negotiated rates, instantly boosting airlines’ cash flow and air-traffic-liability balances. Upon redemption for flights, these points generate incremental revenue closely aligned with network profitability.

The analysts expressed concern that reduced acceptance or surcharges on rewards cards may lower incentives for co-branded cardholders, hindering loyalty program growth. However, premium cardholders often prioritize non-monetary benefits such as elite status and airport lounge access, which might sustain demand even amid decreased interchange fee revenue. Notably, premium cards from American, Southwest, and United generally offer rewards rates equal to or lower than lower-tier cards, supporting this behavioral insight.

Delta’s agreement with American Express is expected to remain unaffected by the changes, with Barclays suggesting that any broader market impacts will likely not materialize before 2027. Additionally, the settlement may soften legislative momentum for reforms like the bipartisan Credit Card Competition Act, despite criticism from Senator Dick Durbin and merchant advocacy groups.

The aviation industry’s deep integration with co-branded credit cards makes this interchange fee reform a significant development with meaningful implications for airline profitability and market dynamics into the next decade.

Aviation Sector Outlook

Overall, the proposed interchange fee overhaul aims to reduce fees by roughly 10 basis points over five years and permit merchants to surcharge premium rewards cards, directly threatening a revenue stream that accounts for up to 20% of some airlines’ income. Given loyalty revenues’ high margins and pivotal role in aviation profitability, these changes could constrain gains from co-branded card partnerships and reshape industry strategies. The earliest impact is projected post-2027, providing airlines and banks a transition window but creating notable uncertainty for aviation financial models moving forward.