Airline Industry Warns of Economic Impact from Credit Card Rate Caps

The head of Airlines for America, Chris Sununu, has cautioned that capping credit card interest rates at ten percent, as proposed by former President Donald Trump, could have significant economic repercussions for the airline industry. The potential consequences include reduced passenger numbers and decreased aircraft orders, Sununu stated at an aviation summit on Thursday.

Billions Tied to Credit Card Rewards

Sununu explained that capping rates or minimizing the fees charged on credit cards would negatively impact the entire industry. U.S. Airlines generate billions of dollars annually through branded credit cards and associated loyalty programs. Senator Dick Durbin has previously described airlines as essentially “credit card companies that fly airplanes.” Industry data reveals that over 31 million Americans held airline travel rewards credit cards in the past year, with 57 percent of frequent flyer miles and points originating from airline credit card usage. Nearly 16 million domestic flights in 2023 were paid for using points accumulated through these cards.

Loyalty Programs at Risk

“The commercial airlines rely so much on their loyalty points, their loyalty programs. They drive revenue, they drive customers. When you start tinkering with it – all of a sudden everything changes,” Sununu said. He warned that hundreds of millions of dollars in airline investments in innovation could be jeopardized, leading to rapid and substantial knock-on effects.

Industry Concerns and JPMorgan Chase CEO’s Warning

Sununu referenced statements made by JPMorgan Chase CEO Jamie Dimon, who suggested that an interest rate cap could limit access to credit cards for many Americans. The airline industry, characterized by low single-digit profit margins, views the proposal as a direct threat to its billion-dollar business model. A reduction in credit card availability could lead to fewer passengers flying, both those paying with cash and those utilizing reward points, ultimately impacting aircraft orders.

Bipartisan Support for Rate Caps

Former President Trump initially called for a one-year interest rate cap of ten percent, starting January 20th. This initiative garnered support from both sides of the political spectrum, with Democratic Senator Elizabeth Warren expressing her willingness to collaborate with Trump on the matter. Labor unions, civil rights organizations, and other groups have also backed a bill proposing a five-year cap on credit card interest rates at 10 percent.

Airline Lobbying Efforts

Major U.S. Airlines have long opposed legislative efforts to lower transaction fees charged by Visa and Mastercard, arguing that such measures could force them to discontinue their rewards credit card programs, which allow consumers to earn frequent flyer miles.