Bank of America Corp. sued US Airways on Wednesday for letting another bank offer a credit card with frequent-flier miles as a reward.
The Charlotte bank said it held exclusive rights to offer such a credit card. It said the airline breached that contract in August, when it sold Juniper Bank the rights to issue a similar card.
The suit should not affect people who hold a US Airways card issued by Bank of America.
Filed in Delaware Chancery Court in Wilmington, the suit asks the court to force the airline to honor the original deal. Bank of America said its current contract expires in December 2008.
"We have been forced to submit this suit in order to protect those existing legal rights under our existing agreement," the bank said in a statement.
US Airways' lawyers received the suit Wednesday afternoon and the company was not yet ready to comment, said spokesman Philip Gee.
Juniper Bank, a subsidiary of British-based Barclays PLC, agreed to pay US Airways $455 million to issue branded cards with mileage rewards: $130 million in a one-time payment, and $325 million to buy miles. Juniper received the exclusive right to market the US Airways credit card beginning in 2008, after a two-year transition period in which both banks can offer US Airways cards, according to regulatory documents.
While lucrative for the airline, such deals also mean serious money for credit-card companies, which gain access to premium customers. Such credit cards also typically carry bigger annual fees and higher interest rates than other cards.
US Airways has nearly 27 million Dividend Miles accounts, according to InsideFlyer.com, although the airline and the bank do not disclose the number of cardholders.
"In addition to the financial loss, Bank of America also hates losing access to the bodies that hold these cards," said David Robertson, who publishes a credit card industry newsletter.
US Airways emerged from bankruptcy protection on Sept. 27 after merging with Phoenix-based America West to form the seventh-largest U.S. carrier.
Juniper, founded in 2000 and based in Wilmington, provides credit-card programs for carriers such as Frontier Airlines Inc., Midwest Air Group Inc. and AirTran Holdings Inc. -- Bloomberg News and staff writer Stan Choe contributed.
-- Binyamin Appelbaum: (704) 358-5170; [email protected]
News stories provided by third parties are not edited by "Site Publication" staff. For suggestions and comments, please click the Contact link at the bottom of this page.
