Citigroup Presses AMR to Decide on Credit-Card Tie
Citigroup Inc. (C) asked the judge overseeing American Airlines’ (AAMRQ) bankruptcy to force the carrier to decide by July 2 whether to retain the bank’s partnership in its loyalty credit-card and mileage program or risk a multibillion-dollar claim.
American and its parent, AMR Corp., have had enough time to decide on maintaining the agreement, which can be rejected as part of the bankruptcy, Citigroup said in a filing today in U.S. Bankruptcy Court in Manhattan.
American’s AAdvantage loyalty program has about 69 million members and will regain its ranking as the industry’s largest when the Fort Worth, Texas-based airline merges with US Airways Group Inc. The two carriers have been negotiating with banks including Citigroup and Barclays Plc (BARC) to provide a branded credit card once they combine.
Under the contract, Citigroup loaned American $1 billion in 2009 to pre-purchase miles in its AAdvantage plan, a transaction secured by the program’s assets, airport flight slots and gates and route authorities, the New York-based bank said.
Rejecting the agreement will create a “multibillion-dollar secured damages claim” against AMR, endangering the airline’s ability to repay creditors and shareholders at the levels set in its reorganization plan and costing it “material amounts of annual revenue in the coming years that could not be fully replaced,” Citigroup said in the filing.
Sean Collins, a spokesman for American Airlines, didn’t immediately respond to a request for comment on the bank’s filing.
The case is In re AMR Corp., 11-15463, U.S. Bankruptcy Court, Southern District of New York (Manhattan).