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Will the UK be the test market for the new Star Alliance credit card?

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The Star Alliance airline grouping made a surprise announcement this week – it is to trial a Star Alliance-branded credit card in an undisclosed country this year.

The card will allow transfers to all 26 Star Alliance frequent flyer programmes. You would earn an intermediate currency – let’s call them ‘StarPoints’ for now – and then be able to transfer your StarPoints into the 26 individual schemes.

This would cover schemes such as Miles & More, Singapore Airlines KrisFlyer, Air Canada Aeroplan, United Airlines MileagePlus and many more. You would be able to arbitrage each trip, picking the scheme with the award chart which offered the lowest mileage and taxes for the flight you wanted.

Why would Star Alliance trial an alliance-wide credit card here?

There are good reasons and bad reasons why the United Kingdom would make a good test bed for a Star Alliance credit card.

On the positive side:

  • there is no single dominant Star Alliance carrier operating out of the UK. Launching a Star Alliance credit card in Scandinavia, Germany, Austria, Switzerland, Belgium, Poland or Portugal would directly compete with products offered by a strong incumbent Star Alliance airline.
  • virtually every airline in Star Alliance flies to the UK. Each will have a few thousand core flyers who would be keen to get a Star Alliance branded credit card as the next best thing to having one issued by their preferred carrier
  • the UK is, by a large margin, the most pro-credit card country in Europe. If Star Alliance was planning to trial its card in Europe, the UK is the obvious place.

On the negative side:

  • the UK credit card market is very competitive. Whilst the Miles & More Mastercard was popular with those looking a generous non-Amex product, this gap has now been filled by the two Barclaycard Avios Mastercard cards. Is there space for a Star Alliance product?
  • I would question how generous a Star Alliance branded product in Europe can be, because the alliance will effectively be buying miles off the individual carriers. The Barclaycard Avios card is there to drive a new generation of customers to Barclays, whilst the Virgin Atlantic credit cards are a true joint venture, with the airline sharing in FX and interest revenue. Assuming that Amex cannot be the issuer due to its BA relationship, Star Alliance may struggle to afford more than 0.5 miles per £1. If Star Alliance wants to make money off this product, it may need to look outside Europe where interchange fees are uncapped.
  • one key attraction of the UK Miles & More credit card was that holding it stopped your Miles & More balance from expiring. This is unlikely to be a benefit of a UK Star Alliance credit card, even if you transferred the StarPoints you earned from it to Lufthansa. There is no certainty that ex-Miles & More cardholders would want this product.

Irrespective of whether the Star Alliance credit card does launch in the UK first, this is a potentially huge development for the industry. It opens up the possibility of a competing oneworld credit card, which would allow you to transfer miles into not just British Airways but also American Airlines AAdvantage and other ‘low charges’ programmes.

You can read more about Star’s plans in this Bloomberg article.

PS. There was another potentially historic announcement in the loyalty credit card space this week from – of all people – ASDA. I will cover this in a few days.

Comments (47)

  • mimx says:

    “Launching a Star Alliance credit card in Scandinavia, Germany, Austria, Switzerland, Belgium, Poland or Portugal would directly compete with products offered by a strong incumbent Star Alliance airline.”

    Not true for Poland. As of Jan 2022 Polish customers are unable to get any M&M card, as one bank dropped it in 2021 and Diners is leaving the market at the end of June.

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