A congressional effort to rein in ever-increasing credit card swipe fees that are costing retailers billions and raising consumer prices has encountered a new hurdle: airline unions. 

Swipe fees, which retailers pay to process credit card transactions, fund the airlines’ lucrative credit card rewards programs that flight attendants push on travelers mid-flight in exchange for a healthy commission. To protect that arrangement, labor unions representing industry workers have joined forces with powerful banking and credit card lobbies to beat back the reforms.

“It would probably hurt the revenue of the airline industry if they didn’t have these credit card partnerships and rewards,” said Lulu Wang, a finance professor at Northwestern University’s Kellogg School of Management who studies competition in credit card markets. “So then, of course, they rally the troops.”

Labor unions that represent flight attendants and other airline workers — including the Association of Flight Attendants-CWA (AFA-CWA) and the national Communications Workers of America (CWA) — have in recent weeks lined up in opposition to the Credit Card Competition Act, a bill introduced in June by Sen. Dick Durbin (D-Ill.) that aims to bring down the U.S.’s sky-high credit card fees, which are some of the steepest in the world.

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Within the labor movement, the airline unions are increasingly alone in their opposition. On Tuesday, the Teamsters and the Service Employees International Union, two of the country’s largest and most powerful unions, both announced their endorsement of the bill, saying the reforms would help workers, consumers, and small businesses.

Airline unions first made their opposition public in September, but they have ramped up their lobbying efforts against the bill in recent days. On Oct. 30, five unions in the aviation industry sent a letter to U.S. senators urging opposition and claiming the bill would “harm our members and undermine good, union contracts across the airline industry.” 

The letter, obtained by The Lever, was signed by the AFA-CWA, the CWA, the International Association of Machinists and Aerospace Workers (IAM), the Association of Professional Flight Attendants (APFA), and the Transport Workers Union of America.

The unions claimed they had taken “the extraordinary step of intervening here” because the legislative proposal failed to “curtail corporate greed,” as supporters claim. Yet they also raised concerns about the bill’s potential impact on credit card rewards programs and airline miles, which are funded by swipe fees.

“The large banks that issue these credit cards have complained and run to everyone they do business with to say, ‘You’ve got to oppose this, the sky is falling,’” said Doug Kantor, general counsel for the National Association of Convenience Stores, which supports the credit card reforms. 

As a result, he told The Lever, airline unions are siding with big banks and the credit card lobby. These interests have been lobbying against the bill in part by fearmongering about the potential “disappearance” of credit card rewards programs, should it pass. 

“We’ll spend whatever is needed,” the American Bankers Association president told Politico in July of the banks’ efforts.

In an email to The Lever, Taylor Garland, communications director at AFA-CWA, reiterated part of the Oct. 30 letter: “To be clear, our unions are champions of laws and regulations which curtail corporate greed and empower consumers. We are actively working to realign the American economy to favor working families instead of large corporations and their executives,” Garland wrote, adding that the proposal “does not accomplish these goals.”

The CWA did not respond to a request for comment from The Lever. A spokesperson for IAM, after initially agreeing to an interview, stopped responding this week to The Lever’s inquiries.

A spokesperson for Durbin’s office also did not return inquiries about the bill or the unions’ opposition.

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“It’s A Huge Inflationary Effect”

Credit card interchange fees, or swipe fees — a fee, usually around two percent, that merchants pay to process a credit card transaction — are a major source of revenue for payment networks like Visa and Mastercard. The banks that issue credit cards also profit from the fees, which they use to fund rewards programs. Airlines, too, get a cut of the money, through deals with credit card companies to offer airline miles and travel points.

These swipe fees, though, are a major cost for merchants, whether they are big box retailers or bodega owners. In 2022, retailers spent more than $160 billion on card processing fees, according to one analysis, a figure that may increase if Visa and Mastercard follow through on their reported plans to raise those fees yet again despite reporting giant profit margins

Those costs, in turn, are passed down to consumers, critics charge. “It’s a huge inflationary effect on people’s budgets and lives,” Kantor said. To account for the fees, which have been continually increasing, retailers are forced to raise prices, he said.

In his statement endorsing the bill, Teamsters president Sean O’Brien emphasized the fees’ impact on wages. “Union members and American families cannot afford to sacrifice so much of their hard-earned wages to predatory and consolidated credit card corporations trying to skim every last dollar they can from vulnerable consumers,” he said.

The Credit Card Competition Act aims to break up the Visa-Mastercard duopoly, a key factor behind the high fees. The majority of credit card transactions — some 80 percent — run through these two payment networks. When a transaction is made with a Visa card, retailers have no option but to pay Visa’s swipe fee.

The bill would require that major banks issue cards that can be processed by two payment networks — one of which isn’t Visa or Mastercard. That would give retailers a choice of what network to use to run any given payment.

“The idea is that this should lead to a race to the bottom,” explained Wang. He was less convinced by this approach, he said, than by other, more straightforward reforms, like a cap on fees. The theory goes, though, that more competition brings lower fees.

Visa, Mastercard, and the banks that they partner with aren’t happy about this prospect. Neither are airlines.

“Extremely Unequal”

Airlines rake in billions from loyalty deals with banks, thanks to the profits that banks see from swipe fees when consumers use their Delta SkyMiles or AAdvantage Platinum card. The banks use this money to buy airline rewards — in the form of frequent flier miles or travel points — which essentially cost airlines nothing until customers redeem them.

Delta’s partnership with American Express, for instance, was projected to bring the airline $6.5 billion this year, a figure that the airline hopes to see grow to $10 billion within several years, executives told investors in June. 

A memo signed jointly by the AFA-CWA, the CWA, IAM, and APFA that was obtained by the Washington insider news daily Punchbowl News in September highlights their concerns about credit card rewards: “The CCCA would eliminate popular credit card awards and points,” it claims. “This would knock airlines off their solid financial footing and hurt unionized workers who are seeking new contracts.”

According to their letter, the unions are also concerned that the swipe fee bill would significantly benefit American Express, because the credit card company is the country’s third largest card network after Visa and Mastercard, and therefore a likely alternative choice for credit card issuers, should the bill pass. Delta — the only major U.S. airline with a brand partnership with American Express — is the least unionized major airline in the country, and the company is fighting hard to keep it that way.

“The resulting dynamic would stack the deck against unionized carriers in the airline industry,” the unions’ letter says.

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Proposed reforms to credit card fees have been dogged by claims that they would harm, or even eliminate, airline rewards programs, which are not only profitable for banks and airlines but increasingly popular among consumers

Yet plenty of research has shown that rewards programs can drive inequality, benefiting largely higher-income consumers at a cost to users with lower incomes and credit scores. Their late fees and interest payments, in other words, subsidize wealthy consumers’ beloved cash back and rewards points. 

“The way people benefit from the rewards — or pay for the rewards — is extremely unequal,” explained Andrea Presbitero, an economist at the IMF who coauthored a recent study that found that such programs redistribute billions of dollars from low-income consumers to higher-income, more financially savvy cardholders.

Still, the specter of vanishing airline miles and premium credit cards is difficult to surmount. The Credit Card Competition Act is Durbin’s second attempt at passing this legislation. His first effort last year, the Credit Card Competition Act of 2022, faced similar pushback from the credit card lobby, and never got off the ground.