Credit card programs take on Frequent Flyer programs

Its been some time coming but we seem to have a winner.  In the USA it's the credit cards companies, in Australia it's Qantas and in New Zealand the jury's still out.

The USA - credit card companies beat the airlines to have the best rewards offerings

In the USA, credit card providers have slowly but surely trumped the Frequent Flyer programs offered by the airlines.  The holy grail of rewards is the concurrent offering of travel (always a winner), merchandise, experiences, cash-back and gift cards.  

Airlines started owning the travel category and credit card programs transferred points into the Frequent Flyer programs.  But the airlines got lazy.  Customer's couldn't use the points when they wanted to and the points (over 7 years and according to Bain)  halved in value.  Only recently have airlines been forced to offer a valve to vent this accumulated Frequent Flyer points pressure (note the national carrier in New Zealand innovatively and transparently solved this problem a few years ago with Airpoints Dollars - a world first).  Many airlines now offer gift cards and merchandise along with enhanced "any seat" redemptions but only on their airline.

But in the background,  credit card companies have grown their offerings to include all the usual rewards suspects AND the capacity to redeem for Any Seat, on Any Airline at Any Time.  AND they still issue airline co-branded cards.  The figure below from Scott Hornick at last year's Frequent Flyer Conference tells the global credit card airline co-brand story.

Capital One doesn't do airlines co-brands and the value proposition comes out very clearly in it's excellent advertising campaign of 4 years ago.