Abstract
We study how adopting co-branded credit cards affects customers’ behavioral loyalty with the brand in the context of the airline industry. Specifically, we explore three dimensions of loyalty that may be affected: the amount of money spent on the airline, loyalty-points redemption, and customer attrition. Leveraging a comprehensive longitudinal dataset from a major North American airline firm, we carefully estimate treatment effects for co-branded credit card adopters by using a combination of propensity score matching and difference-in-differences methods to account for selection effects. Using pre-post data from adopters and our matched control group, we find card adoption increased the frequency of flying, amount spent, and miles earned and redeemed with the focal airline. Further, card adoption decreased customer attrition. We find the effects of the cards persist over time for business travelers, whereas they are short lived for leisure travelers.
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