The Hidden Fee Driving the American Travel Boom
A little-known fee is generating huge revenues for airlines and hotels in the US, with significant implications for the travel industry
The American travel economy is being driven by a lucrative credit card system, with a little-known fee playing a crucial role. This fee, known as the interchange fee, is paid by merchants every time a card is swiped, and it is uncapped in the US. As a result, airlines and hotels have built significant businesses around this fee, with major players like Delta and American Airlines generating billions of dollars in revenue from their co-brand credit cards.
## The Interchange Fee Explained The interchange fee is a charge paid by merchants to the bank that issued the card, and it is a major source of revenue for airlines and hotels. In most other wealthy economies, this fee is capped, but in the US, it is uncapped, allowing companies to generate huge profits. The loyalty programs, co-brand checks, and bank-built lounges that define American travel are all built on top of this fee.
## The Scale of the Revenue The scale of the revenue generated by this fee is huge. For example, Delta collected $8.2 billion from American Express in 2025, which is about 14% of its adjusted operating revenue and roughly 1.4 times its operating income. American Airlines received $6.2 billion from its co-brand cards and other partners, which is roughly four times its adjusted operating income. The following table shows the revenue generated by these fees for Delta and American Airlines: | Airline | Revenue from Co-brand Cards | Percentage of Adjusted Operating Revenue | | --- | --- | --- | | Delta | $8.2 billion | 14% | | American Airlines | $6.2 billion | roughly four times adjusted operating income |
## Implications for the Travel Industry The implications of this fee for the travel industry are significant. With airlines and hotels generating huge revenues from their co-brand credit cards, they are able to offer loyalty programs and other perks to their customers. However, this also means that the cost of these programs is being passed on to merchants, who are paying the interchange fee every time a card is swiped. As the travel industry continues to evolve, it will be interesting to see how this fee affects the way companies do business and the services they offer to their customers.
