United Continental Holdings Inc (NYSE:UAL) and JPMorgan Chase & Co. (NYSE:JPM) are reportedly in talks revolving around the renegotiation of the terms of their card partnership.
Executives at United Continental stated during an earnings call about a week ago that they were in pursuit of a renegotiation of the terms of their joint partnership in a bid to boost profitability. JP Morgan has been using United cards since the 1980s and their partnership was recently extended in 2015. However, the parties did not announce how long the extended contract would be active though it is believed to be roughly three to seven years.
“The renegotiation will get to, ultimately, a much better result,” stated J. Scott Kirby, the President of United Continental.
The announcement of the pursuit of renegotiated terms of the partnership between United and JP Morgan as well as the statement by the president suggests that the current agreement is not as advantageous for United. Despite the fact that the extension of their multi-year partnership deal took place roughly 24 months ago, such deals still allow partners to change the terms especially if one partner happens to be at a disadvantage due to previous arrangements.
United Continental has most likely decided to renegotiate the terms due to the heavy competition that it has been facing from low-cost carriers who have been saturating the market. The holding company has thus turned to its deal with JP Morgan in a bid to renegotiate the partnership terms so that it can be more profitable.
JP Morgan also introduced its own Chase Sapphire Reserve card roughly one year ago. The launch of these cards aroused a lot of interest because it seemed to be targeting the same market that is targeted by United Continental. It is not clear whether this is one of the things that will be considered during their talks though it is highly likely to come up. The latter happens to be the biggest co-brand partner to JP Morgan and it plans to use this dominant position to push for better terms in their partnership.
United Continental stock closed the latest trading session on Monday at $59.10.