Originally published at thehill.com on May 27, 2026.
Spirit Airlines is gone. The airline business is fragile. Fuel prices move. Labor costs rise. Consumers chase low fares. Regulators block mergers. Politicians threaten bailouts. Then, when the math no longer works, planes stop flying.
That is what happened to Spirit. Now, just as travelers are watching one low-cost carrier disappear from the sky, politicians in Illinois and Colorado are threatening another piece of the aviation economy: the credit-card rewards system that increasingly powers airlines.
Originally published at thehill.com on May 27, 2026.
Most Americans still think airline miles are a perk. In fact, they are infrastructure.
The modern airline industry is built on co-branded credit cards. Banks pay airlines billions of dollars for miles, marketing agreements and customer relationships. Those payments help stabilize a business infamous for volatility.
Reuters recently reported that Delta received $8.2 billion in cash from American Express in 2025, equal to about 14 percent of adjusted operating revenue and roughly 1.4 times adjusted operating income. American Airlines reported $6.2 billion in co-brand and other partner payments, about four times its adjusted operating income. Alaska Airlines said loyalty revenue made up about 16 percent of total revenue.
One industry analyst quoted by Reuters put it bluntly: “The modern airline is a gigantic rewards program that just happens to fly airplanes.”
Lawmakers should treat this as a warning.
Credit-card rewards depend on interchange, the small fee merchants pay when consumers use cards. That fee helps fund fraud protection, secure payments, instant authorization, credit risk, and rewards. According to PYMNTS Intelligence, 86 percent of interchange revenue supports rewards programs, helping generate $35 billion in consumer value in 2019. Cap interchange, and miles, points, cash back, and travel benefits become harder to sustain precisely when inflation-weary households rely on them most.
The Federal Reserve Bank of Richmond notes that when Congress capped debit-card interchange through the Durbin Amendment in 2010, debit rewards largely disappeared, free checking became harder to find and consumers did not receive the promised windfall at the cash register. Merchants got relief, but shoppers merely got fewer benefits.
Now, states are trying to repeat this experiment with credit cards.
Illinois enacted the Interchange Fee Prohibition Act, which attempts to ban interchange fees on the sales tax and tip portions of card transactions. Colorado lawmakers have sent similar legislation to Gov. Jared Polis (D).
Modern payment systems do not process a restaurant bill, tip, state tax, local tax, and base transaction as separate transactions at the terminal. The card network authorizes a single total. Settlement occurs across national payment rails built for speed, security and uniformity. Forcing networks and issuers to carve out subcomponents after the fact would amount to a state-mandated redesign of the entire national payments system.
The Supreme Court, under the Barnett Bank standard, ruled that states may not significantly interfere with national banks. Illinois and Colorado are trying to do just that. Their mandates would make interchange harder to collect, harder to administer, and easier to litigate, threatening the $9 trillion card-payments system and the $35 billion in rewards value consumers rely on.
Replicated across states, this patchwork would turn one national payment network into 50 political experiments. One state excludes tips. Another excludes sales tax. Another targets groceries. Another invents a new formula.
And rewards are not just airport-lounge luxuries. Families use points to visit grandparents. Middle-class travelers use miles to afford vacations. Parents use cash back for groceries and gas. Small-business owners use rewards to manage travel costs and reinvest savings. I would know. I do it, too.
Rewards are a market response to consumer demand.
The merchant lobby argues that interchange increases costs and that rewards-card users are subsidized by everyone else. But price controls merely rearrange demand. Interchange caps transfer value from consumers and financial institutions to big-box merchants, especially large retailers, with no guarantee that shoppers will see lower prices.
The Office of the Comptroller of the Currency has taken an important first step by declaring that federal law preempts Illinois’ attempt to restrict interchange fees for national banks and federal savings associations. That intervention is welcome. A national banking and payments system cannot function if every state legislature gets to rewrite the economics of card acceptance.
But Colorado is moving in the same direction, and other states are watching. Congress continues to flirt with broader federal restrictions on credit-card routing and interchange. The political class has discovered that “swipe fees” make an easy villain.
The Spirit lesson should humble them.
Airlines, payment networks, and rewards programs are pieces of a consumer economy that works because private parties have built a sophisticated, interconnected system. If Illinois and Colorado succeed, they will threaten airline miles, consumer rewards, and the financial model of carriers already operating in a brutal industry.
Spirit Airlines just vanished from American skies. This is a strange time for politicians to start attacking the thrust that helps keep the rest of the industry airborne.