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Why Shares of American Airlines Are Flying Higher Tuesday

Image source: American Airlines Group.

What: Shares of American Airlines Group (NASDAQ: AAL) were flying 10% higher Tuesday after the company announced its pre-tax income would increase thanks to credit card deals with Citigroup (NYSE: C) and Barclays (NYSE: BCS).

So what: American Airlines announced its pre-tax income would jump by $200 million this year, $550 million during 2017, and by $800 million in 2018. Typically, airlines only have one credit card issuer, so American is taking a more unique approach with Citi being able to promote its cards on American Airlines' website, mobile apps, direct mail, and in airport lounges, while Barclays will have exclusive rights to promote its cards on American Airlines flights.

Andrew Nocella, chief marketing officer for American Airlines, said the following in a press release:

These long-term relationships with our innovative credit card partners provide our customers with the best ways to enhance their travel experience. From earning miles to boarding early and checking a bag for free, our customers tell us how much they value their AAdvantage-affiliated cards. Our new dual-issuer arrangement is the first of its kind in the U.S. airline industry, and was enabled by the progressive partnership with Citi, Barclaycard US and MasterCard. 

Now what: It makes sense that shares moving 10% higher as a $1.55 billion addition to the company's pre-tax earnings over the next two-and-a-half years is nothing to sneeze at -- consider that during the first quarter, American Airlines generated pre-tax profit of $1.2 billion, excluding special items. Now with this bit of good news in their back pocket, investors will be turning to the company's second-quarter earnings report on July 22 hoping for a better-than-expected result after airline stocks have been beaten down throughout the first half of the year.

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Daniel Miller has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.