Why in the World is US Airways Increasing Award Prices NOW?

It’s been 3 years since US Airways made major adjustments to its award chart. During that time they’ve been dubbed ‘the official consolidator for Star Alliance premium cabin fares’ because of the speed at which they’ve been printing miles on the cheap — through major promotions and offers to sell miles at a deep discount (through outright purchase or transfers from one account to another).

In other words, the thinking has been that US Airways has offered up so many miles that they’ve become a way to buy miles and obtain ‘distressed inventory’ (which partners release as awards) across the Star Alliance. Basically they haven’t just been rewarding loyalty with miles, they’ve been selling partner award tickets for cash with miles as the intermediate form of currency.

Given the production of so many Dividend Miles, I’ve been expecting something of a devaluation. More miles chasing relatively the same number of seats tends to mean an increase int he mileage price of those seats. Plus that’s a natural cycle for many airlines every few years anyway and it seems like it’s “time” in the US Airways case.

But I’ve also bet that the merger possibility with American puts off that devaluation. There are two reasons:

  1. There’s no reason to devalue your program now, if you’re going to shutter the program (more or less) and adopt American’s AAdvantage program. The airline will be called American so certainly the mileage program will be AAdvantage, it is the larger program and the airline is expected to be a member of the oneworld alliance rather than Star. Devaluing now just angers customers, and doesn’t reap benefits in the form of lower costs over a long time horizon if the program is going to go away.
  2. At the beginning of a merger is precisely the last time that airlines tend to devalue, since they don’t want to anger their customers, they want to reassure them that all is well and getting better — that any differences they see are going to be “changes you’re going to like” as they say.

But US Airways Has Made Some Negative Changes to their Award Chart Anyway

I saw this first over at Wandering Aramean, US Airways has made the following changes to their award pricing.

  • They’ve eliminated their ‘off peak’ 60,000 mile business class award (55,000 miles for US Airways credit card holders) from North America including Hawaii to Europe. Now the only off-peak premium cabin awards are to South America and the Caribbean.
  • Alaska has been given a separate zone apart from North America, and they’ve increased the mileage price for ‘medium’ and ‘high’ awards (awards you can book on US Airways only when regular space is not available). This one doesn’t much concern me.
  • They’ve increase the price of saver first class awards to Hawaii from 70,000 points to 80,000 points.
  • They’ve increased the price of business class awards between North America and Hawaii to Europe from 325,000 to 350,000 miles. I would never have considered booking this award, and am unconcerned by the change. The price started off egregious and has become even more so.
  • Medium and high business class awards between North American including Hawaiii and the Middle East have gone up substantially. The medium awards went from 180,000 to 225,000 miles and the high awards have gone from 240,000 miles to 350,000 miles.

I’ve never redeemed US Airways awards at the medium or high level, those are awards which can only be claimed on US Airways flights while I usually use their miles to redeem on partners.

And with enough planning one can usually find saver seats on partners in any case.

Fortunately the biggest changes were confined to awards on their own aircraft, and without altering the standard award pricing — except to Hawaii.

But it’s still disappointing to see the end of off-peak business class awards to Europe, which had been one of the most exceptional values in the program. If you were willing to fly during the dead of winter and had a US Airways Mastercard you could fly an all-US Airways itinerary for just 55,000 miles roundtrip in business class. And the US Airways new business class seat is really good, it’s an earlier generation of what Cathay Pacific flies (and what American is getting).

The Only Explanations I Can Think Of

Perhaps they wanted to get some of the ‘bad news’ out of the way early, before a merger.

One imagines that a combined program would start with the American AAdvantage award chart which lacks some of the sweet spots that US Airways offers like 90,000 miles in business class roundtrip to North Asia as well as cheap Australia awards.

They might even make some negative changes now so that they can pitch the positives for Dividend Miles members going forward.

Perhaps this looks too much for black helicopters, but otherwise it’s hard to imagine the logic. I further can’t fathom the urgency in making these changes, for instance that they’re absolutely bleeding on their redemption costs for these specific awards that they need to stop the hemorrhaging now, for even just a short period.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. It has to do with the valuation of the US mileage program and the merger. Nothing to do with customers or benefits. It’s just an accounting change to impact the valuation.

  2. The reason: Because he can. They now have a clear path to destroying even more capacity and elminate even more competition. The need to reward is less than it used to be. Simple supply and demand forecast.

  3. What makes me the most mad is the lack of any notice AND during the off peak envoy season for Europe. I was in the process of booking Envoy to Europe next week. I had found PHL-Europe in Envoy but hadn’t found a low level of CLT-PHL. DO you think it is going to reprice when I find my connection to PHL and add it? Or will it stay at the old 30000? (I’m Chairmans so no fee)

  4. Its a warm up of what’s to come at AA like very limited to no award availabilty at American
    Higher redemption costs when redeeming for miles and massive fees to book awards
    Im reading it and considering moving my loyalty elsewhere
    Its very sad and evil and I suspect the worst is yet to come from Parker and his cronies

  5. thats why i kept my 1K..as bad as UA/CO is, I’m hoping it is only going to get BETTER while I see traveling as an Exec Plat getting far WORSE in the next two years…

  6. They’re doing it because the merger is off, and they’re trying to shore up the bottom line. … well I can dream anyway…

  7. I’d always assumed we’d get some sort of notice before award price changes. I’m planing 3 US-N. Asia business class trips over the summer.

    Gary, do you think USAirways would axe the 90k US-N. Asia sweet spot without notice? If so I’d imagine it’d be best to book now, even though I’d be subject to massive fees if I needed to change..

  8. Black Helicopters warming up……? Maybe, but more likely a combo of 1) accounting issue related to merger, or 2) left hand not knowing what right hand is doing. My speculation is more on 2. This has probably been in the works for a while, with an execution date established. Parker’s crew probably subsumed with more substantial merger issues, and this slipped by them. Just an educated guess…

  9. 1. Skymiles went down in January

    2. Dividend Miles went down in February

    3. What’s next? UA in March??

  10. Chris: they are clearly willing to make changes at no notice, and to do so when possibly not expected.

    On the other hand, absent a radical change what would you expect N Asia to devalue to, and how many miles do you have in the program? Putting yourself in position to possibly need to pay change fees PLUS pay more miles doesn’t make a lot of sense.

    If you think you can fix your dates, probably prudent to book. If they’re still up in the air, whatever you do has risk.

  11. This is another testament to not hoarding points. Plan your trips, get what you need and then redeem. Sure, it’s nice to have 50k-100k for a rainy day in some airline, but for the most part, point inflation outpaces cash inflation.

  12. I’m sure part of the reason for the change NOW is that the 11 month mark is coming up for booking biz class to Europe at the saver levels…1/15 is the old start of those awards, meaning we’re close to when they’d need to start making those flights available. I know I booked my flights in mid March last year for my trip in a couple days – I would presume many of your readers did as well.

  13. There’s no inherent reason why a devaluation schedule would be correlated with a merger schedule. I think this theory that a merger means that a devaluation would be forestalled for awhile is wishful thinking. No company likes to piss off their customers, whether it’s before a merger, during a merger, or after a merger. If you realize your award chart is no longer in line with your costs, you’ve got to fix it ASAP, impending merger or not.

  14. Couple thoughts on this.

    First it seems AA and US have been having a fire sale on miles over the past few months. This is instant cash flow, cash is king and cash is good in a merger situation.

    Second the programs will merge. If they go Star Alliance it could spell doom for Oneworld in my opinion but I doubt that happens.

    Third, since they sold all the miles in a fire sale fashion it’s time to reap the benefit. Remember all the blogs about the cost per mile when getting them for 100% or 50% bonus when buying miles.

    Lastly, if the merger happens tonight it will take time for the two programs to be thrown together. If I had to make a wild guess they are taking an early strike at the values as one of the program miles will end up being worth more than the other. For example if it takes 100k US miles to earn a trip to Europe on AA metal you won’t scream as much later when they do it.

    I had hoped that they would hold off on devaluation until after this Europe off season bookings when through for next winter. Too sad.

  15. Did you dub US Air “‘the official consolidator for Star Alliance premium cabin fares’”…or were they just dubbed? I figure you might as well take credit for this, also. 😉

  16. I doubt very much that these changes ever crossed Parker’s desk. More likely the result of a Dividend Miles annual team review of the program. Not linked to much of anything other than an effort to tighten up the program a tad.

  17. Concur with ‘hoarding’ miles. Use ’em or use them devalued. I plan on liquidating my DM miles this summer and possibly AA miles as well. The gittins good is over. Just got back from Europe having flown Envoy for 60K. Whew! That was close. The entire run with USAir selling miles on the cheap was bound to inflate the redemption charts. Consider when USAir stopped redeeming miles 1 Jan. for Luft. O class. Supply and demand. It works, but not for the better. I don’t think we’ve seen the end of program changes with regards to higher charges. Too many miles chasing seats, although during off-season they ought to be lower. But less weight on aircraft means less fuel burn. Think about that. An airline doesn’t lose money by not filling a seat with a mileage ticket. It actually saves money by not doing so!
    I can easily see when the milesaver award R/T N.A.-Europe J class is 200K. Up from 100K.

  18. I think that they are some cheating bastards doing this.

    I am so glad that I didnt buy the double miles that I was anticipating doing so in readiness for a booking a trip at 60k to go home next year as soon as they came available. I was ready to book almost a year in advance to get that business class flight.

    How sad.

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