American AAdvantage Won’t Be Going Revenue-Based Any Time Soon

Yesterday I referenced an interview with Doug Parker, Chairman and CEO of American Airlines, where he said that American and US Airways would combine frequent flyer programs in the first six months of 2015.

I noted that was intriguing because American has been clear it won’t combine reservation systems until the end of 2015.

Instead of a big bang, combining everything at once, it appears they’re going with a phased-in integration. That to me was news — both the timeline, and that it appears to differ for the frequent flyer program and the airlines themselves.

What I didn’t highlight were Parker’s reported comments about revenue-based frequent flyer programs.

Parker was asked whether American would follow Delta and United in moving to frequent-flyer program based on revenue accrued instead of miles flown. Such a move was “not even on the plate right now,” he said. “We have to get the two frequent-flyer programs merged first. If it makes sense to make that innovation, we may do that, but to try to change the program now would be foolish.

That actually didn’t strike me as newsworthy, although people generally seem somewhat surprised by it. I wasn’t, because it’s exactly what I’ve been saying for the past two months since United copied Delta’s announcement of revenue-based mileage-earning for flights next year.

The mantra at American is “integrate before we innovate” — that is the phrase used across the entire company with most everyone at American you speak to.

The big challenge the AAdvantage program faces now is combining with US Airways Dividend Miles and becoming the world’s largest frequent flyer program with in excess of 100 million members. All of their focus is on getting that transition right.

I’ve said since the beginning that you don’t want to alienate your new customers in a merger. The airline doesn’t want to lose their US Airways customers, already concerned about the loss of Star Alliance. They have American customers antsy about new leadership. If only for the loss of meals on some shorter flights.

For sure, they could have come out with a new program in a big bang — combine US Airways and American, and give all members something different at the same time. But they’re not even combining programs and reservation systems at the same time, because they want to make sure they get it right and minimize the risk of the sort of disaster we saw with United and Continental (and with US Airways and America West).

The delay gives them time to watch the rest of the industry develop. If they somehow seem to lose market share to United and Delta, and attribute that to not having made the same switch as those airlines, then no doubt they have the ability to move to a revenue-based program. US Airways even had one in the can more or less, which got shelved with the merger.

But if they thrive, and even attract business they don’t think they’d have otherwise gotten but-for the United and Delta changes, they well could not. In other words, they’ll look at the data.


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. Has there been any firm announcement about how they are going to treat US elites after the transition?

    Or even any quiet rumors/comments/winks?

  2. I feel I have to vote with my feet, even though I may have flown close to a million miles with United, I feel now is the time to switch. And I plan to encourage others to do the same. If we all just behave like lemmings we deserve what comes out way.

  3. Press Release…

    “We have total confidence in our coach and feel that they are in a position to lead us into the future. Our board of directors have given them a total vote of confidence”. In other words they may not switch yet but I think it may be a matter of when not if they go revenue based. I blame Southwest for this trend among larger carriers.
    What they should do is keep the current method and come up with ways to make themselves different/better instead. It would make me more loyal.

  4. I’m curious to see if we will ever see a combination of current and revenue based charts. Maybe revenue based for domestic flights but zone based for partner international flights.

  5. “integrate before we innovate”…except for easy devaluations like eliminating gateway stopovers, killing the Explorer award, adding extra tiers to AAnytime awards, reducing meal service…

    Well at least the systems integration is being taken slower than the COdbaUA debacle, so there’s that, which is nice.

    Assuming UA and DL don’t appear to have negative ramifications from their revenue based approach, it will only be a matter of time for AA, in this monkey-see/monkey-do airline industry. Maybe as early as 2016 since the FFPs will have been integrated by then.

  6. He chose his words carefully. To me this means they wil be going revenue based but they have many IT and other issues which are more pressing right now. He calls revenue based programs an innovation.

    If it makes sense to make that innovation, we may do that, but to try to change the program now would be foolish

  7. @robertw – nah, doubt they have an ‘actual’ decision yet (even if they have an inclination, remember that US Airways had revenue-based ready-to-go and shelved it with the merger)

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