American Reveals its Frequent Flyer Program Data to the SEC: Here’s What We Learn

Frequent flyer statistics: American AAdvantage is the largest frequent flyer program in the world — including US Airways members, they boast more than 100 million members.

At that scale, nearly all analysis can be done by the numbers, and fortunately American is more revealing about their numbers than most other carriers.

Airline filings with the SEC can be extremely enlightening if you’re willing to work through them. American’s filings provide quite a bit of detail about the number of members, how many miles were issued in a year, and how many miles remain outstanding (unexpired and unredeemed).

I had a look at annual 10-K filings from the beginning of 2008 through the beginning of 2014. Here’s what they show:

American has over 1000 mileage partners, between airlines, rental car companies, hotels, financial firms, survey sites, and everything else imaginable. And about two-thirds of miles are sold through these partners rather than award for actually flying American.

The classic problem with award redemption is ‘too many miles chasing too few seats’.

In 2004 I wrote that mileage prices will tend to rise, explaining miles as a foreign currency with no central bank or monetary authority outside of the program itself. Printing more miles requires either the number of available seats to go up, or the price of those seats to rise (or customers simply to be unable to redeem).

I wrote about the problem of too many miles chasing too few seats in 2005 at least twice.

In the case of American it appears that the problem isn’t too many miles per se as much as it is too few seats — because the number of unredeemed outstanding miles really hasn’t been growing in a material way. The problem American and all US airlines face is that planes are full (a good problem to have) so fewer saver award seats available.

  • Even so, award redemptions are up ~ 17% over four years.
  • And during that time American has been able to grow its member file as well.

Total outstanding miles were up only 1.5% between 2007 and 2013. So even with all of the monster credit card bonuses that have come about, and all of the ways to manufacture miles at little to no cost, there hasn’t been a material impact on unredeemed miles (or on the total number of miles awarded by American in a given year).

What this means is that roughly speaking, American is printing and redeeming about 200 billion miles per year. Despite the challenges they’re already doing a pretty good job of balances mileage issuance and redemption.

If the economy falls and people stop traveling, or if airlines expand again, then awards become easier. It’s a mistake many of us make to compare the current state of award availability to 2009 through 2011, a time easier than any other over the past decade.

But even with planes full, there’s hardly any sort of crisis by historical standards — and thus little need to upend the structure of the program the way that United and Delta have been doing to theirs.

(HT to Milecards for the prompt to write about American 10-K filings)


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 »

More articles by Gary Leff »

Pingbacks

Comments

  1. “roughly speaking, American is printing and redeeming about 200 billion miles per year.”
    Did they list out breakage?

  2. It would be interesting to see how the accounts are distributed by the number of miles in each account………

  3. Hey Gary, nice info though I do have to correct one thing. A currency with no central bank does NOT devalue. Its actually the central bank that prints money. The value of USD, pre-central bank, went up and down depending on the economy. After central bank, only down.

  4. +1 to David.
    I would bet that at least 15% of the 200B “redeemed” is actually expired miles (or, as AA would call it, pure revenue).

  5. A+ post!

    bet miles o/s goes way up in 2014. But it is interesting that the o/s hasn’t ballooned.

    Of course that ballooning would cause a change in the liability for o/s miles, but still less than the revenue from selling them.

  6. I would be interested to know how many active members (members who flown during the year or members with an award balance) there are compared to members which presumably just means how many people have been given a membership number.

  7. Put in a few graphs and submit to seekingalpha and get some more click money!!! I like this pov 🙂

  8. Do they show in their report how many miles are written off because of suspended accounts due to alleged breach of AA’s T&C? That’s going to be a huge amount right there.

  9. @Gary
    AA has already gutted the redemption side with 5 levels planned for next year
    They have NOT guaranteed no changes to accruals – just that they are too busy with “integration” to do it now.
    OW awardsTATL have NO space on AA at all. It is all BA with huge fuel charges – that is a real “stealth”devauation – if UA can get you 30k to go to UK, AA gets you 50k +”BA fees” that get back in to the AA wallet by the TATL venture

    You might see UA/MP as getting worse.
    I see ALL US programs are being gutted, and contrary to you, I have found a lot of use out of UA and MP despite the 50% devaluation for LH F awards

    Where AA is better – free date changes on awards
    That may get gutted anytime

  10. Not surprised on miles sold to third parties. I earn more miles via Avis in a month (12K) compared to actually flying (8-500 mile segments) or 6K with 50% bonus.

    Crazy!

  11. Just a quick glance at the numbers tells us that the total number of miles relative to the number of accounts has decreased by 18% over that 7 year period. Lots of new accounts (+14 million accounts) but not a concurrent increase in miles outstanding (only 9.3 billion miles increase). In 2007, there was an average of 1021 miles per account. In 2013 there were only 840 miles per account.

    For the numbers given, AA has an average of 604 billion miles outstanding and issues about 191 billion each year(mean miles issued for these numbers). An interesting pattern in the data is the decrease in miles following the recession. A likely explanation is that people began to redeem their miles for flights, reducing the outstanding miles balance slightly. Now that the economy is better for some, people are once again squirreling away miles for the next downturn.

    Perhaps most interesting, is their post-crash focus on selling miles to partners. A new strategy that seems to be profitable, as evidenced by their newly repaired finances.

    As for what these numbers indicate for the future of award redemptions, nothing that I can see clearly. But I would imagine that, seeing as how selling miles is a profit center for the airlines, the move will naturally be to squeeze ever more profit out of the mileage program. They can do that by selling more miles or decreasing the liability for the miles already sold, or both. I am guessing both.

  12. The better question, at least to me, is this. Is the SEC requesting that American disclose this information, and if so why?

    Or is American simply disclosing it voluntarily due to the fact that they’ve gone through a recent restructuring?

    I could see how this might affect an “investor” but frankly do not in any way see how this relevant to one of the most corrupt organizations on the planet.

  13. SO and I have never flown on AA but have close to 2MM AA (mostly due to CC apps in the last few months/years). Pretty easy to see why partners issue more miles.

  14. Gary-

    You imply that award availability spiked during the downturn and now with fuller planes, we have returned to a more normal amount of availability.

    That sounds logical except for that to be true, we would now see availability as it existed in, say, 2005-2008. And we do not, with some route such as TATL virtually shut- off on AA metal.

    Another point: While I agree there is not a huge spike in unredeemed miles, there has been a steady increase over the past three years. And the impact of recent events such as MS going mainstream and the Citi Exec card, have yet to be measured.

  15. Perhaps because of continued low availability of award seats, airlines in general and certainly AA have been pushing non-flight redemptions.

    If it becomes too difficult to redeem miles, or the cost becomes too great, AAdvantage loses its attractiveness, people stop signing up for credit cards or other partners, and AA loses that revenue. So they do need to keep it in balance.

  16. Gary,

    The 2014 10-K is out, and the new numbers are eye-popping (809.0b outstanding miles and 287.1b issued) , but that’s because they’re reporting both AAdvantage and Dividend Miles together (since they were destined to be merged 1:1). So you should probably add a new metrics to your spreadsheet, which is number of outstanding miles per units of ASM and number of issued miles per unit of RPMs — the trends would be very interesting to see (the latter would show by how much “too many miles” are chasing too little awards).

    Other 10-K metrics of interest are the number of one-way redemptions (7.9m in 2014) and what is the % of total RPMs that are flown under award redemption (5.5% in 2014, massively down from 8.2% in 2013).

    Here’s the link to the new 10-K: https://materials.proxyvote.com/Approved/02376R/20150406/AR_244173/pubData/source/Annual%20Report.PDF

    I look forward to an updated post!

  17. Hi Gary, i am now working on a Project regarding the Profile (for instance, age, profession and flying destinations) of frequent flyers. Would you please provide some hints where I can find that?

Leave a Reply

Your email address will not be published. Required fields are marked *