Why Unlimited Complimentary Upgrades are Bad for Frequent Flyers

Over the weekend I took a domestic flight on American Airlines where the first class cabin was only half full.

There were two factors at play, as I tweeted,

1) it’s Saturday 2) I like the @AmericanAir upgrade system please don’t change it..

American and US Airways Have to Decide How to Handle Upgrades as Part of Their Merger

With the merger between US Airways and American Airlines, the two carriers are in the midst of working through their differences and figuring out the policies and procedures that will prevail when the two airlines actually combine into one.

In a practice common to US airlines but not really done in the rest of the world, premium cabin seats on domestic flights that the airlines doesn’t sell are released as upgrades to elite frequent flyers.

US Airways — like Delta and United — offers ‘unlimited complimentary upgrades’ to all of its elites. If an elite member qualifies for an upgrade, they get it, free.

American’s 100,000 mile ‘Executive Platinum’ members get unlimited complimentary upgrades.

Meanwhile lower tier elites – Golds and Platinums – have to pay for their upgrades with 500 mile e-certificates (once known as ‘stickers’).

Those e-certificates are earned at a rate of 2000 miles (four 500 mile certificates) per 10,000 miles flown. Additional certificates beyond the free earned ones can be purchased.

    Sidenote: Executive Platinums do not get free upgrades for their companions. If an Executive Platinum upgrades a companion, they have to support that upgrade with a 500 mile upgrade certificate. And they do not earn those from their flying, so they have to buy them (unless they have any accrued from when they were a lower-tier elite).

The sale of 500 mile upgrade certificates raises significant revenue. That’s hard for an airline to give up, but all major carriers other than American did just that.

Unlimited Complimentary Upgrades Aren’t Good for Frequent Flyers

Most US Airways flyers are going to want to keep the system they have. I expect the average elite frequent flyer to say, why should I have to pay for something they used to give me for free?

However,

  • The sale of stickers, combined with mileage upgrade co-pays that do not exempt elite frequent flyers even domestically, mean that American earns a revenue premium on their first class cabin.

  • A more profitable first class cabin also supports a better first class product. American flyers were in uproar as their first class meals were cut back even a little, more or less meeting the old US Airways halfway. The revenue lets American invest in the product. (I wouldn’t call American’s first class spectacular, but it is materially better than US Airways first class.)

  • Mid-tier and entry-level elites are actually better off without unlimited complimentary upgrades. When every passenger gets free upgrades, every passenger is requesting them almost every time. Elites who want to upgrade have to compete against every other elite every time.

  • When elites are rationing their free upgrades or they have to pay some amount, they actually have to make a decision when they care about getting the upgrade.

  • The upgrades go to the people who want them most.

  • And Golds don’t have to compete against all Platinums, and Platinums don’t have to compete against every other Platinum for the upgrade. That means upgrade percentages go up. You’re more likely to get the upgrade when you request it.

Unlimited complimentary upgrades mean fewer upgrades for lower-tier and mid-tier elites. Just ask most United Silvers and Golds what their upgrade percentages are like.

There are certainly US Airways silvers with good upgrade percentages, maybe based at DC’s National airport and flying lots of Tuesday and Wednesday mid-day flights in the extreme. Here’s How to Maximize Your Changes of an Upgrade.

But on the whole, a system that gives upgrades more often to the people who care about getting them most on a given flight is a better system, and when that system also helps the airline to invest in the premium cabin product, flyers are better off.

Even though that’s not as simple a slogan as “don’t make me pay for what used to be free,” it’s the system that works better for most frequent flyers. Think about it a bit, and tell me do you agree?


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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  1. Consider the United complimentary system:
    You compete against all other equal and higher elites and their travel partners.
    Any mileage tickets booked from elite account with a higher status than you & a United credit card will be above you.
    Plus any lower tier elites on higher fares will be above you.
    Plus any partner of a million mile flier & their travel partner may be above you.
    Plus United will sell upgrades for whatever they can rather than give them away.
    It all ends up being pretty miserable if you are looking for free upgrades. Someone is getting those first class seats but it’s not the guy actually giving them repeat business.

  2. “You’re more likely to get the upgrade when you request it.” — No, because on the routes YOU want to upgrade, EVERYONE ELSE also wants to upgrade.

    Everyone wants to be in Y on the regional and F on the mainline.

    I am midtier on AA and UA and I much prefer the unlimited system. If F is imperative I will buy F outright. Otherwise I never expect an upgrade; when I get one it’s a pleasant surprise. I have received a pleasant surprise on UA many times, including on transcontinental flights like IAD-SEA.

    AA’s system means I will never receive a pleasant surprise on AA.

    So, given the choice, I will book UA over AA.

  3. After the Sept meal cuts there is nothing more premium about AA’s domestic first. Terrible move there.

  4. You are correct to the extent that forcing elites to pick and choose when they get upgraded benefits lesser elites.

    But the question is “whose ox gets gored”?

    Under the current AA system it is mine. And I am obviously not keen on it, ignoring “equity”. I am LT Plat and my employer has pretty strict contracts with providers – I have zero discretion on work travel. I’ve got a bloody heap of avios and aadvantages miles, so I seldom accrue miles for leisure. So, a system where Ex Plats have all you can eat upgrades but plats must pay is the worst of all worlds for me, and my ox is getting gored sooner than others’.

    But that is life. i will manage.

  5. Having never tried US or UA’s unlimited upgrade for all elites, I can’t say which is better or worse, but Gary’s logic sounds reasonable. After the massive EXP/PLT culling this last year (no more soft landing, no more DEQM promos, etc), I was able to upgrade a few times with stickers after I dropped from EXP to Gold, which was nice and unexpected.

    On a side note, I do hope AA doesn’t change the policy when to not dishing out upgrades / miles based on fare class (expect that EXP gets upgrades as Y. Fair enough). After flying KLM/AF this year, earning 25% on deep discount fares suck, not to mention that’s one extra thing to keep track of. AAdvantage is pretty straight forward and I hope they keep it that way.

    AAdvantage is my favourite program, but unfortuately AA’s strength is their Latin American network. As someone that flies to Northwestern Europe a lot, OW/AA just sucks for me.

  6. I have been Gold, Plat and 1K at UA, and Plat and EXP at AA. I completely agree that the AA way is better, at any level.

  7. Rather than fixed redemption costs for the certificates, make the elites bid for the seats. Those who bid the highest in certificates receive the upgrade!

  8. False. Why as a frequent business flyer would I want to give up wholesale upgrades? I concentrate my flying to my program of choice for better not worse treatment. By definition shouldn’t a frequent flyer program benefit the most frequent flyers? If you were to endorse spend as a factor in determining elite level then I could get behind it but your rationale is faulty. Lastly, if you think airlines (especially doug parker) will reinvest into a better hard product as a result of the sale of upgrade certs then you are out to lunch.

  9. @jhfscott

    American style, your ox get’s gored by Ex Plats
    USAir style, your ox gets gored by Ex Plats and Plats.

    In particular, if you are on the same flight as Jason, you will never compete with him under the American system but will always compete with him under the USAir system.

    @Gary You are 100% right. Same goes for charging for better seat assignments within coach.

  10. I am a united silver and have been upgraded 11 out of 20 segments in the last year, mostly the longer segments that I fly. On American last year, I would have earned 12 stickers, which would have gotten me no more than 4 of those 11 upgrades. Alternately, to get the 11 upgrades that I got, I would have needed 38 upgrade stickers at AA. And for the 9 segments not upgrades, I got exit row aisle for every flight. When AA started flying to the destination I travel to this year, I looked at a status trial or match but I would have lost in pretty much every way. I read the blogs where the writers think that AA is amazing and United is a bottom feeder, but I just don’t see it.
    I have a load of AA miles from the executive card extravaganza, but I try to use them and all I can book is British Airways with huge surcharges. Instead, I am scraping together every last Aeroplan and United mile I can and will end up booking our European trip with star alliance again. So far, I haven’t been able to find a use for AA miles. All my successful booking has been with United, Aeroplan, Avios (in N America), and ANA (although I have to pay surcharges with them too, $1500 in fuel charges will save me 530,000 miles).

  11. AA’s system works best for me as a Lifetime PLT. I choose my upgrades. Under 2 hours, I sit in the back, MCE, aisle. Over 2 hours, I’ll try and often get an upgrade. And many others do the same, so my upgrade % is good. If it were unlimited, I’m pretty certain I would never see an upgrade as every flight I’m on has plenty of PLTs.

  12. &farnorthtrader Either you fly Tuesday afternoons or you buy Y/B fares. As a 1K last year I was about 25% buying middle of the road fares. Flying Monday morning and Thursday evening.

  13. Using the exact same reasoning, shouldn’t EXP be required to use sticker too? All the points you listed seem to apply to EXP as much as plt and gold. Why don’t you write to AA and give up your unlimited upgrade so they can ‘have better first class product’? Do you not request upgrade and stay in economy when you don’t ‘need it the most’?

  14. I like the AA system. Currently EXP but when I have been Gold and Plat I agree – I pick the flights I want to be upgraded on using stickers and have good success. SFO on business? No need for an upgrade so dont request. Cabo for vacation – yes please!

  15. @bgiagg – that’s how it used to work, and i do agree the same analysis applies, but the relevant question here is what American is going to do in terms of the current system vs the US Airways one when every other airline is closer to what US Airways does.

    Although it’s not much of an issue for Executive Platinums, who generally clear upgrades either way. So awarding 8000 miles for every 10k flown would seem closer to right there.. 😛

  16. You’ve become an AA apologist if you think the Nov 1 improvements bring it even close to the standard there used to be. The main courses are now $2.99 frozen dinners.

    See how you feel flying DCA-LAX or any other transcon not out of JFK or MIA-LAX. Serious devaluation of the experience.

    Where are the headphones, duvets, the things that made AA special?

    This is UA/CO all over again.

  17. @Gary I did not say the November 1 improvements (which we haven’t actually seen yet) bring them to the previous standard, I was saying that referencing the September 1 cuts was the wrong benchmark as it didn’t represent the status quo for the service.

  18. Yes that is not the status quo, but it was a classic bait and switch.

    I agree paid upgrade instruments are better if they protect the integrity of the product. But this management team is going to try to get away with not delivering the product it needs to.

  19. No, no Tuesdays or Wednesdays that I remember, mostly Thursday/Sunday or Friday/Monday. Probably half of the upgrades were in or out of Denver, so that certainly didn’t hurt, but the others were in/out of Houston or Newark. I am averaging about 7 cents a mile, so definitely not anywhere close to Y/B fares.
    Not sure about the rec for jet airways. Reward flights have been to Europe (using Aeroplan and united), Central America (using Avios), and Southern Europe, North Africa, Middle East (using ANA). Not sure where jet airways would enter into it. I am probably missing something.

  20. @Gary
    Your analysis is flawed
    .
    @jfhscott is right –
    It only makes sense if ALL levels paid for upgrades
    IF EXPs paid for upgrades with stickers earned by flying then AA may be better.
    Then they may not ask for upgrades and one might get a few more

    @Jason is right and farnorthtrader has the same experience as mine.
    UA is much better for upgrades for the midlevel flyer
    (as a UA PP) I consider myself mid level.

    @Ben will get a lot mroe upgrades if EXP were culled from the free upgrade system

    @Matt is right about Dougie
    If AA gives a bette rproduct becuase Plats and Golds pay for it, by your reasoning, why not make EXPs pay for it too?
    We may even get showers in the sky with that much extra money!

    @bgiagg is along same reasoning as mine

  21. I totally disagree with your assessment. Anyone can argue a point particularly if it is in line with what their believe to be ‘true’. It has been obvious from the outset of this merger wherenyourmloyalties lie.
    I find it hilarious that American flyers are still beating the meals issue to death. Unless I am flying an international route, I could care less about a meal on a plane. No matter how you dress it or serve it, it is nothing but a glorified TV dinner….. Even those ‘delightful’ ice cream sundaes are often barely edible because they are frozen harder than a brick.

    As for the upgrades, it makes NO sense for a F cabin to go out with empty seats. Sure, leave those seats empty and then pay the poor people who get bumped out of oversold coach rather than upgrading to the front and filling the back. How does revenue balance out there in the big picture? Loyalty should be rewarded whether one is a business traveler with all or most expenses paid…or a retired schoolteacher who just happens to love your airline and chooses to fly it faithfully.

    I personally believe the ‘sticker’ system is absurd as it stands. US tried it in the 90’s and scrapped it. If the ‘stickers’ were good for a full segment, then perhaps they would be useful. As they stand, farnorthtrader has it right….too many are required for a reasonable flight.
    I have resigned myself to the fact that US Airways loyal flyers, who stuck with them through the America West merger and subsequent austerity goof-ups, are probably going to come out of this merger pretty well screwed to the wall –

    Unfortunately, it is going to be the people who flew Parker’s low cost carrier through thick and thin – who helped it crawl out of a hole and operate in the black for several years in a row – helped it to become strong enough to BUY American out of bankruptcy – yes, it’s going to be those loyal flyers who get the shaft on this if the AAdvantage program (as it is) dominates the merger of the two.

  22. Sorry for the typos above….typing on an iPad ….and feeling quite emotional. My first sentence is directed @Gary and not @ffi.

  23. As an AA Plat, I totally agree with your assessment, Gary. I truly hope the current system (and, for that matter, the current AAdvantage system as we know it sans lack of AAward Availability, especially at the last minute) stays in place.

    You know what my upgrade percentage is on UA as a Premier Silver? 0. On PMUA as a 2P (equivalent level) back in the day, I had decent success in getting an upgrade when I so desired/requested (Mondays & Thursdays on hub to hub routes excepted).

  24. Gary —

    Would you still be supportive of the AA system if they required EXP’s to use the stickers? And earned them at the same rate?

  25. Completely, wholeheartedly agree. I have experienced United Premier (only 1 upgrade in 40,000 miles of domestic flying) and AA where I was only Gold for a few weeks (on my way up to greener pastures…EXP 🙂 but was upgraded twice during that 25K.

  26. I’m a US Platinum and my upgrade success rate in 2014 has been 90.4% on those segments where I was eligible for an upgrade (e.g., omitting segments flown on AA back in February and such).

    I can’t imagine I’m going to have anywhere near that kind of success next year with this sticker business. I don’t know as I would mind it that much if one could use one sticker per leg flown.

    I personally don’t rank first class upgrades as my favorite benefit (the AA faithful will probably moan that this is because most of my FC experience is on US metal, and there is probably some truth to this), but I certainly DO appreciate them (they’re probably my second favorite benefit after either FC check-in or priority boarding) and I don’t really see how my flying life gets better with stickers. But I don’t see much benefit in the merger overall. I think it’s folks like me (US Golds and Platinums who fly a mix of short and long hauls over the course of a year) who end up with the shortest sticks here.

    Additionally, I completely disagree with those who imply that FC for a business trip isn’t all that valuable. I just flew SEA-PHL-DCA last week and didn’t get upgraded on the SEA-PHL leg. It was an early morning flight and I had work to do. I was in an exit aisle seat and the guys next to me on both sides were also trying to work. They both pulled out their laptops. I ended up not even bothering. Instead I just answered emails using my tablet and even then the guy in the middle seat beside me and I were bumping elbows a ton while we tried to type away (me mostly trying to type one handed so as to NOT bump him). For me, FC is significant not just because of the “premier experience” or whatever, but also because the airlines have all turned coach into a sardine tin. I have found that the hours I spend with my butt planted in coach tend to be far less productive than those where it’s planted in first–completely because of space.

  27. Current US elites are the ones who will get screwed if AA moves away from complimentary upgrades. US upgrade rates are (anecdotally and in personal experience) way, way higher than UA, DL, etc. Even back when I was Silver/Gold, I cleared on 60% + of my flights. And no Gary, they weren’t Wednesdays at Noon, or Saturday mornings, or something like that!

  28. Gleff,

    DL’s x00 mile upgrade instruments were earned based on distance flown by DL elites, but DL wasn’t selling those upgrade instruments at any time around when they shifted to unlimited complimentary domestic upgrades. DL and NW had no domestic upgrade instrument to give up when they combined.

    UA’s x00 mile upgrade instruments were earned based on distance flown by UA elites, but IIRC UA wasn’t selling those upgrade instruments at any time around when they shifted to unlimited complimentary domestic upgrades. That would mean UA and CO had no domestic upgrade instrument to give up when they combined and shifted to unlimited domestic complimentary upgrades.

    In other words — unlike with AA — DL and UA had no significant domestic upgrade instrument revenue to give up when they combined (with an airline with unlimited domestic upgrades) and transitioned completely to unlimited domestic complimentary upgrades.

  29. Regardless of which system is better in your mind, one thing that doesn’t seem to have been mentioned that I dislike about the sticker system is that the game is rigged in the house’s favor when it comes to getting full value. What I mean by this is that, generally speaking, any time you use stickers, you are wasting part of that sticker. That is because there is the one-sided cutoff – you need to use more sticker than you really need. Yes, there is the 50 mile tolerance window but then on flights for the rest of that 450 miles length increment you are wasting some value. For the 610 mile flight DCA-ORD you need two stickers.

    In this day and age of, you know, computers being able to do simple arithmetic and all, it might be a nice adjustment to switch from hard 500 mile increments to an actual declining mileage balance. So instead of stickers it would simply be miles worth of upgradability. Purchases and accruals could still occur in chunks, of course, to keep the accounting simple.

  30. Left the word “revenue” out of the last sentence of each of my first two paragraphs above. I’m sure you can figure out where. 🙂

  31. Hi

    Disagree with you …Lessor elites will lose out on long haul flights. Everyone wants to upgrade on long haul flights. Being lowly silver, I get upgrades most of the time because I choose non business times. However if it goes to vouchers I will not have enough to get the upgrades I receive now. Definately not for me!!!

  32. Ironically, this is a conversation many United flyers had when UA switched from e500’s to CPU’s. The “vote” was pretty much split.

    UA now, of course, holds a portion of F seats for Time of Departure (TOD) upgrade purchases. Even just last week, I could see them offering an SFO-ORD upgrade for $199 as I was changing my seat a couple hours prior to departure. I’m sure there is some decent revenue coming in through that particular channel.

    @GUWonder – I thought it was possible to purchase additional e500’s on UA back in the day. Am I mistaken?

  33. IIRC, the kind of regional and domestic upgrade instruments UA provided to UA elites based on miles flown were not available for sale to UA elites at the time where my CO and UA mileage balances could be combined. That said, most of my complimentary upgrade instruments from UA and DL have expired worthless — even my systemwide upgrades; so it’s possible that I didn’t look or pay attention to the sales of such instruments at those times.

  34. “Even though that’s not as simple a slogan as “don’t make me pay for what used to be free,” it’s the system that works better for most frequent flyers.”

    I assume that means you would be happy if AA went to a system where Executive Platinums such as yourself were also on sticker upgrades?

  35. Gary – you nailed this one and I totally agree!! As only a Gold with AA, I am willing to pay for 500 mile e-certificates in order to get upgraded. Upgrades are important to me. If AA goes to unlimited upgrades, I see my chances of future upgrades at slim to none and thus, my loyalty for my amount of annual travel will not necessarily be dedicated soley to AA.

  36. @ jfhscott
    I don’t buy your argument against the AA system at all.
    I am also AA LT Plat and worked for decades for a company that never sent me on anything but an economy ticket. The sticker system worked great for me. I just put in my upgrade request ASAP after company bought the ticket. If I ran out of stickers, they were always available for purchase for a few bucks. I am sure that a got a great deal more upgrade opportunities, especially back in my Gold years, with the AA system.

  37. @ farnorthtrader
    Yes, you are going to have trouble finding low level awards for premium cabin tickets to Europe on AA, but that is always true for all the airlines. One eventually learns the ins and outs of finding those rarities on one’s primary airline, but has an extremely difficult time on other airlines. However, I will share that I have been having great luck on AA flights to Asia.

  38. As much as it pains me to agree with @gobluetwo (Go Bucks!!!), he’s got it right by focusing on the TOD program on UA.

    It’s essentially the same thing as the e500 system, but without any transparency as to availability or pricing, and with an anti-Premier positioning.

    I would *much* prefer to go back to the old regime.

    Greg

  39. I am a loyal USAirways customer (Chairman’s Preferred) who, along with many other loyal USAirways customers, am concerned and frankly worried about the merger with American Airlines.

    I’ve never had such a good relationship with an airline as I have had over the last ten years with USAirways. They give me complimentary first class upgrades on most flights. My wife also gets complimentary upgrades.

    When I spend over $25,000 on a USAirways Mastercard (I have three), they give me 10,000 Preferred Dividend Miles, which has helped me reach my elite status.

    Much of my family’s travel (there are ten of us) is to the U.S. Virgin Islands from Washington, D.C. with connections through either Charlotte or Philadelphia. We could fly non-stop (for the same price and sometimes less) but we fly USAirways because of the upgrades, which are made available to us a full week before departure. We’re told we can upgrade on American as well, but only if seats remain available on the date of departure. Not impressive and a very bad indication of how American will be treating its best customers.

    Should I book award travel using my Dividend Miles and want to make a change, no penalties are assessed because of my status as Chairman’s Preferred. American will charge its most valued customers $150 on each flight. That says a great deal about how much you value our loyalty and patronage.

    We have come to think of USAirways as our friend, as family, and as such, we have a stake in its success. Will the best customers say the same thing about the new American? It would appear that very few of the benefits that USAirways accorded its best customers, and generated such extraordinary loyalty, will carry over with the new airline. Instead, it appears AA plans to adhere to the same policies that didn’t work too well with the old American.

    That would be most sad. It’s not only loyal passengers—like us—who will be hurt. Should the “New American” go in the wrong direction on this, its shareholders will also suffer, not to mention the thousands of dedicated USAirways and AA employees who may also incur heartbreaking setbacks.

  40. @Gary — Any thought that higher profits in the front cabin will be reflected in a better front cabin product is simply wrong. Higher profits go to the bottom line. The airlines will do only what is necessary to be competitive without breaking the mould and truly thinking “out of the box”. In my career, I sat through too many meetings with this result.

    What you are arguing is essentially in favor of self selection -similar to London’s Congestion Charge for traffic. If the upgrade is important to you, you will spend your sticker capital for it. This is essentially true. The UA and DL systems ration according to profitability to the airline in a rough (and now more finely honed) way. So the decision making is not in the passenger’s hands.

    BTW, when I worked, I was mostly DL Gold, and was upped about 75% of the time. if I was traveling with my Lady (about 20% of my travel after she retired), I would get a companion up for her about 20% of those times. I was also UA Silver or Gold at a time when they used the sticker system, and could not find a way to use them more than once.

  41. Also, even the internationals will sometimes up when there is space. On a DTW-LHR flight on BA, our party of 4 was upped from WTP to business because there was space available. (Yes, BA did it both ways, but I’m pretty sure history won’t repeat with the lack of capacity today.)

  42. As an AA flyer for both business and leisure, I float between gold and plat. I’m looking at what’s possible as it’s the only definite. This happened last weekend. As a gold, paid $243 for a non stop trans-con and 6 earned stickers or a $180 copay to buy them got me business with a flat bed seat and a 3 course meal. Is that even possible on DL or UA?

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