Big Changes Coming to the American AAdvantage Program… Most Likely Not Until 2017

With US Airways flights scheduled to be entirely on the American Airlines platform come October 17, and IT resources focused primarly on the merger integration, American AAdvantage is simply running out of time to make big changes for 2016.

Even Delta and United Gave 6-12 Months Notice for Big Structural Program Changes

When Delta announced it was imposing minimum spending requirements to earn elite status they gave a year’s notice.

When United announced their (same exact) minimum spending requirements to earn elite status they gave more than six months’ notice. [In fairness, they needed a few months to be sure they could copy Delta.]

When Delta announced revenue-based mileage earning (earn miles based on dollars spent, rather than distance flown) they gave 10 months’ notice.

When United announced revenue-based mileage earning, they gave more than six months’ notice. [Again, they needed a few months to be sure they could copy Delta.]

American Has Gone to Some Lengths to Give Advance Notice of Changes for the Past 16 Months

Ever since the April 8, 2014 changes without to the AAdvnatage program — elimination of distance-based awards, elimination of free stopovers at a North American gateway (plus elimination of the US Airways 90,000 mile business class Asia award) — the program has made sure to announce even the smallest tweaks with advance notice.

For instance we got two months notice for them to close the loophole where US Airways charged the same amount for business and first class awards domestically (so Cathay Pacific first class, New York – Vancouver, was the same price as business class, and first class on New York JFK – San Francisco and Los Angeles flights were as well).

We also got about six months’ notice that the cost of extra availability ‘AAnytime’ awards would go up for peak holiday travel.

As recently as the end of last week, American has said they do not have plans for changes to their award chart at this time. They almost certainly will at some point.

Reservation Systems Won’t Be Integrated Until October 17

American is draining down US Airways operations: flights October 17 onward are all being sold as American Airlines flights, and are being managed on the American Airlines platform.

Starting October 17, all flights will be run off of the American systems. Very little customer data will be affected — frequent flyer accounts have already been moved over to AAdvantage, and so have pre-existing reservations on US Airways flights for October 17 and beyond.

But that’s the date that all agents will have to be working on the American platform that they aren’t as familiar with. They’ll be using Qik to keep things easy (it automates lots of functions, which isn’t great for getting agents to bend the rules unfortunately).

IT resources are fully committed to integration still, even though by all outward appearances things are going well. (If it stays that way you’d expect American’s Chief Information Officer to be able to write her own ticket, anywhere, after pulling off perhaps the biggest corporate data migration in history for the world’s largest airline.)

And things don’t immediately change focus once flights operate on the American platform. There’s going to be a lot of troubleshooting. It’s not just reservations and activity at the airport. For instance, crew scheduling, you have pilots and flight attendants from US Airways being scheduled for American Airlines flights and who will be transitioning to new platforms.

Though the heaviest lifting will (hopefully) be over October 17, IT work will continue and they won’t stand down and turn to other priorities right away.

Most Big Changes Across the Airline Have Been on Hold Until US Airways is Integrated Into American

There’s a long list of changes that the former US Airways management wants to make at American, but that’s had to be put on hold until they complete integration.

For instance they’re anxious to be putting more US Airways aircraft on legacy American Airlines routes, and vice versa — getting the right aircraft capacity in place for the right route.

And there’s opportunities for more ancillary revenue. There are domestic flights that go out with empty first class seats. There are international business and first class cabins going out half empty at off peak times (e.g. American’s 2:45pm London – New York JFK flight on Wednesdays), they should be able to find ways to earn something on those.

And there are changes they could make to the frequent flyer program. American President Scott Kirby two months ago said “we would have loved to make some modifications to the frequent flyer program” and — unclear whether with respect to the frequent flyer program, or regards ancillary revenue (but in the next sentence), he said “shamelessly copying some of things competitors have done.”

There Won’t Be Enough Time Left to Make Big Changes for 2016

The calendar presents a problem for making big changes in the 2016 program year. Changes to elite qualification need to be announced before year starts — Delta gave a full year and United 6 months, but as a technical matter even they really can’t change those rules mid-year.

And wholesale changes to earning and burning would simply take greater IT resources than they’ll be able to commit in time to take effect for 2016. (We could see them announce something tomorrow, though they’re on record saying they aren’t currently planning to change the redemption side, but it seems risky to commit to that before the merger integration effort is complete.)

So I still expect any 2016 changes to be evolution, not revolution.

There Will Be Changes in the Future… But They Shouldn’t Be All Bad

I don’t think there’s any question that American is more generous than Delta and United for lower-spend customers. Elite status can be earned based on flying or spend (“points”) and without any minimum spend amount.

For instance once that status is earned, American gives a full 100% bonus on flown miles (on the cheapest tickets) for their 50,000 mile flyers. At United and Delta the base earning on cheap long distance flights is much lower, and the elite bonus gets cut in half.

I’ve often argued that when something is several orders of magnitude better than most offerings, you’re going to get reversion towards the mean.

US Airways had a revenue-based program on the shelf before the merger.

American is already ramping up their rewards for high spending customers, but without reducing rewards for low spend.

They’re already able to do quite a lot of revenue tracking, that was a capability that the Ventana system upgrade gave AAdvantage a couple of years ago.

There’s no mystery in any of that.

We’ll certainly see the program evolve, with bigger changes announced in 2016 and going into effect in 2017 — in other words, with AAdvantage showing members at least the minimum respect that United and Delta offered their members when making big changes.

I don’t know precisely what changes those will be. As members we’ve benefited from extra time without big changes making the program less generous as a result of the merger. And we could wind up having dodged some bullets to the program’s generosity as a result of that delay.

That’s because fundamentally Delta didn’t need to spend as much on marketing to fill its planes in recent times. But the current revenue environment has softened. Lower fuel prices, and the expiration of the Wright Amendment, mean a more competitive airline environment. American announced a nearly 7% hit to the revenue they’re deriving from each seat as they battle Southwest expansion at Love Field, Spirit Airlines expansion at DFW, and growth from other carriers across other markets. That’s not a time to cut back on marketing spend. The current soft-ish revenue environment could cut against some of the big changes they’d otherwise make… if they’re smart.

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. @ Gary — I’m surprised you aren’t riding on American for not publishing the 2016 program yet. I find it completely unacceptable that they have not at least laid out the elite qualification rules for 2016. After all, they ARE selling revenue tickets for almost half of the next year already…

  2. First, I’m an EXP on AA which means I spend a lot of time on their planes. Don’t know what domestic flights go out w/empty seats in first-only one I’ve seen this year was a flight last week when the pax asked to get off, after they’d shut the boarding door. Considering there were still pax on the upgrade & standby lists, had that pax gotten off any sooner, that seat would have been easily filled. The only domestic flights I’ve seen go out w/any empty seats are a very few served by the RJ’s & even then, not often. I have no doubt they will change to a revenue based FF model as soon as possible, however, they may be somewhat disappointed in the results-they can’t seriously expect anyone to pay a premium price for the significantly downgraded product they are now offering up front. When Kirby has publicly said Spirit is the ‘new’ AA’s idea of competition, it speaks volumes about where this airline is headed.

  3. The one thing the airline industry has to do is report reams of data to the govt which then becomes public. These big carriers know more about their competition than virtually any other private industry. It is foolish to believe AAdvantage is not headed to revenue-based earn/burn, unless the data out there starts to show that it is eroding loyalty to DL/UA.

    Clearly AA wants a competitive advantage, but their mgmt is on record as wanting to go revenue based as well. Gary’s analysis about timing seems sound. But he tends to imbue these execs with more rationality than they typically show when it comes to loyalty programs. We can only hope customers are voting with their feet in a way that can be discernibly connected to FF program changes.

  4. The title is precisely equivalent to my prediction — there will be big changes to AAdvantage but not until 2017. What more could folks who seem to insist that a title be a short summary of the content of the post ask for?

  5. The title leads people to believe that there are confirmed changes to the program, which is not accurate. That’s the misleading part. Regardless, it’s good to know whatever they implement is still a bit off.

  6. It’s not inaccurate. I don’t think it’s too short, long or incorrect. It’s the implied meaning behind the title that makes it clickbait in my opinion. The title suggests that the changes are known and details will be shared. Past posts with similar titles have then included the exact details of the changes / devaluation. I’m sure most readers are very afraid of the upcoming AA changes, and a post that seems to have concrete news about what’s being changed will trigger an immediate click on the bait…

  7. @ Gary — Well, there are already implied changes for 2016 since the bonuses for paid premium travel are scheduled to end 12/31/2015. Surely, they are testing these incentives in 2015 to see if they make sense going forward, either as a continued band-aid or as part of a comprehensive revenue-based program later. I am anxious to know if they will continue next year, especially since I have already booked enough premium-cabin flights in 2016 to re-qualify for EXP if these bonuses are extended. Otherwise, I am short of re-qualifying. The consequence of this uncertainty means I won’t be purchasing any AA tickets for 2016 travel until the changes (or lack of changes) are announced. It would be lovely if AA added rollover EQMs/EQPs like DL…

  8. If United copy Delta again I think there might just be grounds for a class action? Oh wait we can’t sue over frequent flier programs.

  9. Hi Gary, just fyi your site is now infected with the same malware ads that OMAAT was stricken with a few months back… hope you’re aware of this and working with boarding area to eliminate the malicious ads…

  10. Gary, Do you have any idea what AA will do with the companion tkts that were issued under the old US airways cc that are valid until 12/31/15? If there are no more US flts, is AA going to let us use them on AA flts? mj

  11. American needs to hear loudly and clearly that their members do not want a revenue based system. While we certainly can’t expect the program to remain unchanged, there is certainly the possibility that if enough members (especially EPs) demand that “miles” remain miles, we could avoid the disaster that was MileagePlus.

  12. My gut says the US travel business is in a period of softening right now. I keep track of my CPM costs and they are slightly lower than last year.

    Revenue-based loyalty programs are actually going to hurt Delta and United in the long run. They are basically saying “no need to have any loyalty unless you are buying expensive fares or a top-tier elite”. Top-tier elites may represent 0.5% of flyers and 20% of revenue but you can’t build a business off them. Sure, the entire other 99.5% don’t care about their miles but let’s say 2.5 – 10% do. Those are the next tier of elite flyers and other business travelers who will simply book whatever ticket is cheapest. If they earn miles, great. If not, they don’t care because they saved money.

    I switched to AA from UA and while UA miles are worth more and much easier to redeem, I’ve been happy with AA’s reward structure and staff. If AA switches to a revenue based earn model and is still competing with UA and DL on price, guess what, I’ll fly them instead since (a) UA miles are worth more and (b) DL is a better airline.

    AA should be careful not to shoot itself in the foot.

  13. @Mary Jane as I’ve written, these companion tickets are valid for travel on American flights (the rest of the certificate rules still apply) October 17 onward through expiration.

  14. Except your title is nothing more than a guess. It’s not a statement made in fact, as it would imply. You might believe what you write – and you might even have information that supports it. But none of that was introduced.

    Instead, it’s basically just clickbait.

    I’ve been reading for years, and there’s just been more and more times lately where it’s clickbait titles with lack of actual underlying content. You’ve got more than enough normal content to write solid articles based in fact. Posts like these should really be titled: My Predictions: AA won’t make changes till 2017. That’d be a proper title that conveyed exactly what was expected.

  15. @RM It’s not a GUESS, it’s an ARGUMENT, I’m making a claim and explaining why I believe it. I’m sorry that the lack of the word prediction in the title made you find the post less valuable.

  16. What is your best guess on how they will change partner awards? For example, I have 2 CX business tickets booked for next summer as right now CX isn’t releasing 2 at a time. My hope is that 3-4 days before departure I’ll be able to grab two seats in first for the extra 17,500 each. Do you see that mileage differential increasing between now and then?

  17. I’m laughing at those of you who seem to think that UA and DL are hurting because they’ve gone to a revenue based loyalty scheme…and that somehow AA would be foolish to follow suit. If AA does NOT follow suit, AA will be left with the bulk of the least profitable flyers and the most diluted elite ranks of the big carriers–which only serves to boost UA and DL for those flyers who actually pay more for tickets (e.g. the customers that every airline actually wants!). AA is certain to move to a revenue based system or lose out in profits to UA and DL. That’s just the way it is…especially now that there are only 4 major airlines left–with just the legacy 3 being true international airlines. With so much less competition, it is foolhardy to believe that AA wouldn’t want to move to a revenue based elite scheme to match what UA and DL have already done. That’s why AA management is on record saying that they want to do that!

    The bigger question for mile hoarders is when might AA devalue its award chart. It is curious that there is little to no mention of that in this. I suspect that once integration is finalized in October, there will be no reason for AA to delay too long in the announcement of its anticipated mileage devaluation to be more comparable to those of UA and DL. That announcement likely is coming in late 2015 or very early 2016.

    I’ve been burning through all my AA miles in anticipation of the coming devaluation–and shifted spending to SPG cards over AA cards for the same reason.

  18. The title is shoddy or unethical work.

    Its like… “Obama DIED… just not yet.”.

    A more fair an accurate title could have been “AA: No major changes until 2017” or similar.

    For better or for worse, you are a very popular blogger. Do you have to stoop to this level?

  19. I see that several folks really didn’t like the title, when I wrote it I didn’t give it much thought. I didn’t want to write that changes weren’t coming, though the point of my post was that wouldn’t happen right away. I wanted to communicate that changes are pretty inevitable but American seems to have run out of time to make them for 2016. So I said that big changes would come (which I believe) and that mostly likely wouldn’t happen until 2017 (the thrust of the argument).

    Again, I see several commenters didn’t like the title. But as I say nothing nefarious intended by it, just tried to capture the point of the post succinctly. By some folks standards it seems I failed at that!

  20. You have a body of commenters that make many excellent insights to your posts, provide additional information, agree/disagree with your positions, and let everybody know when you’re wrong.

    But with a commenting system that is open and lightly moderated, far too many comments have become cruel, arrogant, and focus on largely peripheral issues such as your compensation, character, or complain about editing and proofreading-type issues.

    It’s time not to give these commentators the space and credibility anymore. Please shut down the comments section until you can develop an efficient way to let the good in, and keep the bad out.

  21. Gary Leff says:
    I see that several folks really didn’t like the title, when I wrote it I didn’t give it much thought.

    ***

    Horse-Hockey. Your posts and titles have been in the click bait toilet for months.

  22. I usually find the comments interesting, but why do I have to waste my time reading irrelevant comments from people who don’t like the title of your articles?
    Please find a way to quickly delete them so we can concentrate on constructive comments that actually pertain to the facts written.

  23. @dale m – thanks dale, i think i know my thinking as i put together a post. don’t love being called a liar. if that’s what you think of me please don’t visit the site.

  24. I’ve been quite critical of Gary on some matters and quite appreciative of his positions on others. In this instance, I appreciate his stance, including whatever trivial liberties he might have taken with his title. What some of those folks criticizing Gary’s post or title miss is that, in his own modest way as a prominent blogger who could get cited by the press on this issue, he’s helping to set expectations for how much and how soon American can gut its frequent flyer program. He makes a good case for the notion that quick moves by American would fall below even the fairly low standards of notice set by Delta and United. We should be thankful for his contribution to protecting our interests in this way. This is much more important than whether he could have titled his post differently.

  25. There’s almost no question that there will be a big devaluation on the earnings side. I’m hopeful that the deval on the spending side will be small.

  26. I vote for misleading headline. The headline states a fact, but your article is all opinion. That is misleading.

    The sad thing is, except for the fact that I scanned all the way to the end expecting to find the part where it sourced an AA release, the article itself was great. You don’t actually know if there are going to be big changes, or even changes at all. If the headline had said “Prediction: Big Changes Coming,” then it’s not misleading. If you purposely chose not to make that clear, then the criticism is more than due.

    The commenters are (some of) your customers. In a world where customers generally do not bother giving valuable feedback, I don’t think it was your best look to shoot down our opinions, especially when so many shared the same one.

  27. I’m thinking if I should transfer SPG points to AA miles before the promo ends. Plan to use it in another 18 months if there is no AA deval.

  28. @deelizzle again, your complaint was about one word, you would have preferred the word “prediction” but to me my intention was to stake out a bolder position and make a strong claim. My intention wasn’t to mislead anyone. Sorry you felt like you were going to get something that wasn’t promised in the title (“American Announces Big Changes..”).

    You say I should take the feedback because some ‘customers’ feel a certain way. But I don’t view readers of the site as customers, even if you think I should. I write what I’ve wanted to write, what interests me, as I always have. That’s the only way I’d have kept this blog going now for over 13 years. It’s my passion. Some write for other people, I write for myself and then I’m thrilled when others seem to enjoy reading it.

    I do take criticisms seriously, because I don’t consider myself infallible, and not everyone who disagrees with me is either evil or stupid 😉 but I’ll certainly respond to the criticisms that aren’t “I didn’t like your headline” but are “you were doing x” by saying no, as a matter of fact, that’s not what I was doing.

    So I’m not telling folks they should LIKE the headline, that their feelings are wrong. I’m saying that I wasn’t trying to mislead anyone in the slightest, I take the feedback that some folks here read what I wrote differently than I do and differently than how I intended it.

    What I do with that feedback, that I’ve internalized, I’m not sure (if anything). But I do appreciate the feedback, and this is and continues to be an open forum where you can criticize me all you wish!

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