Is It Too Late for American AAdvantage to Go Revenue-Based in 2016?

Two months ago I wrote that big changes will come to American AAdvantage… but not yet.

  • The focus through October 17 (and ultimately beyond) is integration with US Airways.
  • They’re running out the clock to make big changes for 2016.

The simple counterpoint to this is that American didn’t announce their 2015 program details until October 28, 2014.

Bare Minimum Notice is 90 Days

While the standard among US airline programs is to give more notice than this, it seems that the absolute bare minimum is at least 90 days (and for some changes much more).

American has said that 90% of tickets are purchased within 90 days of travel, that’s why they began the reservation system ‘drain down’ of US Airways on a 90 day schedule.

Now that we’re about 90 days from the new year you have a substantial number of members buying tickets that could earn fewer miles than expected. Legally speaking there’s little recourse, as Delta argued before the Supreme Court in Northwest v. Ginsburg once you’ve flown on an airline ticket you’ve gotten “full performance” and state contract law ‘cannot superimpose a duty of good faith and fair dealing’ on an airline loyalty program. Indeed, AAdvantage disclaimed any such obligation in a change to their terms and conditions six months ago. But their own standards for customer expectations — selling tickets and changes the rules — would lose any sense of reasonability. Ninety days’ notice should be the bare minimum to change how AAdvantage miles or elite qualify miles are earned.

The standard is giving much more notice when making fundamental changes to how earning and elite status work

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.

The British Airways Earning Mistake Suggests We Aren’t About to Get Little-Notice Changes

Even the mistaken posting of new lower earning rates for British Airways and Iberia discount fares was telling. While it could have been an old plan that’s been superceded, it reduced earnings on discount fares but didn’t increase earning on premium fares… suggesting that American would keep in place their separate bonus earning structure on premium fares.

What’s more, American just reassured that making any changes to British Airways mileage-earning would be done with substantial notice.

Would the CFPB Go Along With Little-Notice Changes to American’s Elite Program?

At least as far as elite mileage-earning goes, there could be legal problems making big changes without notice — not under state contract law (which is pretty much blocked by Northwest v. Ginsberg)) but as a result of American’s relationships with Citibank and Barclays.

Both banks issue co-brand credit cards that market the ability to earn a certain portion of one’s elite status via spend on their card products. Both banks charge higher annual fees for the cards offering that benefit.

The Consumer Financial Protection Bureau would certainly see credit card marketing complaints if the benefits of those cards became materially less valuable (if you could no longer earn 40% the way towards Gold and 10% the way towards top tier Executive Platinum) during the same cardmember year that consumers had paid big fees for the privilege. Changes to benefits provided by card companies need to be made with great care and notice.

AAdvantage Would Be Wise to Wait on Big Changes

It’s too late to push wholesale changes to the AAdvantage program for the 2016 program year in any reasonable way.

If they did so, they’d be breaking with even the convention that Delta has followed. They would be changing earning of miles or elite status after customers had begun buying tickets for the new year, based on American’s own talking points — tickets purchased with the expectation of published benefits they would receive.

It may have made sense for Delta to reduce their marketing spend, reduce the generosity of the SkyMiles program, with planes full and prices high over the last couple of years. The US Airways merger meant that American didn’t quickly follow suit. But now the terrain has changed, and loyalty programs matter more to fill seats as revenue is falling in the face of greater competition and lower fuel prices. American would be wise both from a customer commitment and from a business standpoint not to try to roll out major changes to how miles and elite status are earned in 2016 now that we’re entering the final quarter of 2015.

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. I don’t earn miles by flying so the earn part doesn’t worry me. But, if redemption becomes more linked to ticket price and reduces the potential of outsized rewards, then that would concern me. This is why I fly AA and not delta/united. Here’s hoping that continues for the years to come.

  2. Good and useful post, Gary. I hope that in your own small way your comments on this topic help to set expectations for American and thus to nudge it in the right direction.

    I wonder whether someway, somehow, the hopefully positive changes in United’s leadership will get American to look over its shoulder to make sure that its frequent flyer program changes don’t result in forfeiting customers to its hopefully revived competitor. But of course this hinges on what United itself does in coming months and years.

  3. Interesting point on Northwest v. Ginsberg. How can you run an effective “loyalty” program when your corporate strategy is that “good faith and fair dealing” are not required. When United changed it’s upgrade policy strictly to who paid more for a ticket and changed it’s “Mileage” plus program from miles to dollars I suggested that they change the name from a “loyalty” program to a “rewards” program, because loyalty has been removed from the equation.

  4. I would love to see data on the percentage of frequent flyers who now KNOW there is a difference between the way AA awards mileage and the way UA and DL award mileage. I’d be curious if this knowledge increases from casual flyers (say, taking 3 trips a year) to those taking more than 12 trips a year. I’d also be interested in knowing the harder-to-measure data of whether this difference makes any real world changes in booking patterns.

    And is AA even looking for such data?

  5. Feels like just a matter of time. I am holding out hope that redemption levels aren’t dramatically changed before about April of next year when I will first be able to book a flight I pretty much know I’ll be taking in March of 2017. Want to redeem at current rates. *Fingers Crossed* #NotOptimistic

  6. Just remove even more premium seats for redemption purposes. Change made. No notice required.
    In all seriousness, perhaps it’s just me, but using AA(old US) miles is exceedingly difficult, particularly to Europe.
    No BA seats(and YQ) please.

  7. @Gary — I enjoy “eavesdropping” on frequent flyer conversions at the airport. I seem to encounter them fairly often, probably because I’m often sitting in lounges and the elite/FC sections of aircraft. I also sometimes encounter such conversations among friends and family.

    My anecdotal experiences confirm your data. Flyers, even those who travel often, don’t know a heck of a lot about the details of the ff programs. Nor should we expect them to. Those details are very complicated, and they have better things to do with their time. Kind of like the way most taxpayers — even those with substantial incomes — don’t know the ins and outs of the tax code.

    Which begs the question of why frequent flyer programs should be “generous.” It seems better to trick and deceive the public. That sucks, but I think is the reality. Which is why I’m skeptical that AA will maintain its “one flight mile equals a mile” policy.

  8. American has poached a number of frequent flyers through status match after United went revenue based and devalued their miles program. I am hoping that they realize it is a competitive advantage to keep their program mostly as it is.

  9. @iahphx.

    (1) I was telling a woman I know about the change from mileage based to revenue based on United. She said it did not make a difference. At the end of the year, she missed Silver by a few dollars. She is really angry and is avoiding United at all cost.

    (2) The Continental/now United million milers I know (EWR) obtained their status flying on the corporate dime and are high value customers. But they have been using their miles to fly their families. They have noticed the downgrades. Plus they are really unhappy with the downgrade of their status. They have noticed and eventually United will pay the price.

    This stuff adds up over time. Although people do not know the ins and outs of the program, they do understand the value of miles. If it is downgraded, then they will stop buying them and move to cash back cards instead. At the end of the day, I do not believe devaluing the programs is a free lunch for the airlines.

  10. CFPB action seems like a stretch, especially if the benefit itself doesn’t change (e.g., earn XX towards status – the benefit isn’t stated as “earn a certain % of the way to a certain status”). Banks are free to change things like CC interest rates, fees, and other terms at will, provided they issue advance notice. How is it that they would interfere with a situation where the CC makes NO CHANGE but merely the FFP alters their elite program? I’m pretty sure all of my co-branded card agreements have disclaimers regarding the bank not being responsible for the loyalty program itself. Is there any history of CFPB action on a similar CC benefit – or a particular regulation that you can cite?

  11. It BETTER be too late. How many times have I complained here about the ridiculous lack information about 2016?

  12. @flyer fun – great points all. These have basxially been my anecdotal observations as well – hope you/we are correct …

  13. If they change to revenue, then I will just quit my AA status challenge and stick with Delta…. they have a unique product at this point…. they should exploit it, and mock Delta for how few miles you can earn on DL versus AA……

  14. AA could wait it out another year. With all the UA customers AA is getting, plus all the issues at UA – new management, etc. AA may not want to rock the boat. Keep status quo in case UA were to change its FF program again.

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