Why American’s 500 Mile Certificate Upgrade Model No Longer Makes Sense

I used to think 500 mile upgrades made sense. I no longer do — although I still don’t believe complimentary unlimited upgrades for all elites make sense.

American is the last airline using the 500 mile upgrade certificate model. Gold and Platinum members earn (4) 500 mile upgrades for every 12,500 qualifying miles flown. If they want to upgrade more than that, they can buy additional certificates. (Executive Platinum members get complimentary upgrades for themselves, do not earn 500 mile upgrade certificates, and have to use those certificates to upgrade their companions.)


American Airlines New Boeing 737 First Class

The reason this made good sense, why I liked it better than giving all members complimentary upgrades, is simply that there’s not enough first class seats to go around. This was a way to ration those seats. Not every Gold and Platinum would request an upgrade every trip. So the times a given member did request it, when it mattered most to them, their chances of actually get the upgrade went up.

A Platinum might not care about DC – Chicago (which takes 2 certificates). That just means the chances of a Gold getting the upgrade are better.

Last year, as they brought US Airways Dividend Miles (which has the complimentary unlimited model for all elites) together with American AAdvantage, they adopted a hybrid system — complimentary unlimited upgrades on flights up to 500 miles, 500 mile upgrade certificate-supported upgrades on longer domestic flights. It’s not uncommon for me to see 40 or 50 people on the upgrade list for my short Dallas – Austin flights. (It’s also not uncommon to see that many on the list for my Thursday 5pm DC – Dallas flights, but that’s another story.)

There’s two other changes that have happened.

  1. American has raised the price of 500 mile upgrades from $30 to $40 apiece.

  2. The price of buying first class outright has gone down.

When first class cost $750 or more one-way, $150 in upgrade certificates off of a $200 fare represented a decent value. You were getting the leftover seats, but you were getting them for half.

But with first class often sold for no more than $180 – $220 more than a coach ticket, getting that first class seat confirmed at booking (and earning bonus miles and double elite qualifying miles) seems a better deal than spending $150 on upgrade certificates if there’s leftover seats.

Let’s look at Dallas – Las Vegas. I pulled up fares on a random date and find American selling first class for $159 more than coach.

Or since it’s 1055 miles, it takes (3) 500 mile upgrade certificates costing $120. A confirmed upgrade, bonus miles, and double elite qualifying miles costs $39.

Now that’s not always the case. A lot of it has to do with the number of upgrade certificates required for a route. With no grace mileage, a trip just over 500 miles or just over 1000 miles takes more certificates and is relatively costly. Maximize those certificates and you can do better.

I still do think a priority system makes some kind of sense rather than a free for all. But raising the price of upgrade certificates at the same time that the price of outright buying domestic first class seats made little sense and undermines the model. If anything, the price of an upgrade certificate ought to fall along with the price of the seat itself.

Granted, a higher price should limit demand for upgrades. But with a price so close to buying the seat and when upgrades come with neither the frequent flyer program benefits nor the flexibility (such as for same day flight changes) of a paid ticket the math just doesn’t work.

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. If people want to sit in first class they should pay for it. The FC cabins have too many tacky people these days who don’t even pay for the upgrade and usually complain they don’t get their pre-departure cocktails. I would rather pay cash and keep the free loaders in the back.

  2. From American Airlines’ business perspective, 500 milers make a lot of sense.

    In 99.9% of AA flights with a First Class cabin after any remaining F seats are filled with upgrades, there is usually a pretty hearty number of Elites that don’t get upgraded from the upgrade request list.

    There are a lot of U.S. businesses that will only pay for the lowest coach fare, and for some road warriors that don’t earn EXP status [i.e. Gold and Platinum members], 500 milers are the only way to fly first domestically on flights >500 miles.

    AA already compromised on adopting US’ policy for unlimited upgrades on flights less than 500 miles. What financial incentive is there for AA to stop selling 500 milers, when in some cases those upgrades take months to get burned?

    It’s a no brainer what AA is doing— on some routes AA sells K-UP/Y-UP at prices cheaper than the cost of a coach fare plus required number of 500 milers. For EXP’s that know that certain routes are battlefield upgrades, they’ll sell out First Class thanks in part to K-UP/Y-UP fares. AA knows a percentage of EXP’s will bite at these K-UP/Y-UP fares— even though they get UDU’s just so they can get a confirmed F seat, and not have to gamble for an upgrade.

    Meanwhile, some Platinums and Golds will still buy 500 milers in advance of the flight, thinking they’ll be able to upgrade– when the reality is that the plane will have F go out full with even many EXP’s not clearing.

  3. @mark
    Flying on your employer’s dime does not make you classy, in fact your dumb comment indicates you are probably a self centered mid rank insurance or aluminum sheets salesman…
    You probably don’t pay with your own money when you go down to cancun with mrs insuranve anyway….

  4. I don’t know if Mark falls in this category, but it always amazes me when people who get their employer to pay for their tickets call those of us who shell out for our own travel freeloaders.

    I guarantee you that many in revenue based programs who have the ability to choose their flights will from time to time select higher priced flights on their company paid tickets just to earn more miles.

  5. I’m an AA Platinum and often add my name to the upgrade list only to find that I end up at number 20 or lower. As a result, I have a lot of unused 500-mile upgrade certificates. Why not restructure the 500-mile upgrades to be more like AAdvantage reward tix? Meaning, keep the current system for “saver” upgrades, but allow people to use more certificates for an “anytime” upgrade. For example, on LAX-JFK I could add my name to the upgrade list and if it clears use 5 certificates (current “saver” system). Or I could use 15 certificates and get a confirmed upgrade (“anytime” option). That would allow me to save up my certificates an get an upgrade that I really want (like LAX-JFK) about once or twice per year and all the other times I would likely be on the list but not clear. As a Platinum, I don’t expect to get upgraded often. But getting it once or twice on a “good” flight would make me feel appreciated by AA. Just my 2 cents.

  6. Gary – this whole post seems to be predicated on the idea that the price difference between Y and F on most domestic routes is so small that buying the F ticket makes more sense than buying the Y ticket.

    Well, OK, but a lot of us travelling on business are forbidden from using corporate dollars to by first class. And I don’t see the value in spending personal $ to buy up to F (I don’t care a whit about RDMs, and I earn plenty of EQMs from my Y travel),

    So if AA can sell more F seats outright with lower prices, good for them. But they are still making additional ancillary revenue from the sticker sales, so why change that? I’m not buying F, so I still get the occasional EXP upgrade that’s good for me, and goodwill for the airline.

  7. @Bob I am not saying “the price difference between Y and F .. is so small that buying F.. makes more sense”

    I am saying “the price difference between Y + Upgrade Certificates and F is so small that buying upgrade certificates makes no sense”

    That’s actually quite different. And not a point at all that affects Executive Platinums (other than that as American sells more first class seats upgrades become harder)

  8. If you can afford the upgrade certificates you can afford to pay for FC. I find it’s always the freeloaders upfront that are the most demanding passengers. You would think they’ve never had a drink or a cookie in their entire life. God forbid their meal choice isn’t available. Why should I be paying for my FC ticket while the guy next to me somehow talked his way up for nothing. If your employer doesn’t pay for FC tickets you should address that with your boss.

  9. Love the analysis.

    I usually get enough free 500-mile segments though. Here’s how: my home airport is Cedar Rapids and there’s hardly ever any first class cabin flights out of here.

    Depending on where I fly next it’s the same. Little regional jets. So I get plenty of miles but much fewer chances to even get upgraded.

  10. @Larry, I love your idea of using double or triple the number of 500-mile upgrades to confirm in advance. I’m also a Plat and keep accruing more and more 500-mile certs, but rarely clear the list, so the balance just continues to grow. I could see AA essentially allowing you to convert 2x the normal number of 500-mile certs required into a pseudo SWU, allowing you to confirm the upgrade in advance if there is A inventory on a route.

    AA, I hope you’re listening!

  11. AA keeps the sticker system simply to get an additional revenue.
    What is happening now is that AA and other airlines are selling First class tickets rather aggressively – see the example given by Gary for LAX-DFW flights. In that example AA was charging only 56% premium over the cheapest Y seats. Such price differentiation was only due to local competition. Indeed, for a typical narrow body configuration with 6 seats across AA will collect $284×6=$1,704 in revenue vs. $443×4=$1,772 for 1 row of the F seats. If you account for the pitch difference, AA is certainly loosing money in terms of revenue per/ airplane length when offering F cabin and selling the seats at that low price. This was even more ridiculous when AA was competing with Jet Blue prices for their Mint product on the transcon flights. Now the SFO-JFK transcon prices for Business and First are back to >$2.5K and the upgrade instruments make much more sense again (if one could score an upgrade on that route).

  12. Gary: thanks for the clarification that what you were getting at is that “the price difference between Y + Upgrade Certificates and F is so small that buying upgrade certificates makes no sense.”

    But either way the implication of what you’re saying is that people that want to upgrade should just buy, or buy-up to, F rather than than buying Y and upgrading.

    That may be true (would require a pretty robust statistical analysis of pricing over time to prove out), but it’s not an argument for AA to do away with the system. If they can both sell the seats and the 500 mile certs why shouldn’t they?

    As PT Barnum was rumored to say….

  13. @mark
    Keep digging in.the d-bag graveyard mark
    We all believe you if you say you also pay for front seats when taking your much better half to vegas….
    Not understanding what you are doing in this forum if you are against upgrades

  14. The bigger issue is that for most trips, especially those bought 14-21 days in advance (much less longer), the first class fare is still too high as either an “instant upgrade” fare or a sticker cost. Domestic F just isn’t worth 8-9 cpm over domestic Y unless you have a very specific circumstance: a redeye, a widebody, a flight with horrible Y seat assignments, COS, etc.

    I’m looking at two trips I have a 50/50 chance of taking soon, both ORD-west coast. One is a work trip 10 days from now, the other is a leisure trip 3 months from now. The work trip has a higher marginal upgrade cost over Y ($500) than the leisure trip ($400). Even with an extra 3500 EQM, it’s difficult to justify paying that kind of money for a AA 738.

  15. The issue remains that a lot of us are required to buy discount economy by our employers. Full stop.

    What would be cool would be if there was some way to buy the discount econ ticket, get it invoiced, then go back and pay the fare differential at the minute to buy up to F (I’m talking like 10 minutes later). Thus one gets an econ receipt so the corporate folks are happy but uses their own dime to buy and confirm F, and AA gets their money. I’m sure there’s a reason why a setup like that wouldn’t work or would be looked down upon but it would be interesting to think about.

  16. But refunding the ticket within 24 and then using the receipt…. depending on your employer and their auditing practices, that could get you into a world of hurt. The key thing is that the ticket number or record locator needs to stay the same to prove that you both purchased and used the ticket. Upfare to F shouldn’t be any different than paying for a checked bag or a MCE seat assignment.

  17. @Gary good point but as Nick says, a little bit on the far side of what many would be comfortable. Agreed that an option to simply upfare, as if purchasing MCE, would be very useful.

  18. @Douh… Gary’s blog isn’t entirely about getting free upgrades. These days the airlines are selling FC seats at a steep discount which means less space for free upgrades and cheaper FC seats. This is how it’s going for all airlines so unfortunately don’t expect much in terms of upgrades moving forward. It’s especially true with new long haul aircraft where FC is being eliminated and they are only 2 cabins. Everyone is copying the Delta model because they realize that soon it won’t matter who you fly since no airline will be giving away any freebies.

  19. I’d like to see them open up TATL and TPAC upgrades using 500 mile coupons. I generally fly to DFW (less than 500 mi) and then overseas from there. I rack up the 500’s (well over 100 now), but can never use them.

  20. @Mark and everyone else

    I buy my own tickets because I work for myself and it is quite upsetting to me that sometimes I buy full fare economy flights (especially last minute flights) and then I have to spend extra money to upgrade if I don’t have enough upgrades. I try to buy FC seats only , but I disagree with your free loader comment. I believe that you’re one of those passengers who thinks they’re entitled to everything because you either have no status or barely made it to gold. As somebody who recently reached Executive Platinum, yes, I would love a pre-flight drink so I don’t have to sit there and stare at every face that walks through that door. Also, as mentioned above, I pay for most of my FC tickets. When I was a platinum member, it used to upset me sometimes that I would no longer have the option to upgrade with money, only with those stupid 500 miles upgrades. I was 1K at United, and I can’t tell you how many times I got upgraded, almost every flight! But once again, it all came out of my pockets, not my employer. I have found that most people who fly on their employer’s dimes, are those who are free loaders and think they are entitled to everything. I have come across a few of these individuals while flying.

  21. @djidrovo
    Maybe you can pay with miles for an anger management and shoulder chip removal class

  22. AA can void your original ticket and charge you for the upgraded fare of a confirmed first class seat on the same flight using whatever credit card you want. Just call the Advantage desk. I’ve done it when I thought that I wasn’t going to get upgraded via the standby list and the price difference of the ticket was reasonable enough.

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