American AAdvantage Went Revenue-Based Today: Here’s What it Means for the Future of Miles and Points

American’s new revenue-based miles earning started today.

Changes Still to Come

It’s important to note that other changes, like minimum revenue requirements for elite status, do not go into effect yet. You’ll have to spend a minimum amount on tickets in 2017 for 2018 elite status. And a trailing 12 month average of qualifying dollars will start to affect upgrade priority at some point in 2017 – but not yet.

Of course American isn’t done making changes: we can expect new fares that exclude elite benefits like upgrades and remaining upgrades to be for one cabin, i.e. coach to premium economy potentially both domestically and internationally.


American Airlines Boeing 787-8

AAdvantage Changes are a Devaluation — for Everyone

While revenue-based earning may negatively affect you, the total miles earned from flying won’t change that much. American claims the reduction is back to the level they were awarding 18 months ago, before the introduction of premium fare bonuses which were intended as an interim measure to compete against the revenue-based offerings of Delta and United.

Make no mistake, this is a devaluation and not merely a redistribution of benefits to the airline’s ‘most valuable customers’. Airlines have couched negative changes as meant to benefit higher fare customers at the expense of low fare travelers since the mid- to late- 1980s. But it’s never really try, always coupling redistribution of benefits with less generosity overall — even for those same high fare passengers.

At the same time American is awarding fewer miles, they’ve bundled changes to their award chart making those miles worth less.

And award redemption isn’t just the award chart price, of course, it’s also a function of availability and routing rules. American’s award availability has gotten much worse over the past 3 years. And they have the most draconian routing rules of any US airline.


American Airlines Airbus A319 Economy Cabin

No Clear Reason to Jump Ship to Delta or United

American Airlines for the most part though is just following changes already made by Delta and United — and copying them nearly exactly. So this doesn’t in itself make the program worse than its major competitors. It just means that the program no longer serves as a differentiator or reason to choose American over its competitors.

With load factors averaging over 80%, airlines don’t have to spend as much marketing to fill incremental seats and so they’re spending less to fill those seats. From a consumer perspective, just another reason to support allowing foreign ownership of US airlines to introduce new competition into the industry.

Revenue-Based and Elite Devaluations Don’t Change the Fundamentals of the Game

These changes are hardly reason for frequent flyers to despair. 6 in 10 AAdvantage miles are earned from things other than flying. And the total number of miles being awarded through the revenue-based changes merely turn back the clock on mileage accumulation a year and a half.

Frequent flyer programs are counter-cyclical. In rough times airlines award more miles to fill incremental seats, and with empty seats awards are easier to get. In more profitable times for airlines they award fewer miles, and there aren’t so many ‘leftover’ seats being offered as awards. If you’re comparing the state of miles and points to 2008 – 2012 or 2000-2004, things seem bleak. It all depends on your reference point.

It’s easy to earn non-flight miles than ever before. I had never seen a 20,000 mile credit card signup bonus before 2003, and only one credit card — Delta’s American Express — offered spending category bonuses.

There were no alliance awards allowing mixing of partners 15 years ago, and before 2008 US airlines didn’t allow one-way awards. (Delta only introduced half price one-way awards 19 months ago.)


American Airlines Airbus A321T at New York JFK

We’ve Called ‘The End Times’ Incorrectly Before

The end seemed near 11 years ago when United started offering confirmed international upgrades to top tier elites only on nearly full fare tickets and considered awarding those upgrades based on ticket spend instead of miles flown. At the same time Delta had been awarding status miles only on full fare tickets.

2003 and 2004 seemed like the end of the game. So did 2008 when US Airways eliminated elite bonuses for flying, only to revert when none of the other airlines followed.

They backed off of those changes because the economy didn’t support it at the time, but current revenue-based strategies have been a long time in coming. Some argue that they date in the US to the original America West FlightFund program. The big international shift may have been more than a decade ago with Air New Zealand Airports, spending Airpoints ‘dollars’ on tickets.

Earning miles via AAA travelers checks came to an end. US savings bonds. US mint. There are plenty of techniques left for earning miles, and indeed far more than there were when I got started — and there’s far more information sharing as well which better arms consuemrs against the programs which are themselves getting smarter.

As soon as the economy turns south and airlines need to fill seats, there will be bonuses. As soon as there are fewer people flying and fewer elite members we’ll see double elite qualifying dollar promotions.

The programs won’t be as naïve as they once were. Although complicated programs provide opportunities for gaming and generating outsized value.

Still Plenty of Ways to Win

The programs are like the casino house — they set the rules, so over time and across the majority of their customers they’re the ones who should win. The game though is still fun to play, and a small percentage of players can still win. That small percentage, of course, is us.

And in the coming days I’ll be laying out some of the benefits, hidden tricks, and drawbacks of foreign airline frequent flyer programs you should know about, whose points are easy for US customers to accumulate and which provide superior value. Just yesterday, for instance, I put a Singapore Airlines KrisFlyer one-way Suites Class award with stopover on a three day hold…

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. seems to be time to apply for a few more temporary cards to get sign up bonuses to compensate for the devaluation

    all part of the game that contributes to miles being worth less in the long run.

  2. @ABC I will personally still credit to American, because (1) I still value my AA status since I will fly them most living in Austin, and (2) my own tickets – predominantly business travel – cost enough that I’ll break-even in terms of earn.

    There aren’t as many good alternatives for crediting AA flights as there were with United (eg Singapore)

  3. As someone who earns 95+% of his miles outside of flying, the Points & Miles Gotterdamerung won’t truly come for me until all of the majors award charts go revenue-based @ 1CPM. I expect that to happen eventually, even though (as Gary has pointed out) the effective elimination of aspirational awards would be a bad thing for FF programs.

    When it does happen, I plan to shift entirely to cashback cards and bank points cards.

  4. Does this mean a round trip from Honolulu to New York that used to get approx. 10,000 miles will now be 7 times (gold status) a $900 ticket, or 6300 miles?

  5. I just booked my first ticket on United in 2 years since earnings are so crappy now, decided best flight times and lowest price… It felt refreshing not to overspend because of a loyalty program. AAs ticket was 175$ more but the meager earnings were not worth that amount.

  6. @Gary – with the today’s changes, what would you recommend for crediting AA flights after earning ExP each year? Do you think there is any benefit of crediting AA flights, after earning ExP to Alaska, or BA, or another OneWorld carrier? Thanks!

  7. IIRC OWE awards go back to the founding of OW in early 1999 (so more than 15 years.) I used an AONE in May that year for our RTW honeymoon (and I remember getting paid $800 in cash by CX for a downgrade on an award ticket in equipment that resulted in no F DPS-HKG.)

    I wonder what these changes will mean for the long term value/usefulness of miles. 20 years of heavy business travel have left me with an accumulated (and now static) balance of just under 3 million. I have used about the same amount life to date, so it isn’t like I have been hoarding them or not using them along the way, but they rolled in quickly and now with career/life changes I don’t have the time or inclination to travel as much as I used to. Time will tell.

  8. These shifts to revenue-based earning by the US3 has actually been a relief to me! I can now book the best price in whatever class and not have to think about how close to whatever elite level that will get me. I now stay away from UA since they continue to be plagued with issues (at least on my last few flights) and credit DL and AA flying to Alaska. And just like what @Scott said, it feels great to not overspend because of loyalty.

    (That said, what’s with DL’s Economy Comfort+ tickets booking into W Class and earning 0 miles on AS?)

  9. Is it possible for you to make the graphs and charts that appear on these blogs clickable so they will enlarge?? The small versions such as the earnings chart above is very small and hard to read on a phone.

  10. Good post.

    As for this all discount coach EXP: didn’t care about RDMs before this change, and still don’t.

  11. Question about the RDM… how does it get calculated – is it after you fly the “entire” itinerary or is it awarded leg-by-leg? (Let me know if this doesn’t make sense, but I can’t quite wrap my mind around it…)

    **Also, what happens if I am in the midst of a roundtrip ticket; and traveled my outbound leg pre-August 1st and my return leg is post-August 1st?

    Thanks!

  12. @Wendell. They have always posted for me leg by leg. I am guessing that your outbound before Aug 1 will be by miles flown and return after Aug 1, will be revenue.

    However, with American trying to grab ever single penny, I do not know for sure.

  13. $12,000 spend for EXP. Okay. More room in the first class lounges for me, weeding out the low-income Obama, Bernie Sanders voters that don’t belong there.

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