Will American Follow Suit and Devalue its Miles?

United’s award chart will be devalued come February, award prices are going up, up up.

Big changes at United have many flyers considering alternatives. But it would be a shame to jump to a new airline to accumulate points, only to find that airline devaluing its own points shortly thereafter. That uncertainty is what’s holding many people back, and helping United.

I’m going to predict there will be some adjustments to American’s award chart over the coming year, but that we will not see a wholesale devaluation like what United has done — not even close.

American’s Award Chart Isn’t That Much Less Expensive Now for Many Awards, So There’s No Need to Raise Most Prices

United’s changes aren’t as bad as they seem for many flyers. Coach doesn’t go up, or up very much, for most regions of the world. Travel within the Americas doesn’t really get more expensive.

For many awards (and though American hasn’t made substantial changes in years), American was already more expensive — recent changes at Delta and United put them on part with American. Not for all awards, and there’s some room for adjustment, but it wouldn’t take a wholesale devaluation on American’s part just to be ‘competitive’.

I compared the new award charts for United, Delta, and American and I think that comparison is really revealing about what we can expect American to do.

Delta has roughly similar pricing to the new MileagePlus prices for United flights. United’s partner awards are a bit higher, but availability is better and routing rules are better and frequently comparing products between United’s Star Alliance partners and Delta’s Skyteam partners, United’s partners offerings are better.

Right now American has the lowest prices for a few regions, Asia is an especially good value. And Delta doesn’t offer first class, so their main US competitor for these awards is United — American’s first class award prices are positively bargains in comparison to United’s new chart. So it’s these regions where we might see some changes — but probably changes that aren’t nearly as bad as United’s.

Why American’s First Class Awards Won’t Get As Expensive As United’s

United’s partner awards, especially in first class, are off the charts. But United’s business class awards even on partners aren’t crazy, they’re in most cases a ~ 20,000 mile roundtrip premium over flying United. United still has great award availability though Star Alliance especially for business class to Europe and Asia. And United doesn’t add fuel surcharges onto any awards.

I hate United’s devaluation because I love first class awards on United’s partners. Those awards now have just batty prices, like 280,000 miles roundtrip to Israel or to India and that’s the price for saver award inventory (as all awards on United’s partners are).

But for most of the world, whose focus isn’t on first class, things will continue and United will remain a good redemption program that also has generous award routing rules making it easy to piece together awards.

It’s in first class that American has the most room to increase prices, but complicating the award chart and gouging customers doesn’t seem to be the current thinking in Dallas. If there’s no US Airways merger, they need to continue to offer a superior value proposition not chase away customers. American has done a good job poaching United elite flyers over the past two years unhappy with United’s changes, by becoming much more generous and aggressive with status matches. Offering a better award chart seems like it could be in the cards too.

Meanwhile if there is a merger, then they won’t want to chase customers away immediately either and would be likely to maintain some semblance of the current value proposition that both US Airways and American are offering. Changes are likely to come int he form of harmonzing (slightly upwards) award prices between Dividend Miles and AAdvantage — not exploding the award chart like United has.

American Already Did Their Major Devaluation Three Years Ago

When American launched their joint venture with British Airways they began to add fuel surcharges onto award tickets that involve British Airways travel. Adding on taxes and fees you can pay around $1000 on an award ticket flying British Airways. (There are much more modest fuel surcharges assessed for travel on Iberia.)

So while American’s award chart is cheaper for travel to Europe, British Airways is their primary partner.

There isn’t a ton of transatlantic award availability on American’s flights (awards to Asia are a totally different story). Iberia has decent availability on some routes, as does Air Berlin. But the bulk of partner routes, and partner seats, involve BA and fuel surcharges.

And customers hate fuel surcharges. They get sticker shock when they go to redeem for a ‘free’ seat. And they complain to AAdvantage. In some sense American has already done its devaluation, and they know that they are more expensive than their competitors for many awards.

Delta adds international origination surcharges to European-originating itineraries, and fuel surcharges to travel on some partners like China Southern and Air Tahiti Nui, but this doesn’t affect nearly as many passengers.

BA’s fuel surcharges will help protect us from an American award chart devaluation.

We’ll Get a New Award Chart … But it Won’t Be Awful

If American and US Airways merge, we can say goodbye to the best values in the US Airways award chart like 90,000 mile business class awards between the US and Asia (Hong Kong and to the North). American’s current business class price to Hong Kong is 110,000 miles. US Airways charges 120,000 miles South of Hong Kong. I’d expect that the bulk of Asia will cost 120,000 or a little bit higher. That’s a big bump for US Airways customers, but for American’s customers it would be in the range of 10%.

Southeast Asia has the most space to go up on the AAdvantage chart, but destinations like Africa, India, and the Middle East shouldn’t get more expensive at all. Europe has cheap mileage pricing but fuel surcharges on many awards so that shouldn’t go up much.

We’ll see harmonzing between the US Airways and AAdvantage charts — and harmonizing upwards — but I don’t expect pricing that’s materially higher than what either airline currently offer. US Airways charges 160,000 miles for first class to Bangkok or Singapore or Bali. American charges 135,000 miles. So I wouldn’t be surprised to see that first class award go to 160,000…. but not 260,000 as at United.

The Future is Reasonably Bright, But…

Mileage currencies devalue so I have little doubt that American will devalue in some form or fashion in the future — simply because the program offers a mileage currency.

The best value awards never stay around, great deals eventually disappear, so 135,000 miles first class roundtrip to Asia on an airline like Cathay Pacific using American miles almost certainly has to go away and get more expensive.

But these awards shouldn’t get so much more expensive, in my estimation, that they chase us away from the AAdvantage program.

There are certainly changes afoot in the frequent flyer space, we haven’t escaped the stalking horse of the ‘revenue-based’ frequent flyer program even though Delta hasn’t rolled one out just yet, and I’ll offer some tips on defensive measures we can take. But I’m still accumulating AAdvantage miles.

My mantra remains, though, that it’s best to earn and then burn miles and not save them for some future time. Enjoy them now, then earn more, and redeem those based on whatever the future value proposition may be.

What’s Your Prediction?


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. Of course they will. Airlines have figured out that Washington/DOT/your congressperson has no spine and will continue to allow them to scam you — just when you think you’re 1,000 miles short from your vacation to Hawaii, poof, they’ll tell you that you’re now 11,000 miles away because the award has changed and you now need 10,000 more miles (oh wait, didn’t UA/DL do something close to this)?

    Since they can devalue EXISTING miles with no impunity as if it was Zimbabwe, why shouldn’t they?? Yes, AA will devalue almost immediately after the takeover by US management is either done or abandoned and the official, unconditional, exit from bankruptcy is garnered.

  2. Your point on limited AA transatlantic availability in premium classes is spot on, and I don’t think it’s gotten as much attention as it should. Anecdotal evidence is that J and F saver inventory to not only Europe but also deep S America for 2014 on AA metal has been virtually nonexistent, and a clear change from the very recent past.

  3. I know many people are sticking with UA after giving a look at the excellent chart you and some other bloggers posted showing that UA is still for most part in line with the industry for biz class awards.

    For me, if all are relatively equal, then it is all about day of travel treatment, which happens to be slightly more important for me. If one major airline’s award chart is considerably more valuable – which used to be UA – I’ll stick with them. But that is no longer the case. AA is indeed more valuable now, but at this point with no AA status, it is not just worth it with the pending merger. I went through DL/NW and UA/CO, not interested in dealing with a third merger.

    So it is DL for me, not for sky pesos, but for their day of travel experience. That is something they apparently get.

  4. I predict that the 8 SWU’s will go away and they might just offer 4. Possibly a new Tier, 150,000 EQM’s Super EXP level? 20,000 one way offpeak to Europe will go away for sure and will probably cost 30k instead. 100% bonus miles will go away for Platinums.

  5. As an avid reader of this blog as well as a frequent attendee to ftu I can say that I am not surprised by any of this. While the credit card bonuses will continue, the value of the points given will decline. For many years I primarily flew American and got/spent many miles with them. Overall I thought their pricing for free tickets was fair. Now with fuel surcharges on many flights (BA for example) the value is lesser. I amassed a good chunk of Delta miles. Gary always calls them SKY pesos. Naturally I will be trying to spend them with the best possible returns. All of the programs will be in flux. American, United, US Air. When the smoke clears I think you will find little differences in the programs (maybe Delta will still be worth somewhat less). However the days about bragging about how one program is so great, that is surely over.

  6. I think you and some of the posters hit the nail on the head. Asia is the only sweet spot right now. Europe is either BA with huge surcharges, AA metal, or a glorified low cost carrier. S. America is mostly AA metal. Middle East and Africa are super high mile redemptions already. And then there is the availability side. How is, say, CX availability going to look with all the US FFers now clamoring for it? Sure they can keep offering their 2 F seats per flight and the same number of miles are going to be spent. The seats will just fill right up and everyone else will be left sitting on their useless unspendable miles. Who needs a devaluation when you have a fiat currency and no way to spend it due to supply restrictions?

  7. If Delta pesos are so worthless (and I agree they are) why do so many people still fly them, as evidenced by their recent announcement of rather very good earnings? Shouldn’t;t poor frequent flyer value turn away customers? Or are there no good airlines at all in this area and we should all get cash back credit cards?

  8. Yes, they will match UA and DL IF the “merger” goes through.

    No, they won’t if it doesn’t.

    AA can compete well with the 2 giants by having a better FF program among other things. (US is hopeless)

  9. As someone who mostly uses miles to fly on domestic saver awards, is there any concern about UA or AA increasing domestic mileage saver awards from 25k miles. While I know cash back cards may be better for ongoing spend if you use miles for domestic awards, there are so many great bonuses that I have rarely paid for an airline ticket in the past 3-4 years. Should I be worried about domestic saver awards increasing in price? And obviously revenue based system would be bad for how I am using miles.

  10. @Jamison @ Points Summary – I agree that AA will offer a new tier, but not at the 150k level you’re proposing.

    I believe it will be in between Platinum and EXP, at 75K, similar to what US is currently offering.

    So the new elite tiers would be 25k, 50k, 75k, and 100k.

  11. I have a reservation in fare class I from NY to Paris through American, Open Skies operating as British Airways. It is from Dec. 27th to Jan. 10th. Is there any chance of signing up for an AA status challenge, even though it is already booked? Does it count towards next year? How many more points would I need after this flight, if it counts? Thanks in advance, LOVE your blog!

  12. For anyone wanting two J or FC TATL seats on AA, the devaluation has already occurred. The only difference is United announced theirs, and AA is keepings it’s devaluation a secret.

    As a Lifetime Gold with AA, having used premium awards to Europe for the past 20 years, my experience is that the current availability of AA premium cabin awards has nearly disappeared. Yes, I used to have to work to find available flights, maybe route us thru weird airports like Manchester instead of LHR, and sometimes adjust our desired dates by a couple of weeks, but I always eventually got our award flights. No longer….

    In the past, the easiest award to find has been JFK to LHR. I searched this morning, looking for 2 seats in the same class of service, J or F, on the same flight.

    Starting today thru the end of booking next year, there is not even one day available. Not one single day for the entire year. It’s true that AA used to release their awards sporadically, but I’ve been checking nearly every day for the past year. With the one exception of July 1st 2014, AA has not been releasing any double awards.

    Searching today for a single seat is somewhat “better”. You can find a single J seat on many days in January and February. If you don’t mind connecting thru ORD. And most of July is available in both J and F, but only connecting thru ORD, or MIA. But only one seat per flight in Saver.

    As of today, there is not even a single J or F seat on a non-stop flight available at the Saver level from JFK to LHR all year.

    For any two people wanting, or needing, to fly together in J or F, the only option on AA metal is for at least one of them to use an Anytime award. Double miles !

    FC TATL on United will soon be 320,000 miles for 2 R/T awards. Because of the non-existence of two Saver awards on the same flight, on AA it is already a minimum of 375,000 miles. And if booking right now, with dates for both going and retuning in July 2014, doesn’t work for you, then it’s 500,000 miles. 🙁

    This is far, far worse than the United devaluation, the worst of which only applies to partner awards. With AA now, with the exception of July, 2 people either pay 500,000 miles R/T FC TATL; or 250,000 miles, plus $2,000, for a “free” award on BA. Which makes the new United award chart seem like a bargain…

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