American Did the Same Thing to Retired Employees That They Did to Lifetime Elites

American Airlines gutted its lifetime elite benefits this year.

The highest tier they allow members to earn is lifetime Platinum (2 million miler), but:

  • They introduced a new level, Platinum Pro, above Platinum. 2 million miler is now second from the bottom, and no longer second from the top.

  • Upgrades are now prioritized based on spend with the airline in the last 12 months. So elites whose status is based on a lifetime of activity rather than recent activity are at the bottom of the upgrade list (in addition to being below the new Platinum Pro level).

  • Lifetime elites no longer receive all of their benefits on the lowest fares, either, with the introduction of Basic Economy.

When United removed lifetime elite benefits they specifically promised months earlier not to take away, customers sued and a judge summarized,

United’s defense here is that the airline’s very best customers—its Million Mile Flyers—should have known better than to believe United’s promise of “lifetime” benefits. This defense amounts to a confession of consumer fraud. United could not—honestly and legally—promise “lifetime” benefits while reserving the right to cancel its promise at any time and for any reason.

Yet there was nothing customers could do about it.

American, though, didn’t just take away benefits from their most loyal (lifetime) customers. They took away travel benefits from legacy American Airlines retirees, too. Retiree travel priority changed in September 2014.

My understanding of employee priority is as follows:

  • D1 employees traveling on passes
  • D2 Current American Airlines employees (and employees of wholly owned regionals) and their parents when accompanied by the employee
  • D2R Retirees
  • D2P Parents of employees traveling on their own
  • AAC Employees of non-owned regional carrier partners (and companions)
  • D3 Buddy pass travel
  • ONE oneworld airline employees
  • D4 other airline business travel
  • ZED employees of other airlines personal travel

US Airways travel policy was:

  • Active employees before retirees
  • Priority based on seniority

American Airlines travel policy was:

  • Ective employees and retirees had the same priority
  • First come, first served

What American did was put active employees before retirees (creating the D2R category) and adopted first come, first served prioritization. Legacy American Airlines retired employees now find it much harder to travel nonrev.

There’s a certain parallel between retired employee and lifetime frequent flyer benefits, and American cut both compared to what legacy American Airlines offered.

Some legacy American Airlines retired employees sued.

  • American’s retiree handbook outlined the benefits employees would receive in retirement
  • Employees even took early retirement expecting to receive their travel benefits
  • Early retirements, promising travel benefits, were explicitly solicited by American
  • But American says the employee handbook “is not a contract because it expressly allows the carrier to unilaterally terminate or modify the terms in at least five separate sections.”

A judge refused to rule for American and throw out the suit.

Coleman sided with the retirees, writing the book “contains clear enough language that employees and retirees meeting certain eligibility requirements would believe an offer has been made for them to receive specific travel benefits.” She said the language allowing American to change the terms “does not disclaim the actual formation of a contract.” She further said the codified promise of travel benefits “for the life” of the retiree conflicts with the power to modify benefits, resulting in enough ambiguity to allow the lawsuit to proceed.

American Airlines is begging its current employees to like them on the theory that unilateral raises — to everyone, regardless of merit, and without expectations in return — will cause employees to provide better service and American to be a better airline.

Prioritizing current employees for travel may seem like it will make current employees happy, but for some it also breaches a fundamental sense of fairness. One step forward, two steps back, and in the end they won’t get better service from the same employees regardless of how much travel they provide or raises they give.

At the end of the day the employees suing for their benefits will do about as well as the frequent flyers who tried to sue United — being told they should have assumed the company had its fingers crossed.

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 »

More articles by Gary Leff »

Comments

  1. I really find this move counter intuitive. AA keeps moving the goalposts. Passengers, employees, retirees, Gold, Platinum……well everyone, the parameters keep changing.

    I want to thank you Gary for keeping on top of this nonsense. It really puzzles me as to what this says about building loyalty, it is a ine way street.

    I am going to become a free agent, i think.

  2. Meh, this is a pretty poor argument to make. Both DL and UA prioritize retirees behind active employees, and that is how it should be. Active employees have to use what little vacation they get to travel, whereas retirees are free to travel as much as they please, and it is not difficult to use the benefits if you plan and know what you are doing. It’s completely fair, and not a promised RIGHT, it is a PRIVILEGE. If they don’t like it, have the airline strip them of the BENEFIT (again, not a promised RIGHT) and see how they like it.

  3. No issues with the change, Delta has retirees fly lower priority too.

    retirees have more free time, they can wait.

    S1 emergency
    S2 priority pass (each employee gets a few)
    S3 employee standard travel
    S3b retiree, parents etc
    S3c affiliates DGS/Skywest
    S4 buddy
    ZED all other who have access to it.

  4. The real injustice are the active regionals and DGS gate/ground staff. They fly behind retirees, parents and relatives.

  5. Gary,

    In that UA Million-Mile-Flyer case, you quoted an interesting and damning opinion by the dissenting appeals court judge. I found something that’s even more interesting IMHO.

    The majority opinion including the following rationale:

    “If we were to sanction the transformation of consumer fraud claims into contract disputes in this way, we would fatally undermine the statutory scheme, which dictates that consumer fraud cases must be handled through the Department of Transportation. However bad United’s conduct may have been, it must be addressed in the manner that Congress prescribed.”

    http://media.ca7.uscourts.gov/cgi-bin/rssExec.pl?Submit=Display&Path=Y2014/D12-22/C:14-1375:J:Wood:aut:T:fnOp:N:1474449:S:0

    Not that long ago, however, while perusing the DOT website I came across the following statement:

    “The Department of Transportation does not have rules applicable to the terms of airline frequent flyer program contracts. These are matters of individual company policy. If you are dissatisfied with the way a program is administered, changes which may take place, or the basic terms of the agreement, you should complain directly to the company. If such informal efforts to resolve the problem are unsuccessful, you may wish to consider legal action through the appropriate civil court.”

    https://www.transportation.gov/airconsumer/frequent-flier-programs

    In other words, two out of three of the learned justices of the US Seventh Circuit Court of Appeals in Chicago told the plaintiff the proper route is to take any complaints to the DOT. The DOT tells potential complainants they will have nothing to do with the terms of frequent flyer programs and to take any complaints to court.

    Cute, isn’t it?

  6. This is basically how it is in any industry. The current active/employees will get more perks than the guys who worked 20 years ago. What’s the big deal?

  7. They make it pretty clear that they can change the benefits at any time and clear that these are things that can go away entirely. Every other US carrier has retirees flying after current employees. You should look at foreign airlines and see their “benefits” and us carrier employees / retirees will see how good they have it. Frankjly, though, this should be a non issue for anybody who is not an employee or retiree of an airline.

  8. Gary- your obsession with AA is crazy. You find anything to write that is negative towards them. Even your headlines are bias towards the company. Let’s get back to the days when you covered real stories in aviation. Seriously.

  9. I don’t think the comparison between employees and frequent fliers getting the same thing from a lawsuit is accurate. The airlines have hidden behind their government protection when it comes to frequent fliers, but the vast majority of AA employees do have a contract. Whether this specific issue is mentioned in contracts, I’m not sure. But retiree flying benefits are a big deal. Those benefits are constantly used to recruit and retain employees. Promising and then reneging on a benefit is commonplace. Lots of companies do this. Mostly with retiree healthcare. So this could become a tipping point with retiree benefits.

  10. To all those who claim other airlines prioritize active employees over retirees — that is not an issue and is completely irrelevant. At issue is whether AA is allowed to change the benefits after an employee chooses to retire based on an understanding of benefits he/she is going to receive.

    If AA wanted to be fair while also changing the policy going forward, they should have just grandfathered existing retirees into D2 status while granting D2R to any new retirees.

  11. Reads like someone has an ax to grind. Retirees are just that, retired. A lot more time to fly standby.

  12. @Ivan Y

    Tell that to the public sector retirees from Detroit… AA retirees have ZERO to complain about

  13. As usual Gary, you have no clue! Your pass classifications are also not correct but I am posting material on NRTP/Jetnet here.

    Every other airline in North America places retirees behind active employees. AA was the only carrier doing it this way and it’s much better now for people who actually work and currently add value to the company.

    Years ago when people retired, they retired. They weren’t working other jobs, working for a competitor, or doing freelance work. Active employees have a more limited opportunity set to travel.

    Retirees still get D1s to enhance their priority and D3s to share with relatives and friends.

    And by the way, the company did make other changes like getting rid of the TWR (TWA retiree) classification.

    Stick to matters like Emirates award routing rules or which type of treif meal is served on a given route as you have no clue about non-rev and the current system works quite well.

  14. @Josh G

    Thanks for putting to words what I couldn’t.

    Gary, your blog these days is just horrible. Your relationship, or should I say obsession, with AA is similar to something I’d expect to see in a Fatal Attraction remake. Why not post real news involving points or awesome products out there? Hell, I miss the days of even reading about credit card deals.

    Please get over yourself. It’s getting difficult to even read this blog.

    And to equate AA changing the rules for retirees to frequent fliers is just a stretch on your part. Not the same. Not even close. Nope.

    Please get back to what your above profile says you’re an expert in: “points, miles, and frequent business travel”.

    Please and thank you.

  15. @Josh G – “Every other airline in North America places retirees behind active employees” misses the point. American benefits were different, people worked throughout their careers for those benefits, and those benefits were changed. Employees have a legitimate beef. American will win the lawsuit.

  16. @Gary- when employees at AA- and other airlines- singbup for their pass travel, the agreement they sign explicitly says that the terms of the travel program can change at any time and are at the sole discretion of the airline. I’ve signed these types of agreements at two US carriers and this program Rule is pretty explicitly disclosed. NOWHERE is it written that the terms of the program will never changed. NOWHERE. This is the same at every US carrier. Again, not unique to AA, and TOTALLY irrelevant to the content of this blog

  17. So now you are an attorney and prophet too?

    Again what you don’t understand is that all non-rev travel is non-contractual and it’s a perk not a benefit like healthcare, 401K match, etc. The company reserves the right to unilaterally change the program as they see fit. It’s always been this way and all the peeved retirees know this full well. Are you now carrying water for AMRRC? These people by and large had very rewarding careers with the company, are able to retire with dignity but are upset about the travel changes.

    Again you really have no idea and lose credibility with posts like this. Do you do this to drive hits and clicks? Retirees won’t want to use your affiliate marketing links.

  18. Arguing that the terms can change for nonrev travel is no different than American’s position on lifetime elite benefits. THAT is the point.

    I’m not taking a specific position that American should be legally liable to its employees for changing the terms of their retirement travel benefits, just like I’m not saying the courts are wrong to apply Northwest v Ginsberg which precludes any frequent flyer suit that isn’t for explicit violation of a program’s own terms.

    After years of service, even telling employees the benefits they’d get with an early-out, American more or less said their fingers were crossed. Just like they’ve done with lifetime elites.

    That’s not a legal argument, it’s a consistent pattern of behavior.

  19. @Jason – I note in the post that American points out the ability to change terms is written 5 times in the employee handbook. A judge notes that specific offers were made to early-outs in communications that didn’t contain that caveat. But that’s neither here nor there. The point is that after years of employment, just like after years of customer loyalty, American exercises that provision.

  20. I don’t understand why you engage Josh G, Gary, he’s not very smart and most of the time he thinks he’s refuting your posts when what he writes has little or nothing to do with them. Don’t feed the troll.

  21. It’s an interesting change to see behind-the-scenes issues like these every now and then – not just the product reviews. If Gary’s blog posts about American Airlines seem to be trending on the negative side for some time now perhaps it’s just an accurate reflection of what’s coming out of AA which isn’t necessarily positive for flyers these days (even CK and EPs who contend with the same lack of saver award space on American metal). Delta took quite a beating in the blogosphere when it “enhanced” its rewards program a few years ago but some of the folks posting comments may not recall how that went down.

  22. Those unearned pay raised did ZERO to improve the attitude and performance from the employees.

    CEO Doug Parker is good at increasing a company’s stock price.

    He is lousy at managing and motivating employees.

  23. All they did was put retirees behind active employees. They didn’t take away any benefit of travel. I think it’s kind of overzealous to be arguing so much over this, which brings them in line with the industry. Yes, it was a nice perk while it lasted. But really, active employees should have priority.

  24. This is a very old issue (I didn’t realize it was even an issue anymore), and your opinion on it is, frankly, ridiculous. First, arguing the employee perks have any relationship to frequent flyer perks is a leap of logic few would attempt to make. Regardless, the reality is that, after the US merger, AA management had to make a choice. Following common industry practice, US’s pass travel policy generally put active employees ahead of retirees. AA’s police was an odd duck, giving no preference to active employees. Management chose to go with the US system.

    Understandably, there were some AA retirees who were unhappy to lose pass priority. Some of them were quite vocal about it because, after all, this is the airline industry and employees tend to feel entitled to things, even when they are irrational. But everyone I know in the industry who was not a retiree thought this was the right call. Most companies prioritize perks to favor active employees. And, when it comes to pass travel, this makes TONS of sense because active employees have limited vacation time and and have to get back to work; retirees, presumably, should have much more flexible travel plans.

    If you truly want to be a “thought leader in travel, ” you really have to stop spouting foolish opinions. Honestly, this is probably your most foolish one.

  25. From the guy who thinks American Airlines is in the right on the protectionist stance against the Mideast carriers…

    By the way it’s not an ‘old issue’ when there was a new court ruling on it (and by the way it was raised at the company’s annual meeting). Just because you didn’t realize it was an issue…

  26. Retirees raising this issue at the annual meeting doesn’t make it news — it just makes it sad. Some retirees obviously feel strongly about this. They feel entitled to this perk. Their position is both legally and morally wrong. If somehow they prevail in this suit (unlikely, but given the rash of bizarre lower court decisions we’ve seen recently, it’s impossible to rule it out), the only losers will be current AA employees. AA doesn’t really have a horse in the race; some pass riders will get on the plane, and some won’t. All management was trying to do was be fair. It obviously makes tons more sense to give priority to active duty employees who need to get back to work, and not retirees who don’t. There is no one in the industry — except these disgruntled employees and, seemingly, you — who thinks otherwise. And the idea that any system contained in an employee handbook is binding forever makes a mockery of common sense and employment law. Are the courts also going to bar employees from changing vacation policy, too? Or the company dress code? I mean, really. This is nuts.

    And bringing in the Middle East airline stuff? I’m sorry I’m mocking your silly post on this, but what on earth does that dispute have to do with this one?

  27. Active employees need to realize one day they may be retired employees. Let’s see how they feel when a new hire bumps their 35-40 years of seniority. Seniority should be the great equalizer to make the system fair to all when travelling for pleasure.

  28. Many retirees accepted early retirement based on the promise they will continue as d2 pass riders. The retiree contract should have stated the terms and conditions are subject to change, which it did not!.

  29. Conclusion. Negotiate cash in pay and retirement pensions so everyone can afford to pay for travel. Stop giving pass travel benefits the value the airline presents on the table. This will cost a bundle to the airline at the table and they will understand why pass travel is such a valuable negotiation tool. As well prioritize pass travel for employees and retirees and sacrifice benefits for buddy and family not travelling with employee/retiree if it maintains oloyee/retiree benefits at a better value.

  30. To all you Winnie actives who state that “retirees have all the time in the world to travel, just wait until you retire.
    ANYONE, Active or Retired, travel for a specific reason, a booked vacation where you need to check-in at on a specific date so you don’t loose your reservation. Or, maybe a grandchild’s College Graduation, or God forbid, a funeral of a family member. Or, a cruse where you don’t want to be left at the dock. Spare me the “Retirees have all the time in the world to travel” stupid. “NO WE DO NOT””””. Legacy AA, with “first come first served” D2, was fair to all active and retirees alike. The current system stinks, so prepare yourselves to buy tickets on South West and JetBlue. Heck, even D1is a challenge. But just wait ……..your time is coming actives.

Leave a Reply

Your email address will not be published. Required fields are marked *