Expect American to Introduce Dynamic Award Pricing (Four Reasons This Could Be Good)

After United announced the elimination of their award charts and introduction of dynamic award pricing, following Delta’s footsteps, I asked American their plans and their statement seemed (to me, at least) to confirm that they too would move in a similar direction.

I pointed out that as well,

  • American has been making award space available on a fare basis since at least late 2017. That is, they don’t price the awards dynamically but they seem to do dynamic availability, an award has a fare value to ‘buy’ the flight from revenue management. That’s the first piece to pricing awards dynamically and is effectively what American has been doing with connecting coach availability.

  • American’s discounted web specials starting at 5000 miles book into a broader inventory than saver awards.

One Mile at a Time adds that the airline’s new award booking tool appears built for dynamic pricing. It doesn’t distinguish between saver and anytime awards when displaying prices. This is how they plan to display award costs going forward – this new tool is the only one that shows premium economy awards, they didn’t invest in displaying those via the old award calendar which is based on shopping for ‘types’ of awards.

Now JonNYC has weighed in, suggesting that dynamic award pricing is coming to American. His sourcing on these things is usually excellent, although he doesn’t give us detail just lets us know that his little birds are telling him this is going to happen.

I believe that award charts are crucial to the value proposition of frequent flyer programs. At Delta the move to opaque pricing has also meant rapid inflation, especially for the best awards.

It’s worth pointing out though that for American in particular could solve at least four problems relative to how awards are handled today. Since I always want to explore ideas contrary to my own, it seems worth laying them out:

  • Award availability on American’s flights has lagged competitors since the US Airways merger though it moved up a bit in 2018, according to data filed with the SEC. This will help availability, though it isn’t likely to provide members outsized value.

  • I tend not to use American miles to fly American, but to travel on their partners. If partner awards continue to be based on a chart (as United promises), and if more seats are combinable with partner awards as a result of this change, it will actually make it easier to connect to awards. I’ve found myself having to buy American Airlines tickets to connect to partner awards because the domestic saver space hasn’t been there. This could save me hundreds of dollars on my international partner awards.


    Have to Connect From My Home City to Fly the Etihad First Apartment

  • It could also save a lot of hassle because if you do not sell the revenue ticket inside the award reservation you won’t be able to through-check luggage on American. Greater domestic availability could solve that.


    Easier to Check Bags Connecting to Cathay Pacific

  • Finally it could make changing awards much easier compared to the current married-segment approach to availability where a whole itinerary must be available rather than just a segment you’re looking to change, although whether this improves or not depends on the implementation.


    An American in Paris

I’m not looking forward to this, but I’m hopeful that partner award prices don’t change for awhile and that perhaps American (and United) can be convinced to be transparent about partner pricing going forward even as they price their own flights dynamically.

That is of course where the best value lies today from both programs.

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. As I’ve said before, I’m almost certain AA is going to dynamic pricing, probably sooner than later. This raises a couple of rarely discussed but important issues for the AAdvantage program. First, what happens to the ability to change (for free) your AA award when more inventory opens up? This is a very valuable but under-appreciated feature of the AA program. I suppose AA could now let you “pay the difference” between the number of miles you used for your award and the current price on the new flight you want. More likely, however, is they’ll do what other airlines do and not let you make changes.
    The second issue tends to impact all the USA frequent flyer programs. With dynamic pricing, there’s more incentive to book award tickets on fixed price partner airlines. I don’t think the USA airlines will like this. So they may take steps to discourage it — like perhaps raise the number of miles needed for these partner flights. Also, I would expect the foreign carriers to (eventually) go to dynamic award pricing too. How is that going to work when booking with AA miles? Will those dynamic prices appear on AA’s website? Hard to say, but the only sure thing is that frequent flyer programs will be getting even more complicated.

  2. I just hope that the change to partner awards doesn’t change until after the summer. I’m planning a Maldives trip for next summer, and I want to fly Etihad first class. I plan on booking late July/early August for next summer. Ugh.

  3. @GaryLeff Do you know if American Airlines has an affiliate program by chance? If so, what affiliate network are they on? 🙂

  4. Will this end our ability to redeem Avios for AA flights? Last minute trips will almost certainly not be offered at low AA miles if they follow the others and drop the $75 late booking fee.

  5. Partner awards will be next for all of them. Just wait. Next year I predict as the other alliance carriers are not going to sit back on this.

    We have now entered the new age of points. You can experience it now at Delta. 1.4M miles for two people r/t to Europe.

    There is no silver lining in this as Gary tries to paint – or the airlines try to spin. The end is near.

  6. For both United and American, if they both go the route that Delta has with raising last minute tickets through the roof with points then this is devastating. I often find Delta also restricts less than 21 days before a flight saver award with partners so you cannot outsize value for last minute tickets. They did for a while have some last minute award availability through partners but I don’t ever see it and wish points blogs called Delta out on this more. I had so much fun in the past just booking a last minute trip, especially when an airline has empty seats that are unlikely to sell, it’s just ridiculous not to price the seats accordingly.

    This convinces me more then ever to collect points you can just book flights outright (like Chase Sapphire Reserve for 1.5 points per dollar) and not to be loyal to a specific airline, unless you travel a lot for work. Why can’t these airlines try to innovate a bit instead of just copying Delta? It would inspire some loyalty I know for me at least.

  7. Anyone left in the airline miles game will continue to be treated like dirt by the “Big 3”. It appears that AA and UA have adopted the DL motto: “The beatings will continue until morale improves.”

    And I also received that email from AA to “Buy miles and get up to 100,000 bonus miles” at 1.9+ cents each. Given that I last redeemed miles with AA for 0.9 cents per mile in long haul business class, buying miles is a sucker’s bet.

    And by Gary continuing to mention that he’s “hopeful that partner award prices don’t change for awhile” brings this to the attention of AA, to now be put on the chopping block, tout suite.

  8. @Lee. I agree. My entire redemption existence the past few years was going the last minute route. With United and, to some extent, American, it normally always worked out. Delta I long ago totally ignored with the exception of some pretty good occasional last minute Virgin Atlantic redemptions.

    I think Gary and others need to write some blog posts that help us to see where we can better strategize our spending and flying in the future so as to game (as much as possible) these changes. To assume the best and that partner awards will go untouched is naive. They will be going dynamic as well. And other than flying Alaska (which is not much of an option for me as I am East Coast) I have no idea what to do.

  9. Gary, That’s not what I see in JonNYC’s tweets,

    “and, to be clear– maybe the info is coming from elsewhere– but I’ve said nothing about the award charts (when/how/if they are dropped.) One can -assume- that I gather, but I’ve heard absolutely nothing– yet– on that particular aspect.

    Again, to reiterate, I’ve heard nothing about when/where/how/if/why the award charts go away.”

    AA is already bending rules with things like BOS-JFK at different prices in business on the SAME DAY depending on which plane you get.

  10. Just to address some of CHOPSTICKS’ question, long ago AA did already offer true dynamic awards. They were available to elites only and you paid miles entirely tied to cash price. No changes were allowed at all. Once you got the ticket, that was end. You better use it.

    When Parker came along they got rid of dynamic (and explorer) awards. Maybe he’ll just turn that button back on.

  11. Does Delta use a fixed cost per mile in figuring out the award cost in miles? If so, what is it (or what range).

    Any doubt it will be in the same range?

  12. @ nsx — I share your concern. Avios is current a great (best?) way to book most award travel on AA. No last minute fees, a reasonable distance-based award chart (most tickets are cheaper on BA than AA) and if you need to cancel or change, you just pay the tax. With dynamic award ticket pricing, we don’t know how any of this will work. It almost certainly won’t be for the better (although it may now be better to use AA miles to book many AA domestic flights). I personally wouldn’t be stockpiling Avios miles here for use on AA in 2020.

  13. @beachfan:

    My understanding is that there’s something like 5 different buckets per tier, that “loosely” correlates to the fare code for Delta (at least for Coach, I think there’s a thread on FT where someone was able to correlate things).

    Something like this:
    “cheapest” award is say, 7,500 miles, and that’s tied to like fare code I (I’m making up the fare codes)
    and then the next “bucket” is say, 10,000 miles and fare code X (again, making things up here) and so on.

    However, the Business/first awards don’t quite correlate the same, if I recall. Same fare code for same flight on same day could run you between say, 210,000 and 280,000 miles, depending on the route it takes, which seems to imply a correlation with the cash price of the ticket as well.

  14. Dynamic award pricing on AA is here, and has been in use in certain markets — maybe as some sort of trial — since at least late last year. For a specific example, awards from GIG have definitely been dynamic since around November 2018, while flights to and from GRU remain normal under the chart. As a result it takes much fewer miles to fly GRU routes than GIG, so much so that I have paid my own way to GRU to save a chunk of miles.

  15. Wonder if AA will stop the policy of miles expiring, as long as they’re copying Delta.

  16. Just as “we” expected.
    Dug and I agreed sometime ago that it would take an MIT grad to figure out the value connected to Dynamic Award Pricing.
    Now if we can only figure out how to legally squeeze in another row of seats.

  17. People keep talking about partner charts and alliances doing this, but there are a lot of socioeconomic and cultural issues with that. I have a very hard time imagining Japanese and Korean carriers implementing something like this. Now European carriers? Who cares. BA metal is already worthless due to taxes, and FlyingBlue already charges unreasonable amounts.

  18. People have noted that booking with Avios would look like a better idea. But such bookings can only be made for mileSAAver awards. Presumably dynamic pricing makes the saaver vs anytime distinction go away. Then what?

  19. Dynamic Award Pricing ==> converting your defined benefit pension to a 401k plan.

  20. More dynamic award travel pricing at AA won’t be good for just about anyone with functioning good judgment who experienced what DL did to SkyMiles and had a very well diversified pool of miles and points available to them for redemption choices when considering the use of DL SkyMiles.

  21. It’s funny how Gary has crusified Delta continuously in the past for eliminating their award chart. Now that American will probably copycat, he puts a positive spin on it (4 reasons how this could be good). The bloggers have to keep putting a positive spin on things to get people to continuosly sign up for credit cards. Dont be fooled anymore! I switched over to cash back cards over a year ago. The goal post keeps moving and people are continuing to get suckered. It’s a continuous game of bait & switch. SMH…

  22. If AA does go to dynamic award pricing, will the masses stop seeing value in AA miles, cancel their AA credit cards, and maybe go to either cash-back or neutral points cards? Or will they continue on the AA miles train, saving up for a trip they won’t even know the cost of?

  23. In some ways they’ve largely had this for a while now as saver awards are nearly impossible to find (unless using BA and being forced pay extremely high surcharges). On most AA flights, saver awards rarely show up and when they do it’s for insane routings. If it means more availability then fine. But considering AA is yet to do anything in favor of providing not only a good product, but any type of true premium product, I have little to basically no hope. I just don’t understand why the board allows the CEO to continue to destroy this one great airline with every single step he takes. So sad.

    I stopped putting spend on Citi AA card a while back and with this will have no reason to ever go back. I’d only hope that the masses will see the lack of value with their miles like the DL Skymiles. So much for planning for trips. Wisest thing is to stick with AmEx or Chase for transferrable points or cash purchases.

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