American has been talking about revamping its AAdvantage program for some time now, but thanks to the merger with US Airways, the dust had to settle before any big changes could be made. I know the airline has been hard at work on designing the new program, and yesterday, the details were revealed. Unfortunately, we learned that American was really just “hard at work” copying Delta and United. American had the chance to be innovative, but it punted.
For the 2017 program, American has pretty much copied-and-pasted what United has done, which in itself was a copy-and-paste job of what Delta constructed from scratch. The basic points are this.
- For award miles, you’ll now earn 5 points per dollar spent on American. (Elites earn higher multiples depending upon status exactly the same as United and Delta.) For travel on partners, it will still be a hodge-podge of miles flown as has been the case with Delta and United, but no details have been released.
- For elite status, there will now be a new tier in between Platinum and Executive Platinum. It’s awkwardly called Platinum Pro and it sits at the 75,000 mile level. This will match up with United and Delta’s Platinum tier, just to make the naming even more confusing.
- For elite status qualification using miles or segments, the mileage thresholds remain the same (with the exception of Platinum Pro, which is obviously new). American and United are identical. (Delta is the same except for its Diamond level which is at the 125,000 mile threshold instead of the 100,000 mile level.)
- American will add Elite Qualifying Dollars as a requirement in addition to mileage/segments for earning elite status. As United and Delta already do, American will require 0.12 times the base number of miles to qualify for each level. That’s $3,000 for Gold, $6,000 for Platinum, $9,000 for Platinum Pro, and $12,000 for Exec Platinum.
Are you as unimpressed as I am? I get that there’s something to be said for conformity. It makes it easier for travelers to compare what they’ll get from each airline, but it also means that nobody’s program stands out. (Well, nobody except for Alaska Airlines, which is keeping its old style of program and will probably win even more fans.)
The problem here is that airlines have become too reliant on their frequent flier programs. It’s not about earning someone’s loyalty either. The award miles side of the house is all about making money. Airlines make a boat load of cash selling miles to partners, and they don’t want that to end. Then on the elite miles side, there is the issue of alliance-wide benefits. Plus, they need to convince people they have a chance of upgrading, even though that’s becoming less and less likely to occur every day.
I can only imagine that these constraints make airlines like American think inside a very small box when they try to rethink loyalty. Instead of actually making improvements, they just shuffle the deck chairs. What’s changed now with this new program? Well it’s a whole lot more complex, that’s for sure. And all this added complexity doesn’t solve the problem that airlines wanted to fix with their mileage-based programs. It just trades one problem for another.
Airlines wanted to find ways to better reward their customers who spent more money with them. The person who spent $1,000 earned the same number of miles as the person who spent $200 for the very same flight. Over time, airlines started giving bonuses for higher classes of service, and frankly that was a better solution than what they’ve come up with now. Because going revenue-based creates a different problem. Now, the person who spends $200 to fly across the country is likely less profitable than the person who spent $200 to go 300 miles, but they both earn the same amount of miles. Nothing has been solved. The problem has just shifted.
With the explosion of data that has come available to you over the last few years, airlines, you could do something really different, and really awesome. Loyalty programs could become more fluid. Data can be better analyzed and people can be individually targeted. If I’m logged in and looking to book a flight, create a tailored offer to try to win me over. Offer me free wifi and that might encourage me to book with you. Or push a free upgrade my way. Learn more about me and give me things that will make me more loyal as we interact from flight to flight. Don’t just give me a level of status based on my generic interaction with you, constantly reduce benefits, and call it a day.
If American really wanted to focus on loyalty, it would do the hard work necessary to craft something that actually would achieve that goal. Instead it has just phoned it in and failed to inspire.
[Original man copier photo via Shutterstock]
49 comments on “American Sadly Chooses Conformity Over Superiority With Its New Revenue-Based AAdvantage Program”
And all these swashbuckling, risk-taking, and innovative execs will still collect their millions each year.
I think you mean 3/25 of the required miles – 8.3x25k=207,500 :)
Tonei – Ha, whoops. I did that backwards. It’s fixed.
I’ve Ben fairly loyal to AA over the years and have been Platinum for a long while. That said, depending on how much work travel I do, that may change. I wonder if they will have the EQD waiver for those with the credit card?
Makes me wonder if it makes more sense to just move over to Alaska. I’d retain the ability to get perks on AS and AA (and BA) and also get Delta and a whole slew of other international carriers.
Am qualifying as Gold on AA this year solely on segments, looks that will no longer be the case for me, as my $250 r/t, 6 segment SAT-MCO-SAT trips will not bring them enough revenue next year for me to qualify again. I will never spend $3K on tickets in a year, so I guess I will be going back to whoever has the best times and prices. I just wish they would have changed the earnings to tickets bought after August, not flights flown, as that will cost me about 5K miles this year. I still get the amenities with my credit card, but will just have to get one with all of the other airlines and pick the cheapest.
Randy – I think that the new qualifying year starts January 2017. You should have 2017 itself as Gold.
Yeah, I’ll still be Gold for next year. I meant that I won’t beable to hit it next year for 2018 using strictly segments. AA is good on fares being the same for three stops or two, so I have usually made it based on segments.
For upgrades, I believe AA will be using a rolling 12 months rather than calendar year.
That sounds absolutely terrible… If your travel is inconsistent over the year you could lose status mid-year, even if you would’ve hit the requirements by the end of the year.
I wonder if an airlines Board of Directors hears the deafening roar of excitement from its customer base. I know the executives don’t. I have been a PLAT for 12 straight years. I fly around 60-70K miles a year. I could give a rat’s but about making Platinum Pro. What a joke.
Elite status with these rules becomes pure cloudcuckooland for most leisure travelers, who won’t average $1,000US per month on air tickets. Likely, that can be expected to actually reduce loyalty as many customers will simply buy whatever Point A-Point B ticket is cheapest.
but in our new hub structure with 3 (5?-WN/B6) major carriers, theres little apples to apples competition for most people anyway.
this “collusion” to reduce benefits probably helps airlines more than potential costs…Delta, who led the devaluations still has my loyalty among many others as much as I dont want to give it to them sometimes.
“Now, the person who spends $200 to fly across the country is likely less profitable than the person who spent $200 to go 300 miles, but they both earn the same amount of miles. Nothing has been solved. The problem has just shifted.”
I see your point. The 300 mile trip costs the airline a lot less to operate than the 3000 mile trip. If they get the same fare going 1/10th the distance that person is far more profitable on dollar and time basis and should be rewarded for it. As someone who had done a lot of the under 1000 mile trips I’ve been a huge fan of revenue based award status since those short hops usually cost more than the JFK-LAX transcon’s. I think miles shouldn’t matter at all and everything should be based airline revenue Why reward the people that shop your sales and snub those that pay last minute walk-up fares? Likewise I’ve been very pleased to see airlines actually charging more reasonable fares for the premium cabin. Wasn’t all that long ago a domestic Y fare was $200 while the F seat was $2000. Now I can just pay up for that seat at a more more palatable $200 upgrade. Before they were earning zero revenue on those seats (who was crazy enough to pay it??) and giving them away to elites who may or may not be spending a lot with the airline. Sure, AA punted and just copied everyone here but they are moving in the right direction IMO. Strict miles based awards programs are the unimaginative and unfair. Time for them to be gone.
Yeah. But, from the airline’s point of view, this is better now than it was.
With a pure mileage award system, the less-profitable $200 transcon flyer earned 6 or more times as many miles as the more-profitable $200 300-mile flyer. Now they earn the same, which is at least closer to reflecting profitability.
I don’t like the revenue-based system, but without coming up with some profitability measure (which doesn’t reveal trade secrets), I understand where they’re coming from with award miles based on revenue. At least, like miles flown, money spent is relatively easy to understand, whereas a profitability measure would be much more difficult to explain.
The elite qualifying dollars is just an ugly kludge. I really hoped American would do better, though I’m not at all surprised that they didn’t.
A – But it wasn’t a straight miles program before. There were higher percentages given for higher fare classes. So more expensive fares were given more weight.
loyalty can really be measured by:
1. share of competition – segments
2. share of time – miles
3. share of wallet – dollars
Saddens me that you cant qualify on 1 or 2 or 3, but instead need 1 or 2 AND 3.
Then again, perhaps in our world of increased data and personalization, they could change from 3-4 main elite levels and do more mini challenges for rewards relevant to me and my situation / context (miles, upgrades, priority lines, etc.)
with the normalizing of FF programs we are now back to the situation where there is basically one airline but with different colored planes depending on which city you live in. if there is nothing that distinguishes one product over another then there is no competition.
Well, they can start competing on product and reliability instead of frequent flyer program, which I think is a good thing. There’s one global US airline with a clear edge in both of those categories, and it isn’t AA or UA.
(Due to consolidation, there certainly isn’t real competition in the US airline industry these days. The carbon-copy frequent flyer programs are pretty clear evidence that AA and UA don’t see a need to differentiate themselves from DL.)
I agree that AA’s new program is “uninspired,” but perhaps they want it that way? I think the airlines have reached the realization that traditional frequent flyers don’t drive much incremental business and that just “having one” is enough. There is nothing stopping the airlines from using their data to ADD the type of individual offers you talk about. Indeed, UA is doing just that right now. They’ve targeted members with mileage bonuses for spending a targeted among of money on ticket purchases in the next few months. I’m sure we’ll see more such individual offers.
I think you have it exactly on a couple of counts. I have been UA Platinum for a number of years, but really that is more a function that I fly enough miles to get there on exactly one airline. It would make almost no difference to me if AA had a wildly differentiated FF program that was better if their flights weren’t also better and more cost effective than UA (which they aren’t for me). The overall value is where an airline can differentiate, and the FF program is a minor component of this at best as I see it.
iahphx – They may very well want it that way, but that’s sad. If they’re going to have a loyalty program, then they should be trying to generate loyalty. The big three have become comfortable with the massive revenue-generating capability of these programs and have lost the original purpose of them. I wouldn’t expect them to sacrifice revenue, and that’s why I’d hope that there would be an additional component to try to better actually address loyalty. There isn’t anything in here that does that.
I’m not as optimistic as you are that airlines will really do a good job of tracking data and providing incentives to people to spend more. But they need to do it, and that should be the true loyalty portion of the program.
I don’t know how much effort is going into tracking individual behavior, but have you looked at the criteria for elite status? It’s pretty complicated stuff. If they can do that, they could certainly gin up some targeted promotions aimed at boosting revenue. We’ll see what happens in the next few years.
Cranky – how about an indepth post of how you’d design a more creative loyalty program.
Quite frankly, what you allude to towards the end of this article, opaque rules that award (surprise) people based on what the airline thinks they know about the traveler doesn’t appeal to me at all. And I don’t know that it would drive my loyalty. We already see valuable targeted promotions such as AS’ rollover EQMs. Pisses off many of those that aren’t being targeted. Now imagine an airline that awards upgrades without published rules. How is that making me more loyal if I can’t predict how my purchase decisions will impact my benefits.
Oliver – I can try to put this into a post, but I’m not sure I have all the answers. What I do know is that the way the programs are designed today, they don’t create loyalty. Award miles aren’t a big deal, especially since if you want to earn them, it’s far easier to do via credit cards than actually flying. And elite status just doesn’t get you much. Yes, if you’re a top tier elite, then you have a better chance at upgrades, but airlines are selling those seats more and more, so upgrades will only become more scarce.
So what does elite status give you? Free bags and priority boarding can easily be had through the airline credit card. You can earn bonus award miles and get seat assignments that are blocked for elites. That’s not all that compelling to me. If I live in a hub and am going to be flying one airline anyway, then I might as well get those benefits. But that’s not about swaying behavior. It becomes important when you’re in a rare city with multiple airline hubs (LA, NY, Chicago…) or if you live in a spoke where each airline provides a similar level of service. That can add up to a lot of people.
If I’m an airline, I want to do something that’s going to get people to a) choose me over another airline in a given transaction and b) spend more with me than they might otherwise. Some of that can be done with fares and pricing. Bundling, for example, will get people to pay for things they probably wouldn’t otherwise care about.
But there’s a lot that can be done to… and it sounds bad… manipulate behavior through emotions. I’m not a good example myself because I search via travel agent systems. But most people are comparing multiple websites when they look to purchase. If I’m on an airline website and I get offered something for being loyal, then I’m going to like that airline more and it might influence my purchase decisions.
Loyalty can mean that I usually fly Airline X once a year, but I’ve flown that airline twice in the last month. The next time I look, that airline can recognize that I’ve either picked up my flying or shifted flying from another airline. Either way, rewarding that behavior can help continue the trend. There are so many possible cases where an airline’s action can make a difference. I think about the first time I flew with my son. I signed him up for the frequent flier program, and an airline could recognize that this was a special trip and offered something to make it easier. (Free liquor comes to mind…)
It may not sound attractive to you, but if it happens to you, then it’s going to mean something more. It helps the airline to become a part of your life in a more meaningful way. The big airlines just haven’t really done a good job of appealing to people emotionally. That’s a shame.
This is exactly right, and something I’ve been thinking about a lot recently.
Currently DL Diamond, but with several of the credit cards, TSA Pre, and a company that lets me buy Biz/First for some work travel, I get most of the things I need – lounge, faster security, seat upfront, etc – with or without status.
I can’t really tell much of a difference between Diamond and Plat. So why would I give DL the extra 50K miles to get to Diamond when it might make more sense to get to Gold on AA with that flying? Mid status on two vs. super on one.
I no longer see a point in any of these loyalty programs.Probably long past the time the airlines did away with them
It seems like we are closing in on one gigantic airline with nothing different except the paint on the plane. Making a decision on who to fly now is convenience and value regardless of class of service. Maybe the door is open for an airline that wants to be creative, we can only hope (and support them if) they appear.
Sent from Barry’s iPad
I think Barry’s iPad might be right.
#Goingforgreat
Lyndon Johnson like to say “If it ain’t broke don’t fix it”. AA had the first and best loyalty program. I was one of the first members for which the largest airline in the free world acknowledged earlier this year with a 300 mile bonus! I was underwhelmed. Brett is so right, “Loyalty has nothing to do with it.” Greed reigns…
What they haven’t talked about is whether AA will have the waiver for credit card customers who reach a spending level like UA and DL have. If they allow that waiver for all levels except EXP, which is similar to UA and DL, then I think this could be tolerable. If they don’t, I could see UA making a play for my loyalty, even though I much prefer taking most of my flights out of DCA as opposed to IAD.
Delta allows people to attain Diamond Medallion status without the spend if they have spent $25k on a Delta Amex.
So even better at Delta than United…
(not the first time I’ve heard or said that)
Dan – I think the issue with the credit card waiver is that American is in active discussions on renewing its agreement now. I’m sure that’s part of the process, but until a deal is done, it probably can’t be announced.
I think the point of the loyalty programs is to get frequent business flyers whose companies will only pay for economy to earn elite status so they get some sort of less cramped coach seat with a chance of moving up to the front of the plane. Perhaps, a small number of avid leisure travelers who won’t pay for premium cabin also fit into this class. As regular coach gets more miserable, the demand for elite status can only increase
Who replaced Suzanne Rubin as head of AAdvantage?
mandel.jerry1 – I’m not sure that has happened yet. I don’t remember seeing anyone named to that position.
Do American and United have to pay Delta royalties for copying their crummy system?
In all seriousness, these programs are terrible for anyone who doesn’t purchase full fare tickets. I haven’t seen more miles from any flight I’ve taken as a medallion member on Delta under this new scheme and that includes me buying some First Class fares. More often than not, I would have had more miles under the old system even as a general member than I would under the new system even if I was a diamond medallion.
The problem the legacy carriers face is that with every decision they make like this, rewarding the biggest spenders and taking benefits from the average Joe, the more customers are going to see no value difference between them and ULCCs like Spirit.
If you are going squash people into tiny spaces, not offer meaningful rewards, and gouge them for fees, they will just flock to those guys even more.
These airlines are gradually maneuvering themselves into trouble. And I say that as an Ex Plat that gets all the goodies, and this move favors.
“Complexity” is something in the genes of transportation people, be it the frequent flier program or the fare and pricing people. Complexity, good; simplicity, bad.
These frequent flier programs are a joke, whether based on miles, revenues, whatever. How about based on the minutes I spend on an airliner? And, revenues from what? Airline travel, or you name it!
Why an airline wants my business I’ll never know. My spending $29 might be important to the airline because it sends a message to some low cost carrier to back off, more important than my spending $300 in some market where there is no competition.
Loyalty PROGRAMS, based on this or that, are useless. Just try and SELL me, and reward me with what you find that I may want–free trips, percentage-discount tickets, upgrades, free baggage handling, speedier security processing, entry to airport clubs, merchandise, services, whatever, just ask me. You have my FF# and email address.
Everyone involved in the administering these programs ought to get transferred to the sales department, assuming airlines still have such departments. Working years ago, for some big spenders, I remember the importance of a monthly visit by the airline’s regional sales rep. It worked. Anyone old enough at an airlineto remember what sales reps did?
While this frequent flyer change may not be what many AA passengers want, it is a positive step in fixing AA’s persistent revenue generation problems – RASM shortfall.
Loyalty programs should incentive the customers you most want to keep.
For years, we have been reading that AA’s program has been better esp. than DL’s which started the revenue-based FF model among the big 3. DL’s revenue metrics have been better than AA and UA”s for years. The FF program isn’t the only reason but it is a solid and major reason.
A great loyalty program means nothing if a company’s overall financials are deteriorating because it is having to compete for lower quality revenue.
This move helps to fix some of the revenue generating problems which AA has faced. It makes good business sense even if it makes all of the big 3 have virtually identical FF programs.
Aadvantage program has long been profitable due to its partners. RASM has nothing to do with it.
all airline loyalty programs are huge profit drivers….they wouldn’t offer them if they were not.
Any frequent flyer program that adds an incentive to taking a circuitous routing in order to increase FF points is most definitely a revenue drag – and thus negatively affects RASM. Part of the problem can be fixed by the revenue mgmt systems for both pricing and inventory mgmt but the best way to deal with the problem is to remove incentives from the FF program to add legs which cause low quality revenue including to be divided over more segments. If a carrier does not provide an incentive to be able to move up because fares are what matters, then it will improve revenue. This is precisely the reason why all of the other large domestic carries have already adopted revenue based models. It matters far less on Alaska because they are much more point to point focused and have basically one large hub which makes it much harder to abuse their FF system.
I think that the focus is to get rid of loyalty. Simplify, make devoid of meaning, and finally reduce to apply to only the highest spenders. Already first two tiers are a tease. Couple nice perks left with upper two statuses on all airlines (e.g. changing award tickets for free on DAL), but no reason for that not to go away soon. Airlines don’t need loyalty anymore, it’s the sad fact.
First, it was gold, silver and bronze. Then platinum was added as a higher level.
Now platinum is the third lowest level.
Talk about inflation.
Elite status serves one purpose – to stroke your ego and get you to spend more.
Haha, so true!
Since the airlines have changed their frequent flyer programs to revenue based I’ve flown less (no longer motivated to qualify for any tiers) and am also going to airline with the best travel schedule. Almost every benefit can be bought a la cart.
These changes are going to be a big problem for the airlines one day. But I could care less. And that’s the crux of the problem: apathy and loss of aspiration (to a higher tier or the potential for outsize benefits through trips, etc).
My comment is a new angle, but a pain point I experience often as a (very) frequent AA flier: WHY did they have to name the new tier “Platinum pro?”
The boarding process on AA is in meltdown. A few reasons for that, but one is that only the true avgeeks among us know the difference between Executive Platinum, Platinum Pro, and Platinum. Now, with the second tier elites being “Platinum,” when they call the EP group, we can expect the 50% of the plane with “status” to swarm the boarding lane. Groan.
I switched to AAdvantage this year. Well, that was quite a mistake given the changes. At least with Delta the EQD do (did?) not apply to non US residents but here this appears to apply to everyone. There is no way I can spend 6000 USD pre-tax (so actually much more) on airfares in any given year. I am a professor at a public University in Chile and even in the best of cases the yearly travel budget for transportation+registration fee+hotel nights+food is lower than that (to be fair my US based colleagues are generally not in a much better situation anyway). So I think I will just finish the year with AA, trying to reach plat as I have a good shot at it and then just status match with LAN, whose program is getting more competitive in comparison.