At media day earlier this year, American admitted that it needed to loosen up on award availability. The airline has recently, quietly, done just that but only on connecting flights. Weird? It may seem that way, but there is a method to this madness. I don’t write about miles and points often, but this is a change worth discussing.
Let’s use a simple example in order to illustrate what’s going on here. Say you wanted to go from Richmond to Philly at 11:05am on Feb 10. American shows no MileSAAver (low level) award available on that flight, so you’d have to pay the full AAnytime award amount. Separately, let’s say you wanted to fly from Philly to LA on the 3:40pm flight that day. That’s the same story: no low level availability. But, what if you want to fly from Richmond to LA on both those flights as a connection? Behold, a MileSAAver…
And this isn’t just limited to domestic markets either. We found all sorts of examples including Knoxville to London and Sacramento to Tokyo. Though I can’t be sure of the exact scale of this, it seems to be very widespread. If you want to use your miles to fly coach in a connecting market, then your chances of finding a MileSAAver award just went up significantly.
I reached out to American, and the airline confirmed that this was just recently rolled out. I was also told that there hasn’t been a change to the way they decided to open up space in nonstop markets (not that I have a way to actually confirm that). These are purely incremental seats being opened in connecting markets. The natural question is… why? I think there are several things going on here.
But first, you have to abandon the basic premise that a loyalty program has anything to with loyalty. Instead, think of it as just another way for the airline to generate revenue. Just as with paid tickets, American has to strike the right balance to make the most profit. This move helps in a few ways.
American Wants You to Use Your Miles
Beginning next year, the way airlines account for mileage on the books will change. In short, liabilities are going to spike higher, and they’ll only go down once those miles are burned. So the incentives are going to be greater for airlines to get those miles off the books. American has for some time been going down a path of stinginess. It has tightened up on availability and that makes it harder for people to burn their miles. Next year, American gets a nice kick in the pants to get people to spend more.
American Makes a Ton Off People Earning Miles
But wait, didn’t I just say that American will be better off when people use their miles? Yes, but American makes a ton of cash when people earn them. How? It’s not off the traveler but rather the others involved.
If you have the Citi or Barclays American credit card, the banks pay American for every point you earn. If you have Starwood Starpoints, American gets paid every time you transfer miles into American’s program. The same goes for shopping portals and anything else that earns miles. And if you have points with any partner, say British Airways Avios, then BA pays American for every redemption. The companies involved pay American, and it adds up.
For those relationships to work, American has to make it easy enough for travelers to redeem those points. If not, people will stop earning (or start earning in other airline or credit card programs), and American will stop making as much money. Remember, flying an airline is one of the worst ways to earn points these days. With credit card offers getting richer and richer, it’s a lot easier to shift where you earn. So by opening up more space, American is creating more incentives for people to actually bother earning those miles in the first place. On the other hand, American doesn’t want to dilute revenue from paid tickets, so it’s a delicate dance.
Goal: Open Award Space While Hurting Paid Ticket Revenue as Little as Possible
Thanks to improved revenue management techniques, American has become much more skilled at maximizing its revenues on every flight it operates. So if the airline is going to open up more award availability, it wants to do it in a way that can have the lowest impact on ticket revenue.
In most markets where American flies nonstop, the airline knows that it has a big advantage. If someone wants to fly from Richmond to Philly or Philly to LA, American is probably going to get the lion’s share of the business, especially from those high-dollar, non-flexible travelers. But in a connecting market like Richmond to LA, American has no pricing power. It also has little, if any, competitive advantage.
If American wants to open up more award space for the reasons stated above, doing so in a connecting market should have the least impact on the bottom line. Not only are fares generally lower (in mid-size to large markets anyway), but there’s a better chance that if someone does buy a ticket, it’ll end up being on another airline anyway. So, opening up space on connections runs the least risk of diluting those high dollar revenue opportunities.
This wasn’t an easy shift. This requires having an revenue management system that allows you to assign availability not just flight by flight but by full origin and destination. American now has that, at least in coach, so it can start doing these kinds of things that it couldn’t before.
If you live in a non-hub that requires connections today, then there’s a good chance you’re going to find a lot more seats available for your miles. Of course, this is just for travel in coach at this point, but I imagine that we’ll eventually see the premium cabin come along, eventually.
In the meantime, everyone should be happy to see American doing something to loosen the reins here. The incentives are all there for American to try to get people to burn those miles. I’m hoping this is just the first initiative of many to help make that happen.
Does this lead to hidden city award ticketing?
Guest – Sure could. Only one way, of course, since if you no-show for the first flight, the rest gets canceled.
I thought about this, but the other thing is you risk losing your whole frequent flier account. One of the standard advice bits when doing hidden city ticketing is to not put your FF account number on your reservation
Thanks for the post! now it’ll be easier to use my alaska miles on american to get to my inlaws’ house in tennessee! too bad that still means i’d have to fly on american
It seems that this change is a back-door way of offering award space based on the cost of a paid ticket. High dollar, non-stop flights require full award pricing while low cost flights offer sAAver awards.
Eventually I suspect that AA and other legacy airlines will get rid of the mileage chart and price their award flights solely on the cost of a paid ticket (like Southwest).
As a Chicago-based flyer, I’ve noticed this all too often. Saver awards are never available for non-stop flights and the only connecting options are absolutely terrible. As an example, a recent search for ORD-SJU provided the option of ORD-BNA (overnight connection)-CLT-SJU. No thanks. Chicago flyers are fortune to have hubs for United, American, and Southwest. American’s award stinginess has caused me to shift my loyalty to UA when the flights are within $20-$30. I’ve found Mileage Plus to be far more rewarding, fewer restrictions, and an infinitely better selection of partners if traveling to Europe. The only Saver awards to Europe from Chicago involve BA metal at least 90% of the time. Rather than paying $700 in surcharges for redeeming miles, I’d rather fly non-stop on a Star Alliance partner and earn miles instead of burning them.
Are frequent flier programs regulated solely under DOT’s consumer protection regulations, or solely by FTC, or by the States under attorney general regulations, or by some combination of them? I would think that DOT should have nothing to do with them as they really no longer have much to do with what you fares, prices, flights or flight options and consumer protection related thereto. Yet, DOT still has section about them in its Fly Rights publication. WHY?
Lawyer write these programs because they are still mad that they don’t have domestic tariffs to play with. Want to keep them busy, let me sue the airlines in the Federal or State courts over every word, every practice in these convoluted programs. I think airlines would quit with them fast.
Look, rewarding good customers for their loyalty is a fact of life. The airline FF programs amount to scams, ways to snooker consumers into thinking they are getting something free. Sure, a free ticket, an upgrade here or there, pursuant to the massive program rules. But, there are no free lunches! Truly regulate them, and they would die, but lawyer never die, they just come up with something more convoluted.. Please!
I just searched a couple days ago for a basic LA to ORD (Chicago) flight on AA and it would only show me the flight that flew through Bentonville, Arkansas. I ended up using my miles on United for this trip.
Which is ironic since my airfare to XNA yesterday on AA was $500 each way. You’d think they’d want to retain availability on that flight for full-fares.
This makes me wonder how long it will be before regular FF awards get relegated to basic economy seats, and a premium will be charged to be treated like a semi-human in regular coach. I’m glad for the increase in connecting seats on AA, though — it’s rare that anyplace I care to go is a nonstop from Albuquerque anyway, and I had already noticed a need to book at least 4-6 months out to be able to find any availability in coach.
If FF economy awards are basic economy, they become pretty unattractive to many and the Chase Prime Reserve card seems a better bet than airline cards.
So they are applying journey based availability logic, finally. I do wonder though if they’ve implemented married segment control on the sell side? If they don’t, in theory, one could place a connecting award on hold, then call in and cancel the segment they don’t need, retaining the non-stop.
BTW, the captcha tool is really bad
You’d just have to pay the award processing fee because once an agent touches it you can no longer complete the booking online.
I’ve looked at miles redemption as a bonus these days. It’s no longer something that I expect will happen for the seats I want when I want.