What American’s Elite Rewards (don’t) tell us about the future of the “new” American

Yesterday American published their 2013 Elite Rewards, which no doubt modified my travel plans for the rest of the year, as I’ve decided I have to go for 150,000 elite qualifying miles with American this year to earn 100,000 bonus redeemable miles (or some other combination of rewards).

But with the upcoming merger with US Airways, there’s lots of speculation about the implications of this promotion. Does the promotion tell us something about what we can expect in the combined airline?

Some of the speculation I’ve seen centers around things like:

  • This year there are four “tiers” of rewards, while last year there were three tiers. Could this possibly align with the “new” AAdvantage program having four tiers instead of three?
  • Why would American offer “sticker” upgrades as an option when it’s very likely they’ll be going away with the merger?
  • Why would American offer systemwide upgrades as an option when it’s very likely they’ll be making changes to this benefit with the merger?

And these are all reasonable questions that I don’t know the answers to, so all I can do is speculate. Usually I’m the person that reads too much into things, though in this case I don’t think any of the above have implications. For that matter I don’t think American and US Airways are even far enough along in the merger process to know the answers to most of the above questions, let alone take them into consideration when designing a promotion.

While it’s interesting there are four award tiers instead of three, they would in no way align with potential four tier elite program. If the “new” American were to have four elite tiers they’d be at 25,000 miles, 50,000 miles, 75,000 miles, and 100,000/125,000 miles. So the reward thresholds of 40,000 miles, 75,000 miles, 125,000 miles, and 150,000 miles wouldn’t make sense, given that they’re designed to be “between” tiers.

I do think it’s fairly certain sticker upgrades will go away with the merger. Why are they offering them through this promotion? Probably because some people value them greatly for the time being, and it’ll likely be at least the end of the year before they even think of getting rid of them. They can be purchased for $30 a pop so I really don’t think they’re a good value given the other options, but then again not everyone chooses wisely, so…

The systemwide upgrades are the real surprise here. While I wish it weren’t the case, I’d be willing to bet almost anything that American will change their systemwide upgrade policy with the merger. Presently they give Executive Platinum members eight systemwide upgrades for qualifying, and they have no fare restrictions. Not only do they give top tier elites more systemwide upgrades than the other legacy carriers, but they also have by far the fewest restrictions. So when it’s a near guarantee that this will be changing in the next year, why are they potentially giving Executive Platinum seven extra systemwide upgrades, for a total of 15?

I’d say probably because they haven’t yet decided on what changes they’ll make to systemwide upgrades, and at the end of the day systemwide upgrades probably carry less liability than miles. After all, they’re space available upgrade vouchers, so to some degree what do they care if there are a few more out there in circulation?

There’s only one way I’ll read into this promotion, and it’s as follows. We’ve seen the Delta and Northwest merger. At the time it seemed like chaos. Then we saw the United and Continental merger, which was way more chaotic, and as a relative matter made the Delta and Northwest merger look like a piece of cake. American and US Airways know they have a long road ahead of them, and it’s easy to lose frequent flyers in the process, as “harmonizing” systems rarely goes smoothly. And let’s be honest, when mergers happen the airlines take the worst of both programs, so people consider switching their business for good reason.

Let’s say a majority of the American merger happens next year. Isn’t it almost in American’s best interest to throw their top tier elites an additional handful of systemwide upgrades with no fare restrictions to use during that time? Even if they want to leave, it’s unlikely they would with so many upgrades or other rewards. And as any elite member knows, once you’ve requalified you’re “hooked,” and it’s very tough to switch carriers.

So I really don’t think there’s too much to read into here, other than American perhaps apologizing in advance for what will be a rocky 12-18 months.

What do you guys think?

Comments

  1. I really think the options are really just to give customers a wide range of incentives. Sure, the miles might be worth more dollarwise than an SWU or some stickers but don’t forget there are plenty of flyers out there who travel week in and week out for work with little choice about airlines or class of service and are too busy to plan their life around mileage redemptions and for them and SWU looks mighty nice as it means they will have a slightly more comfortable flight on their next trip.

  2. Yeah, I think you’re over thinking this. The new airline will be directed by Dougie Parker, who had absolutely nothing to do with this promo.

  3. I am a UA traveler for a lot of convenient reasons, but this almost makes me want to do an AA challenge just to earn the15 systemwides.

    Incredible that AA is offering 15 of these unrestricted babies while at the same time UA is increasing change fees AFTER a turbulent merger and AFTER they reduced elite benefits with nothing like this to ease the pain.

    Enjoy it while it lasts Lucky. Very impressed by AA in all of this, even if it is kinda their way of welcoming Parker to the team 🙂

  4. This is a classic bait and switch by an airline still flying under ch11. So everyone piles on and flies 150k to get 600k in miles and 15swu, stickers etc. Then comes the merger with all its chaos. People will not book away/avoid the new AA/US because tHey are sitting on a pile of miles and SWUs :p of course once the merger is over doug is free to define the FFP as he thinks fit!
    Nice strategy.

  5. over thinking a situation. I just think AA is making sure that no one leaves under fear of changes to the AA program, so it is giving away more goodies.

  6. I don’t understand the argument that SWU will change because they’re “too good to be true.” A new airline program will want the old customers to stick around. They will want to sweeten the pot.

  7. @ Nun — While it would be nice for airlines to sweeten the pot with mergers, the reality is that historically mergers result in the worst of both programs. What fliers gain is a much stronger route network, and what they lose is the best aspect of each airline’s expect.

    Does it really make sense for American to offer eight systemwide upgrades without any fare restrictions, while United only offers six with fare restrictions, and Delta only offers ones that can be used on near full fare tickets?

  8. I see no reason to fly 150k on AA in one year. I have no desire for more systemwides so I can fly internationally in wedgie seats, and I sure as hell don’t need more miles. I imagine you are in a similar position.

  9. I can tell you with 99.9% certainty nothing you are seeing is indicative of the merged program. Only last week were employee programs set up to start evaluating the differences between the two companies. They are just starting to create documents that compare and contrast program policy and procedures. Also, unlike most people who read this and other airline blogs, most AA and US managers and analyst do not know the intricacies of each others program. They are hardly forming the future program at this stage in the game.

  10. Since the merger isn’t expected to close until late 2013, I would not be surprised if the two FF programs were not merged (and thus benefits aligned) until January/February 2015, so there’s still plenty of time for AA flyers to use those 500-mi coupons and SWUs during 2013 and 2014.

  11. I am hopeful that the 500-mile upgrade thing goes away and AA matches its competitors’ elite upgrade policies…though as a US Silver, I think I get upgraded a lot more now than I will on the combined AA.

  12. Does this new promotion tell us much about the combined program down the road? Probably not. Does this new promotion tell us much about the next set of changes to AA’s program prior to consolidation? Absolutely!

    Anyone who doesn’t believe a major devaluation is not around the corner, regardless of whatever may or may not happen with US Airways, is probably just deluding themselves. History is clear. Points programs are destined to be devalued over time and never is this more likely than after an especially generous promotion.

    I remember when promotions offering a “whopping” 10,000 seemed amazing. Then those offers eventually became 25,000 points followed by 50,000 and 100,000 and so on. Each time they raise the bonus it sounds great. Until you see the next devaluation wave come through.

    Does anyone doubt that top credit card sign-up bonuses will eventually reach a million points or more? I’m sure it will sound amazing until you realize that it takes 500,000 miles just to get a “free” flight anymore.

    The writing is on the wall. Yes there will likely be a very nice grace period when things work the way we assumed they would. But in short order that period will end and we’ll be right back where we started. Or maybe a little worse for the wear. Promotions like this will be remembered mainly for what they briefly gave us, rather than what they eventually took away for good.

  13. My biggest concern with the merger is how existing Million Milers get treated in a four tier elite program. My worry is that Lifetime Golds get the equivalent of the lowest tier (perhaps not even Oneworld Ruby) and Lifetime Platinums would be dropped from Saphire to Ruby. Needless to say, the difference in benefits would be a huge devaluation.

  14. Actually, thinking about it more, it is also a problem for elites in general. Fitting a 4 tier elite system at AA into a 3 tier elite system with OW, means, I would think, that the 25K level gets no OW status and the 50K level drops to OW Ruby.

  15. I think when high profile bloggers consistently say “this benefit is too good, I predict it will go away soon” it gives the companies empowerment to do it. They will think “the frequent flyers think we’ll take it away anyway, great idea, let’s do it!”

    Don’t be so doom and gloom. Or at least make a compelling argument why it would be a bad idea on their part to do so.

  16. I believe that once AA/US consolidate, they will be free to set similar policies as UA/DL. Maybe a little bit better but not by much. After all they follow each other and there will be less competitors. Who would have thought back in 1999 that bag fees, seat fees, priority fees, food purchase would be the norm in the year 2009+?

    Finally, how can you all fly 150k miles, ?? wow!

  17. @ Ryan — I’d put my money on the 25K tier being Ruby, the 50K and 75K tiers being Sapphire, and the 100K or 125K tiers being Emerald.

  18. @ Gene — Agree I don’t need more systemwide upgrades, but I sure as hell want more 100,000 more miles!

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