Some more thoughts about potential fuel surcharges on American AAdvantage award tickets

Update: It appears that this was all a huge glitch/misunderstanding. Here’s an official statement from American:

Last night, in a routine effort to better align American to industry standards with other global carriers, American began collecting carrier-imposed surcharges on tickets for travel on other carrier’s metal.  This change was intended for revenue tickets only, but the surcharge was erroneously added to AAdvantage award redemptions on other airlines as well.  Except in the cases of British Airways and Iberia (where American currently collects these surcharges), no carrier-imposed surcharges will be applied when redeeming AAdvantage miles for award travel on other carriers.  Any customers who encountered this fee in error will be fully refunded.

Overnight I posted about American’s brand new policy of imposing fuel surcharges on award tickets. I live and breathe miles and points, and as ridiculous as it may sound, I can’t even begin to describe how numb I felt when the agent read me the memo about the new policy last night. Yes, admittedly I perhaps have some vested interest in miles being “lucrative” given what I do, but more than that this hobby really is one of my greatest passions, and it kills me to see it change.

Naturally I pulled an all nighter, calling about every five minutes to try and price different awards, to see what was really going on. I emailed a contact at American asking for an official statement, and hope to have an update from them shortly.

Anyway, I really can’t even begin to rationalize how this change could have occurred for a variety of reasons, including:

American has an amazing track record the past couple of years

Maybe I’m naive, but something tells me that American doesn’t realize what they’re doing here, and that a mid-level bean counter made the decision.

I believe this because American has proven over the past couple of years that they’re the legacy airline with the most integrity. The former head of AAdvantage, Maya Leibman, and current head of AAdvantage, Suzanne Rubin, have both proven to be really strong, customer-focused leaders. So I just have a hard time imagining that without any advance notice — let alone an announcement — they’d make a change this severe. This type of a change with no advance notice literally destroys all the goodwill the airline has worked so hard to build up with their frequent flyers over the past couple of years. And maybe this is just what happens when you start to trust an airline, and believe they’ll make rational, fair changes with advance notice…

Frequent flyer program changes don’t usually happen during mergers

If history is any indicator, airlines typically don’t make major changes to their frequent flyer programs during mergers. Usually those only occur once the programs are combined. This is not only because they have bigger fish to fry, but also because they don’t want to piss off members when negative changes may just be reversed under a new program.

Changes especially shouldn’t happen when the DOJ is trying to block a merger…

This, in particular, is the reason I don’t think a higher-up, rational person had anything to do with these changes. The DOJ is trying to block the American/US Airways merger because they think if the merger occurs there won’t be enough competition and consumers will essentially be the victims. Adding fuel surcharges to what are supposed to be “free(ish)” tickets probably won’t sit well with the DOJ, and I can’t help but think it’ll further hurt their chances at the merger being approved. And all of this is right after American announced record monthly profits for the month of July.

Frequent flyer program changes don’t just impact the airlines…

Yes, foreign carriers do mostly impose fuel surcharges, but the really unique thing about US airlines is that half of their business nowadays seems to be running their co-branded credit card business. So I have to imagine they don’t have the sole discretion to make decisions like this overnight, especially decisions that massively alter the value of the millions of dollars worth of miles that they’ve sold to Citi.

And to be clear, these fuel surcharges aren’t going to their partner carriers. I mean, indirectly they could be in that they’ll be used to compensate their partner airlines for award seats American uses, but Qantas isn’t coming to American overnight here and saying “hey, we want the extra $700 fuel surcharges for the coach award ticket you booked on us between Los Angeles and Sydney.”

Anyways…

While I’m usually a huge fan of American’s Twitter team and social media, the way the current situation is being handled is pretty horrible. American’s Twitter team is simply repeating “We’re collecting other carrier imposed charges effective today. Some carriers may have exemptions.” And when people ask which carriers this applies to, they have responded with “We’re unable to provide a list via Twitter. Please call 800-882-8880 for more info.” Now, in fairness they were probably totally blindsided by this, so they’re literally having to make the most of the information they have, which is… nothing.

That’s why I don’t think it makes sense to start a “campaign” against this just yet. Let’s wait for an official announcement and then we’ll share how we feel.

Who knows, perhaps these fuel surcharges will just apply to Malaysia Airlines for now, and the memo was written in a much broader way to give them more leeway long term.

To put this into terms that even Honey Boo Boo can understand, yesterday American was Hannah Montana, today American is Miley Cyrus at the VMAs.

Comments

  1. I am curious about your assertion that fuel surcharges aren’t passed through to the operating carrier. Presumably in at least some cases they must be, right? Otherwise why would AA, until now, have charged fuel surcharges on BA but not on any other carrier? I know airlines can be irrational at times, but if the fuel surcharges are kept by the issuing carrier, it’s very hard to explain why an airline wouldn’t realize they could grab more cash by charging fuel surcharges on all partner airlines.

  2. @ Bgriff — BA is unique, because keep in mind up until a couple of years ago there was the anti-trust arrangement between AA and BA. Alaska also imposes fuel surcharges for travel on BA, and that’s their only partner on which they do that.

    So I firmly believe that BA is dictating those terms, because they don’t want their own program to be “undercut.”

    I doubt that’s the case here, though…

  3. I agree with Lucky on the point about the miles AA has sold to Citi, although I would guess we are talking billions of dollars instead of millions (someone can correct me if this assertion is incorrect). This change massively devalues those miles which citi has already paid for. It is hard to imagine that Citi won’t be very upset about it. It is also hard to imagine their legal team didn’t write protections for this sort of event in their contract. I am guessing Lucky is right and that by the end of the day AA is going to be rolling back that memo. Perhaps just applying it to Malaysian to save face.

  4. “I am guessing Lucky is right and that by the end of the day AA is going to be rolling back that memo”

    And announcing DEQM for the rest of the year to compensate us for their buffoonery.

  5. Cautiously optimistic that United will use this to attract flyers to their program instead of match the YQ.

    They stand to benefit from this more than anybody. They were neck and neck with AA as best FF program and now undoubtedly move into the lead with this – a lot of AA frequent flyers in the NYC, Chicago, LA and Houston/Dallas regions might not be so thrilled about these changes

  6. honestly you bloggers are a waste. you guys do nothing than asking us to use your links to get compensation. why don’t you work with us SOMETIMES and fight back these greed and injustice. These fuel surcharges are fraud. What’s the benefit of using tens of thousands of hard earned miles for an award ticket and than pay full coach fare in fuel surcharge on top of that? that is a rip off. I checked fares with airlines that charge fuel surcharge. It is better to just pay the full fare than waste miles and than pay full fare on top of that.

  7. I am surprised, Lucky, that you are surprised by this. Beyond the poor timing (in the middle of a merger push), it sort of seemed inevitable. American may adjust their decision if there’s enough outcry, but it won’t be for long.

    As you rightly point out, these programs generate significant revenue for the carrier, often more that the airline generates by transporting passengers or cargo. The relatively small surcharge (compared with the perceived value of the ticket) isn’t going to change consumer behavior in the long-term, and the airlines know that. I imagine that you recognize it isn’t going to change your own very much; it’s just going to cost you more.

    And here’s where my mantra of the past 20 years holds firm – miles are worth nothing until they are redeemed, at which point you can place a value on them. Certainly you should know by now that to “trust” an airline, especially one as big as American, is a little odd.

    Finally, you say that “American has proven over the past couple of years that they’re the legacy airline with the most integrity.” I’m not sure why you think that, but an airline that is in bankruptcy, that engages in a pretty hostile battle with its employees that overflowed to customers for a significant stretch, and leaves its poor Coach passengers in substandard conditions in the rear of the aircraft, is not exactly a company that I would use the word “integrity” to describe.

  8. Lucky – exactly the point I made on Milepoint. AA has effectively just behaded the monstrous loyalty their top-tier elites had given them, even through the bankruptcy and merger. That’s who this really hurts… the folks that were saving and redeeming for transatlantic and transpacific trips. Increasing award fees during a merger/bk suit and inviting the government to dig in and uncover the truth about YQ, though, might be the most helpful thing AA has ever done.

  9. @ jim — That’s exactly what I’m trying to do! Trust me, I’m angrier about these surcharges than anyone, and will do everything in my power to fight them… would just like official confirmation first. 😉

  10. As for Ben not being fighting mad yet:

    if this sticks, I can imagine he and the bloggers getting a little more riled up. Think about it — if miles are now worth less (possibly worthless) who’s going to care about signing up for a credit card, who’s going to care about paying for award booking services. Heck, who’s going to care about Frequent Flyer programs in general???

    Everybody has a livelihood to protect.

  11. Can you give us the contact info you think would be most effective to vice our displeasure. Aside form the DOJ timing, I’m just shocked a major change went through with no notice to their loyal customers

  12. @ Phil — Am working on compiling best places to voice displeasure right now and will post them shortly. But would recommend waiting till we get official confirmation first just to be sure this isn’t a huge miscommunication on the part of AA.

  13. @Jim – You note that with the changes “It is better to just pay the full fare than waste miles”.

    A. That’s what they’re hoping for.
    B. You prove the point that, regardless of devaluation, the miles are still more valuable to you than cash. You are going to continue to collect and keep miles because you value them for other rewards – like those Business Class tickets that will still cost you only a few hundred dollars (albeit more than they used to).

    That’s why the outcry will die down, and you’ll cough up.

  14. The execution alone is enough to make me think that something’s not right about this whole operation.

    Even if AA were to roll out this new policy, and even if they decided to do it without notice, the fact that they haven’t provided their own staff with clear statement of the policy indicates that they probably did not intend to initiate such a large change in their redemption program.

    We should know in the next day or two.

  15. I don’t know if this is a coincidence or not but I am trying to book an AA domestic flight on BA using Avios and I keep getting an error message stating “ERROR CANNOT FIND PRICE OPTION FOR DISTANCE BASED PRICING.”
    I tried calling BA to book it over the phone and their system, which is different than the one we use online, was saying the same thing and he was unable to book it. I asked if he knew what was going on and he said “sort of” but wouldn’t explain further. He did say this is only happening for flights being booked on AA.

  16. now that the crisis is over, can you post your next installment, Singapore Airlines Silver Kris Lounge Bangkok, need to get my fix.

  17. just to be clear please:
    -does AA charge fuel surcharges for international award tickets?
    -what about domestic award tickets?
    -international revenue tix?
    -domestic revenue tix?
    thanks

  18. @ Mr. Cool — On award tickets, American only imposes fuel surcharges for travel on British Airways, and very mild ones for travel on Iberia.

    American does impose fuel surcharges on international revenue tickets in many markets.

  19. Yesterday you asked a question whether to fly F or J. I said F for I believe the days of virtually free F awards are numbered.

    What happened today can give us an idea of what is coming. So I reiterate today, fly F as much as you can…..

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