American will overhaul its AAdvantage program next year. (Image: American)
A lot of people have been speculating that when American Airlines finally got around to revising its AAdvantage program after dealing with other merger-related priorities, it would follow the lead of Delta, United and Southwest by switching from a distance-based to a spending-based system.
And now American has an answer to those speculators: You were right.
Starting in the second half of next year, AAdvantage members will start to earn award miles based on the price of their ticket in combination with the buyer’s elite status.
Non-elites will earn five miles per dollar spent; AAdvantage Golds will get seven, Platinums will earn eight, and Executive Platinums will bring in 11 miles per dollar spent, American said. Details here
Does that chart look familiar? It should, because it’s nearly a carbon copy of the United and Delta programs announced last year.
United’s MileagePlus conversion calculator (Feb 2014)
Delta’s SkyMiles conversion chart (February 2014)
Beginning in January, AAdvantage will dump elite-qualifying points, and will provide two ways for members to gain elite status: Elite-Qualifying Miles (EQMs) or Elite-Qualifying Segments. American claims it will offer “the most generous multipliers in the industry,” offering 1 EQM for discount economy fares, 1.5 for full-fare economy, 2 for discounted premium fares and 3 for full premium fares. Here’s American’s comparison chart with Delta and United:
Upgrades in the revised system will also be based on EQMs, with Golds and Platinums earning four 500-mile upgrades from each 12,500 EQMs. Executive Platinums will score four systemwide upgrades upon qualification, and up to four more based on subsequent flight activity. How to earn AAdvantage Elite status in 2016
And award redemption charts are changing as well, American said, with some increasing and some going down (especially to Mexico, the Caribbean and Central America for flights booked after March 22). What’s more, MileSAAver awards for flights of 500 miles or less in the U.S. and Canada can be had for as little as 7,500 miles one-way.
Which award routes will cost more? “Other routes will be adjusted to match increased customer demand, including routes that feature our world-class A321T and 777-300ER aircraft,” an AA official remarked. American uses the A321Ts on its upgraded transcontinental service (JFK LAX SFO), and 777-300ERs on key international routes.
Full details about the new AAdvantage program on AA.com
To me, it never made good business sense for airlines to base programs on miles flown instead of dollars spent. That’s because airline fares are not based on distance flown; they are driven by market forces. This is why it can cost three times as much to fly from, say Atlanta to Nashville (215 miles), than it does to fly from Atlanta to New York (750 miles). As painful as this announcement is to American devotees, it makes business sense for airlines to better reward their customers who spend the most…not those who fly the farthest.
Airlines made a mistake when they started distributing applications for “frequent flyer” programs to everyone—even those who fly once or twice a year. That diluted the loyalty experience for the airlines’ best customers…the ones who pay the most (not those who flew the farthest). It opened the door to a wily generation of “gamers” who figured out how to snag more miles at very low fares by manipulating an admittedly imperfect system. With new spending based programs, those gamers can still earn mountains of miles and travel “for free” but over time I’m betting they won’t get those upgrades, shorter lines and other bennies bestowed on those who spend a lot.
The move to revenue-based programs realigns the system back to its initial premise: to reward truly frequent business travelers, those who fly 10+ times per year on non-discounted fares. I’m talking about the person whose company pays $6,000 for a business class ticket to London, or a $550 last minute fare between Portland and San Francisco. If that’s not you, then sorry. If that is you, then get ready for things to get better. But it will take a while.
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FF miles are compensation and should be taxed as income to the recipient. If there is a direct tie to cash value, as there are in all these new FF programs, the taxable amount should be exactly equal to the cash value. A change or two to the corporate tax code to give companies who seize FF miles, or book in classes that do not issue FF miles, and perhaps we can put this many-year-long party in the front cabin to rest. People who want luxury treatment should be paying for it, or paying taxes on it, without the taxpayer being on the hook for any of it.
The word “I” is the key here. If your company is paying a lot of money, the taxpayers are helping to fund your expectations. Only when those tax exemptions for business travel are eliminated can one say “I” for business travel.
If I pay a lot of money for a First or Business class ticket, I expect to be treated well whether I am an elite member or not. Thus I do not need to have too much loyalty to one brand–I will be treated well wherever I spend my money. But if I am a value flyer, the thing that keeps me coming back is that my loyalty over time might earn me a little better treatment. Without that I am just going to fly whoever gives me the most bang for my buck. And that will become my habit–which might come back to bite those airlines who currently find themselves not needing the little guys but probably will in the next downturn.
Your comment: I’m talking about the person whose company pays $6,000 for a business class ticket to London, or a $550 last minute fare between Portland and San Francisco. By your example then the miles earned should go to the company and not the employee or better yet the airlines just should get rid of the programs, eliminating the entitlement factor.
This is starting to resemble the IRS tax code in its complexity. Speaking of which, what are the latest rules about redeeming free flights with miles? Is that a taxable event? Citibank caused the roof to fall in a few years ago when they issued 1099-MISC statements after giving out bonus miles to customers who open accounts, but my understanding is that airlines treat award travel as rebates, which are not taxed.