I’ve been getting tons of questions about what happens to frequent flyer miles in a merger between American and US Airways, and what to expect from the various elite and upgrade programs that the two airlines offer if they combine.
And the answer of course is that for the most part we don’t know. But there are plenty of things we can make fairly educated guesses about.
To be clear, my predictions are just that — guesses about the future — rather than leaks of plans that have been made by any of the parties to a potential merger. I imagine that there haven’t even been any decisions made as yet, since until and unless a merger actually happens the two airlines remain competitors and I doubt that they are working through the nuances of their mileage programs just yet.
I have to imagine that the US Airways people remain in charge. Sure, it seems foolhardy to take the folks running the smaller program and stick them at the head of a much larger enterprise, perhaps the most successful part of the airline they’re taking over. But Parker’s enterprise, Parker’s people is my starting point. Hopefully the folks that have given us a really strong AAdvantage program will continue to drive things but I’m not banking on it.
Here are some of my guesses about what the mileage and elite programs look like after a merger between American and US Airways.
A combined US Airways – American Airlines will be a member of oneworld. This much we actually know, it’s been remarked upon by US Airways CEO Doug Parker, and if they weren’t going to stay in oneworld I bet we’d have seen a competing bid by a consortium that involved British Airways.
- That has its pluses and minuses. Star has more member airlines, which means it can be better for getting business class awards to both Asia and Europe — simply more partners means more options. But oneworld is better for flying to South America (American’s own flights and partner LAN’s — plus it’s expected that TAM will defect from Star to oneworld this year as well). And also better options for first class awards such as on Cathay Pacific and British Airways (the latter with fuel surcharges). Oneworld will be adding Malaysian shortly, and their first class is excellent.
We’ll get American’s award chart with few immediate changes. American has the bigger program. It also has an award chart tied to its own flights and oneworld partner destinations. Its system is set up to book those oneworld partners as well as partners outside of oneworld. The simpler IT task is to keep the American system for booking those partners and awards, and migrating US Airways Dividend Miles members over to it — rather than building the IT capability for the US Airways sytem to book all of American’s partners.
- That would mean American’s routing rules as a starting place — one-way awards, which US Airways doesn’t currently offer, distance-based awards, the requirement that an overwater carrier have a published fare between origin and destination, imposition of (still-generous) maximum permitted mileage rules, etc.
- They wouldn’t be likely to re-price awards in the immediate term. This is a big win for flyers, since US Airways really does seem due for a devaluation. It’s been about 3 years since they made changes to their award chart. They print/sell miles cheap. There’s been talk of US Airways going to a revenue-based program. But a merger distracts from all of that, and in the process of merging airlines usually try to avoid taking steps to anger their customers and instead tell them they’re going to get ‘the best of both worlds.’ American, incidentally, is overdue for a devaluation as well – it’s been even longer since they’ve bumped award prices than US Airways (or United or Delta).
- This also puts of the risk of a revenue-based program, that’s not the sort of wholesale change to expect in the honeymoon period after a merger.
We get a four-tiered program. US Airways already has one, inherited from the days of a 75,000 mile Platinum level at America West. Delta and United have 4 tiers (Delta’s tops out at 125k). So not unreasonable to assume that the rumors of AAdvantage looking at 4 tiers were true, if only because they look at everything their competitors do. It’s hard to imagine that the combined airline would simply rid itself of a 75,000 mile level which US Airways now offers.
American’s lifetime status program survives. But it’s devalued simply as a result of having four tiers.
- American offers up to Platinum (currently mid-tier status). They aren’t going to take away the lifetime status that someone has earned, it’s not as though they are ‘ending’ the AAdvantage program, telling lifetime elites that it was the lifetime of that program, and they get to start off with something else in a new program.
- US Airways has among the least generous lifetime programs now. Lifetime silver after 1 million flown miles, and no opportunity to earn higher lifetime status. While they aren’t going to take away anything from lifetime elites, they don’t have a history of greater generosity.
- So one imagines 1 million miles still qualifies for 25,000 mile status and 2 million lifetime miles still qualifies for 50,000 mile status. But 50,000 mile status will no longer be mid-tier, instead if they introduce a 75,000 mile tier it will be second from the bottom, third from the top. So that’s a bit of a devaluation.
- It remains to be seen whether earning lifetime status in the future will continue to come with upgrade certificates (along with more certificates at each subsequent million mile level). Since there’s no new upgrade certificates annually like United had been giving, there’s very little to take away and so I don’t expect anything that lifetime Golds or Platinums have now to be taken away.
American Would Eliminate 500-mile Upgrade ‘Stickers’. The combined program offers ‘unlimited complimentary upgrades.’ Currently only American remains among airlines award 500 mile upgrade certificates (2000 miles’ worth every 10,000 flown miles). They generate revenue from selling more to elites. And they give unlimited upgrades only to their 100,000 mile flyers.
US Airways doesn’t like giving up revenue sources, but if they implemented the American approach then existing Dividend Miles elites would see it as a big devaluation — even though I think the 500 mile system is actually better for lower tier elites.
While ‘complimentary unlimited upgrades’ are free, they’re harder to get. Every Platinum is requesting an upgrade every time. But when there are a limited number of free upgrade certificates, and Platinums and Golds are paying for upgrades beyond those, they do not request upgrades every time. So not every Platinum is competing against every other Platinum for upgrades on every flight. Those times a Platinum requests an upgrades they are more likely to get it. That also means the odds of an upgrade when it matters to the member are higher.
But my strong hunch is the combined program does away with the 500 miler system. Which is another blow, in my view, to American’s lifetime Platinums who can now get upgrades if they’re willing to pay for stickers (beyond the ones they earn), but will have a harder time clearing upgrades in the future.
Here’s what I don’t have a strong (enough) prediction on:
- What happens to American’s 8 annual confirmed systemwide upgrades valid from any fare? Will top tier elites keep those?
- What happens to American’s approach to first class meal service — American certainly provides meals on far more flights, of much shorter distaces, than US Airways does. My gut says that we get something closer to the US Airways model, that US Airways management will see this as an area ripe for cost-cutting. But I’m hopeful that their view that they need to become a more premium carrier with the increase in corporate contracts that come from American and they won’t axe the meals. This isn’t a frequent flyer program element, per se, but I’m placing a 60% but not firm guess here.
- International first class, another 60% guess it eventually goes away but then it’s headed in that direction anyway since American has already announced that when they retrofit their 777-200s that those will no longer have 3-cabin first class — that only the new 777-300ERs will.
Do these guesses seem right to you? What’s most important in the frequent flyer program that I’ve left out that you’re wondering about? What do you think a combined program would look like?
i hope there is no merger Gary!! scary thoughts
Thanks for the reasoned analysis.
Re:
“So not unreasonable to assume that the rumors of AAdvantage looking at 4 tiers were true, if only because they look at everything their competitors do.”
Wasn’t one of the questions at the megado about if they were to add a 4th level, should it be at the 75K level or the 125K level? Yeah, it was just a silly poll, overall, but it was mention of a possible 4th tier coming directly from the head of AAdvantage.
I’m assuming the mileage programs will merge at 1:1 since that is the way other merged carriers have done it. What about US’s Chairman’s Preferred level–will it become Executive Platinum? And if so, will it be available for purchase, as Chairman’s currently is?
US Airways has been selling miles over the last few years to generate cash income. American did this some recently. Any ideas if the combined will repeat the sale of miles?
When US came out of bankruptcy they sold off their credit card business to Barclay, AA has Citibank. Who is going to have the combined business now and how much are they going to pay for it? This ia a whole new branding war!
I love my *A, and IMHO I like LH far better then AA or BA to Europe, their FC cabin and service is miles ahead. The fuel surcharges on BA is completely BS. SQ to Asia is better than CX IMHO. Domestically, I stopped flying UA, switched to US (I live in a hub city) and haven’t really regretted. I fly AA enough to make PLT and I’m Chairman Preferred on US. So if they do merge I’m pretty well placed to make top tier with AA (as we know the name wont change.)
I am lifetime Plat with American 2MM. Frankly Delta Diamond or Plat offer more as far as I am concerned than lifetime AA Plat. AA gives no upgrades without stickers or miles. They could have several seats available in First on any flight and they wont move a single lifetime Plat from business to First or coach to first. I was on a flight to Japan where my wife and I were the only two in first class. Business was full. I am sure there were some lifetime plats in business. I think speculating is hard these days because airlines have less regard to these things than in the past. Or so it seems to me?
What happens to those of us who have US airways dividend miles? I’m holding on to my miles (obtained through a combination of actual flying and buying from usairways.com when they offered their buy-miles 100% bonus).
Post-merger, would that mean if everything goes over to oneworld, I’d have the exact same number of AAdvantage miles? Or would they bring in some sort of ratio to convert?
I would guess that AAdvantage is one of the few areas of the combined company where the top leadership would be from the American side. I could be wrong about this, and Parker might not think that anyone at AAdvantage is worthy of the top job, but my hunch is that he will think AA is more skilled than US at managing a customer loyalty program. If true, this would mean few immediate changes for AAdvantage members, and more changes for Dividend Miles members.
That said, over time, I would have to guess that AAdvantage gets “stingier.” Let’s face it, US and DL make money even though they have crummy redemption inventory. US at least currently has decent Star inventory to draw on, but DL shows us that you can make good money in the airline industry with a lousy loyalty program. So I suspect, over time, award seats in the new AA program will become harder to get. I hope I’m wrong. And I hope that, at least, former US customers get better inventory on the old US routes. Like the current PHL-Europe and PHX-Hawaii flights; extremely difficult to get award seats on these now.
Conversion will pretty much certainly be at 1:1
Gary, I really hope there is no merger.
I also hope there is no merger. Lets keep things the way they are. By combining the program with US I do not see ANY advantage for us AA flyers, more of a mega devaluation all around.
Any predictions on what percentage of US frequent fliers will move to United in order to stay with the Star Alliance?
.
It seems to me that if the US executive team wanted to implement a revenue based system, the merger would be a good time to do so for several reasons.
1) Most people know that the US team is revenue centric and will change programs to maximize income, thus such a shift will likely illicit more of an “I told you so” response than it would if AA did it under current management.
2) Since the two frequent flier programs would already be in flux, introducing new mileage redemption options (1 mile=$0.01) and revenue based requirements on attaining status (like delta) would not likely overburden the transition people feel.
3) I propose that waiting until after a merger, and the subsequent fallout to subside, to implement such a program would make the company late to the party, which could hurt them overall. If they are the only FF program not revenue based, they will see a significant increase in migration into the program by people whole like the old system (as it is now). This will make it much more difficult to switch over later, since customer sentiment would be against such a change and many would feel betrayed. In addition if they are the last traditional FF program offering elite status, they will likely get many of the mileage runners and gamers that earn status with little spend, which is a population concentration they won’t want.
I think there are a lot of advantages to making a shift to a revenue based program during the chaos of a merger vice waiting until later.
@Chris B.-I think you’re getting way ahead of the game. There is no indication whatsoever than any program other than Delta’s is planning a switch to a “revenue-based” FF program in the near future.
Gary, as usual, great post!
However, I’d like to disagree on your point regarding Oneworld F awards being better with CX and BA.
Yes, CX is great, QF F on 380s are excellent (if you happen to fly the 4 routes that use the plane on).
Lucky recently said BA F is the best J he’s flown. AA F is as “meh” as UA F. And finding JL F space is like a root canal.
However, at Star, one can choose between UA, LH, NH, OZ, CA, TG for F. And if you have miles in other FF programs, add LX and SQ. And thanks to UA’s policy, *zero* fuel surcharges on partners.
@Peterson – LH first class awards are only available within 2 weeks of travel. LX and SQ first class awards are simply not available to partners at all in any meaningful way. So you are limited to United, but let’s ignore those, I wasn’t making the case for American first class space so let’s ignore them both. My point was that Cathay and British Airways (and Etihad) are more available than Singapore and Lufthansa etc. Thai doesn’t having first class service from the US usually so exclude them. ANA only offers award space up front in the winter (sometimes). Asiana space is decent, Air China space is decent. That’s what you’re comparing Cathay space to realistically.
A merger would almost nullify any chance of Grand Slam returning, however slim that already is
robertw,
AA does give Gold and Plat elites some “domestic” upgrades without using stickers/miles/upgrade certs.
Such AA elites on a Y/B fare is entitled to a “domestic” upgrades without use of any upgrade support instrument.
Unfortunately most such fares available to the general public are pretty expensive — not so for those with some negotiated contract fares or who take advantage of other opportunities that may be fleeting.
AA does make some nice change from selling stickers, one might think Parker et al would want to keep that.
But I agree, a merger sounds like bad news.
@robertw – Those upgrades are only for domestic flights. International upgrades are a whole different animal, even on other US airlines.
You could be spot on, but to be honest I don’t understand your logic. Why would AA want to adopt any of US’s program if they retain AAadvantage? If AA wanted 4 tiers they could have done it already in the past. Since oneworld has 3 tiers, I don’t see why they would want to become “incompatible” with the alliance they founded.
The same with 500-mile upgrades. Just because others don’t have them doesn’t mean they’ll eliminate them. Keep in mind that AA invented a lot of this stuff and others copied them, not the other way around.
If they remain at three tiers, then they have to figure out what to do with the DM Plat folks. They could either make them Plat or Exec Plat. One of those choices pisses off a bunch of people and the other costs a lot of money. As for OW, they don’t have to change the tiers there, they just make Plat and Exec Plat the highest tier. I’m assuming they will add a Silver tier if they merge and move Gold up.
@Gary :
TG offers tons of F seats from Europe to Asia, and since UA allows US-Europe-Asia routings, one could easily position IAD-FRA on either UA/LH then take FRA-BKK on TG.
LH only opens up at T-14, but there are tons of flights that could get really easy F seats, i.e. DTW/DFW-FRA, CLT-MUC, etc.
Also, since UA allows US-Europe-Asia routings, that opens up a *lot* more options (LX J, TK, SN, OS, LOT, Tap) in J routing as well (on top of AirCanada’s numerous flights out of YVR/YYZ).
I’ve recently done JFK-LX-ZRH-TG-BKK-TG-TPE in J, booked within 48 hours of departure since it was family emergency. If I were redeeming AA miles against JL/CX at such short timeframe, I’d probably be staring at at Y seat.
@Peterson you’re talking about tons of business class availability and I agree with you but that has nothing to do with the point I was making which is who has better first class award space. You say Lufthansa is available pretty easily close to departure and that’s what I said as well but it’s not helpful to most — especially to folks with US Airways miles who face a $150 change fee and NO CHANGES PERMITTED AFTER DEPARTURE OF FIRST FLIGHT meaning you can do LH F over at the last minute for a fee, but not do it on the return. So yeah you can do United first class. But I don’t think that reasonably compares to BA/CX/etc.
actually US has already explicitly banned LH F redemptions recently in their award chart changes, so that’s kinda moot.
For me, any award program that doesn’t allow one-way redemptions is a big no-no. Let’s just hope AA doesn’t adopt that “best practice” of US.
I think you have made some fine points.
I agree that a US/AA merged would have 4 tiers 25/50/75/125 with only the top 2 earning 100% bonus points. I also think that generally the merged airlines (North West —> Delta) and (United —> Continental) that the programs usually had the stingier benefits retained.
This is why my guess is we would see the elimination of meals in First on many flights, system wide upgrades limit to 6 possibly, with the need to buy up to a higher fair. We will also likely see a large reduction in the availability of standard award seats.
For customers, especially American Executive Platinum members, I predict a DRAMATIC decrease in the benefits.
“Nun said,
You could be spot on, but to be honest I don’t understand your logic. Why would AA want to adopt any of US’s program if they retain AAadvantage?”
You missed one of the main points. US Airways management will be in charge NOT AA management if there is a merger.
Gary if the combined AA/US gets rid of F, is there a possibility it will not be allowed to redeem for F on partner airlines, the way DL is shut out of F redemptions on ST?
As long as they copy DL and UA with free award changes at 75k status, I will be fine with anything else.
Both US and AA are quite stingy in that respect and AA does not waive fees if the EXP is not on the ticket.
It’s pretty simple (as en EXP with American).
American Airlines doesn’t need Pennsylvania, therefore, no merger. American can merge with Alaska if they need to merge at all.
A US Airways/American (Seagull logo) Airlines merger would be an utter disaster.
People who are whining that they do not want a merger, guess what, it is a done deal. Just going through the motions waiting for the creditors to sign off on it. Since Parker was from AA as well as some of the TOP US management team. Also Parker will be in charge of the new airline. Now the US (east pilots) do not want to see this merger happen, they will be forced to play with others better then they have been, the AA pilots will hold the power.
Biggest problem from my point of view is that the AA routing rules are overly restrictive, particularly for Trans Pacific travel. I don’t mind losing the Australia to North America via Europe routing from US but not being able to travel via Asia without redeeming multiple awards is nuts. The stopover rules are also a shame for anyone not based in North America.
I agree that the loss of the 500-mile Upgrade Stickers would have a significant impact to Golds and Platinums for the very reasons you mention in the article Gary. I fluctuate between GLD and PLT due to travel demand by my customer base, and the stickers have helped me obtain seats up front when it mattered to me.
@Tony – the US East pilots *do* want to see this merger happen. If they didn’t, the pilots union at US Airways wouldn’t have signed off on the Memorandum of Understanding for what a pilot deal would look like post-merger. They want it because they all get raises, they get more international flying, more widebodies, etc.
@77W no reason they would eliminate redemption for international first. US Airways got rid of 3-cabin first years ago but still allows you to redeem for it on their partners.
@Gary, I have a friend who is a pilot on the east, the only good thing for them is a raise, however, they will loose control over what happens to them. The AA pilots mostly the senior pilots do not want to share the widebodies with anyone else. As they see it, they have earned the right to be sitting in the those seats, many FO’s would lose those seats to US FO’s or Captains that want to move up to larger aircraft’s.
Anybody reading the tea leaves on how Dividend Miles merged into AA would affect Million Mile balances?
So how long will Lufthansa partner awards remain available on US Air? I had my heart set on D-Day reunion in 2014 which means I can’t book until mid June…….who will the US Scareways partner miles be good for then?
US Airways will certainly still be in Star Alliance in June
Thank you…….
How about upgrade priority? Will it be done in the US Airways way (person with the most miles flown that year in a given tier wins?) or AA’s way – person who requests the earliest wins, which is bad for those buying tickets last minute?