American Selling Miles Again for 1.7 Cents: Tacit Admission Their Miles Have Been Devalued Too Far

American keeps lowering the price that they will sell miles for. After the merger with US Airways they took the Dividend Miles approach of putting miles on sale three fourths of the year. The only purpose that ‘regular price’ serves is to be a reference point that allows them to announce a huge (always on) sale.

At first they hovered a little over 2 cents a mile, then the price point fell to 2 and then below 2 cents. Each promotion would vary a bit but the trend has been downward.

Now the price is as low as 1.72 cents. In fact last month American was selling miles for as low as 1.72 cents apiece. That was a limited time offer valid through end of June. That’s the price they brought back for July.

Buy exactly 150,000 miles and you’ll get receive 250,000 miles for 1.72 cents apiece. (This price is still more than AAdvantage miles are worth.)

The deal is “10% off” and a bonus of ‘up to’ 100,000 miles through June 30.

Here’s the offer table:

Buying 150,000 miles and receiving 250,000 works out to a price of $4311.19 or $0.017244 apiece.

Terms and conditions:

To be eligible for a the bonus miles and discount AAdvantage members must purchase 11,000 AAdvantage miles or more in a single transaction from the Buy or Gift Miles program beginning 12:00:00am CT on July 3, 2017 to 11:59:59pm CT on July 31, 2017. The prices shown include the discount. The discount applies to the AAdvantage miles purchased and does not apply towards taxes or the $30 transaction processing fee. The bonus miles earned are calculated based on each individual purchase amount and the corresponding bonus award. Bonus miles earned do not count toward the annual purchase limits. The applicable bonus miles are awarded to the recipient for Gift Miles transactions.

The miles purchased with the Buy Miles program and received with the Gift Miles program do not count towards AAdvantage Gold, AAdvantage Platinum, AAdvantage Platinum Pro, AAdvantage Executive Platinum or AAdvantage Million MilerSM status qualification. Transactions are nonrefundable and nonreversible. The miles successfully purchased or transferred usually post to the designated account right away, but please allow up to 8 hours for processing. Each AAdvantage member is limited to purchasing or receiving in a calendar year, a combined total of no more than 150,000 AAdvantage miles. Miles purchased through the Buy Miles program or received as a gift through the Gift Miles program count against this total. A confirmation email will be sent to the primary buyer/gifter and/or recipient, using the email address(es) associated with the AAdvantage account(s) and any additional email address provided. AAdvantage accounts less than 30 days old are not permitted to Buy or Gift Miles. The price of your purchase is in U.S. dollars. Your credit card company may add a currency conversion fee.

Even at 1.72 cents I still can’t recommend buying unless it is for a specific award where the paid ticket you would otherwise buy is more expensive and you can find the availability and put space on hold before purchasing.

In fact with more frequent premium cabin sales than in the past it isn’t even always cheaper than buying the ticket.

It is not at all surprising to see the price of American AAdvantage miles falling because the VALUE of American AAdvantage miles has been falling.

We know that American hasn’t hit projections for credit card signups. That is materially affecting the airline’s revenue as they disclosed to the SEC. They increased signup bonuses to try and compensate.

Co-brand credit card deals are worth about $2 billion a year to American and expected to grow. If customers are less interested in working to acquire those miles there is a big hit to revenue. Customers may be less willing to pay as much to purchase miles, so we are seeing lower prices. American isn’t lowering prices because they expect it to lead to the less revenue after all.

As airline programs have cut back, bank proprietary rewards programs have been ramping up spending to record levels. In other words, the programs have competition — which is why they cannot maintain better than 50% profit margins. They have to improve the value proposition for consumers or their cuts will be self-defeating — less credit card revenue and less revenue from the sale of miles, not to mention a less useful currency to actually encourage customers to choose their airline over competitors.

How low can pricing go? On average across all customers American sells miles for about 1.3 cents apiece. They make good money doing so. If they push down the regular consumer price, however, they’ll have difficulty maintain current pricing with other customers. The entire model is getting squeezed.

While I don’t recommend buying American AAdvantage miles speculatively at 1.72 cents, the fact that they’re for sale at this price is actually a good sign for program members. After all, they say the first step is the loyalty program admitting they have a problem.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. 1.7cpm is a joke. I wish I could get 1cpm value out of my redemptions.

    No award seats at standard levels on AA metal makes AAdvantage a bigger ponzi scheme than Enron.

  2. “It is not at all surprising to see the price of American AAdvantage miles falling because the VALUE of American AAdvantage miles has been falling.”

    Can’t agree with this logic. US Airways often used to SEVERELY discount their miles while the value of their miles remained stable.

  3. @tommyleo

    1. US Airways in the last several years of the program sold miles for more than this.. 1.88 cents.

    2. The vakue of those miles was predicated on partner awards with better availability via Star Alliance.

    3. And indeed the price they discounted to was in general an increase over earlier prices

    4. The point here is that American’s proce trajectory is falling. If people were willing to pay more than American is selling miles at they would be selling miles at a higher price. The monthly discounts to prices that have headed lower and lower suggest they are finding a lower market clearing price than there used to be.

    5. You would expect people to be willing to pay less for something that is less valuavle. It is the opposite hypothesis that would require greater explanation…

  4. @tommyleo

    I could ALWAYS find two seats in business with a star partner using US Air miles with reasonable surcharges. I would swap my 2+mm of disAdvantage miles for those all day long.

    Now all tatl awards on AA are on BA with surcharges often equal to a paid tix.

  5. Not interested in buying AA miles at this price . I might bite @ 1cent/mile. 3 big reasons

    1) recent devaluation, for example huge increase in F to asia1
    2) poor availability
    3) decent paid J fares (se FT thread)

  6. Let’s boycott buying AA miles, signing up for AA credit cards, or flying AA all together until they start making saver awards available. What’s the point of accumulating AA miles if you can’t redeem them?

  7. Who cares? The miles are worth nothing close to 1.7 cents. Let them make seats available again and their miles will be worth something.

  8. Actually, I am still surprised that the sale of FF miles is nor regulated by federal and/or local government(s). There is no other industry that will sell certificates for future products without any guarantee in value. And, of course, some of the consumers are stupidly buying those. When an airline rewards a customer with FF miles is one thing, selling those miles for currency might constitute either a product or an exchange to another currency. If the latter, the consumers should also be able to sell/gift/exchange miles as they wish.

  9. What used to be the flagship program of frequent flyers has become a sad wasteland. The BA fuel charges, no MileSAAver awards, the AAnytime awards costing more. Wide swaths of dates simply not available, upgrades are harder to come by, sounds like the lounges in Seattle, Portland and Anchorage will vanish with the Alaska de-coupling.

    This is little more than a propaganda “benefit”.

  10. I just bought a $325 trip for 12500 Avios and $5.60. It was also available for 12500 AA miles and $80.60 which would have been an acceptable value.

    Within a few years I expect to switch most of my coach ticket redemptions to Chase Sapphire Reserve points at 1.5 cents each against cash fares or to Southwest points at 1.43 cents plus waived taxes. Then I won’t need to search frantically for elusive award seats. The time savings alone are compelling. When I earn 1.5 points per dollar (Chase Freedom Unlimited) or more (bonus categories), I’m getting a relatively simple rebate exceeding 2%.

    I will use legacy airline points for premium cabin, for last-minute high fare trips, and where I need an option to cancel. Miles and points are less and less useful but not yet useless.

  11. AA miles are worthless for domestic travel and nearly so for Europe, but they can still be good for Asia. I wouldn’t buy miles at that price normally, but if you find the availability, at 1.7 cents JL First US-Japan works out to $1360 one way, which is a very good value.

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