The American Airlines rumor is confirmed. The Wall Street Journal writes:

American Airlines will start charging passengers a $250 one-way fee to use frequent-flier miles to convert low-cost international tickets into first-class or business-class seats.



The nonrefundable fee, effective Dec. 1, will apply to discounted and deeply discounted coach-class tickets. Full-fare coach tickets and business-class tickets will be exempt from the fee, said the Fort Worth, Texas, unit of AMR Corp.



The fee applies to flights between North America and Europe, Japan, and parts of South America, including Brazil, Argentina and Uruguay. At the same time, passengers flying between Latin America and Europe no longer will be able to use frequent-flier miles to upgrade their seats.

Details on the changes can be found on American’s site here. Some interesting details emerge.

Mileage costs for business class to first class appear to have increased from 10,000 miles to 25,000 miles each way — an increase of 30,000 miles roundtrip in addition to the buy-up fee.

The upgrade award/fee cannot be processed online. And since online purchases take a few hours to ticket, and upgrades can’t be confirmed until ticketing, it’s necessary to either buy online and wait and hope that seats are still available a few hours later or call American and pay their telephone ticketing fee in addition to the buy-up fee.

The upgrade fee is completely non-refundable. My understanding is that if you cancel a trip, the ticket itself retains value for a year (minus the change fee) but the upgrade fee is lost.

What’s bizarre in all of this is that American has really sophisticated computers and decades of data that tell them that not all flights have the same demand. Yet they charge the same for upgrades regardless of flight duration or likelihood of selling business class seats. Certain destinations and days of week yield heavier business travel than others. I’m surprised they didn’t introduce peak/off-peak fees. Simiarly, if they’re concerned that passengers are buying cheap fares only and upgrading, they could have solved their problems without penalizing their best and highest revenue customers (who might occasionally buy cheaper tickets on their leisure/vacation trips with their families) by waiving the fees for top-level elites or for customers who have purchased a certain number of full fare tickets during the previous year – issue ‘get out of jail free cards’ as it were to high revenue passengers.

This change takes American out of the running for best frequent flyer program. My view was, more or less, that American offered the best program for 100,000 mile flyers. And those flyers still get (for the moment) electronic upgrade certificates that can be used internationally without this fee. But this new upcharge is a substantial devaluation, a break from American’s past practice as the most liberal carrier for international upgrades, and starts pointing me in other directions.

Customers whose main interest in miles is international upgrades should probably look at United, which doesn’t allow upgrades on the lowest fares but does offer upgrades on mid-level fares without an upcharge.