Airlines thought they could devalue forever – they could offer less value – and their customers wouldn’t know the difference. American, at least, is starting to see signs that devaluations are killing the golden goose — perhaps even to the tune of $200 million so far.
Last week and several IT meltdowns notwithstanding Delta has run a good enough operation that people put up with SkyMiles even when they declare you shouldn’t use miles for travel and that upgrades are dead.
United has had enough operational problems in recent years that it’s been tough to pinpoint their problems to MileagePlus which of course was making money even when the airline wasn’t.
But American is in a unique position of timing where we can directly see an impact to the airline’s bottom line — and a brand new SEC filing makes clear the cause.
Last year American entered into a new credit card deal that was expected to drive big revenue gains for the airline. This happened mere months after American devalued its award chart and weeks before they began awarding fewer miles as part of a shift to rewarding ticket spend not flying.
Customers aren’t buying it. They aren’t willing to take and spend on the American credit card as expected when American miles aren’t worth as much and have become harder to use.
And it is costing American hundreds of millions of dollars.
Here is what their new 8-K filing says (HT: David F.):
Other revenue is now expected to be $5.24 billion, up $330 million year-over-year. The first quarter reduction versus prior guidance is primarily due to lower than expected AAdvantage credit card acquisitions as first quarter promotions were not as effective as planned.
People aren’t willing to take the AAdvantage credit card like American thought.
American is a little bit opaque about all of the moving pieces in these numbers. They projected $5.32 billion two and a half months ago, and this would be down just $80 million from that figure.
However when they announced new credit card agreements last July they said they expected:
- $200 million more in the second half of 2016
- $550 million more in 2017
- $800 million more in 2018
And that this was growth beyond increases already anticipated in the old agreements.
Abstracting from other moving pieces not being detailed, they’d expect to grow this category by some amount more than $550 million in 2017 (update: relative to 2015 baseline). They now anticipate other income will be up $330 million year-over-year, a difference of more than $220 million.
While other revenue isn’t exclusively AAdvantage, the delta in other revenue was expected to be driven by AAdvantage and in particular the new credit card deal.
Much of the expected revenue growth comes from, as CEO Doug Parker said in January, “just getting a higher rate per mile” coming up short on credit card revenue is an even bigger deal than it might seem at first.
AAdvantage devaluations are coming back to bite American’s bottom-line. AAdvantage was the shining jewel in the airline’s crown. One financial analyst thinks the AAdvantage program alone is worth over $35 billion when the whole airline’s market cap is just over $20 billion.
That’s an exaggeration, but the loyalty program itself is big business and it was the one unique selling proposition for the airline over its competitors. Under the leadership of Scott Kirby they ratcheted down its value, reducing the percentage of seats flown by passengers using miles to below the levels of Delta and United, reducing the number of miles given out to flyers, and raising the cost of awards that customers have to pay.
In other words, they’ve made the program worth less to customers, and customers aren’t responding, which is a bad idea when customer response is so profitable.
As noted by the ‘update’ above I’ve clarified the comparison numbers, $550 million is not 2017 versus 2016 but against the 2016 baseline prior to the new agreement.
Bring on more of the 60k no-24-month-language Citi offers!
It used to be a great program, just really hard to use now:
1. No availability
2. Higher redemption rates
3. No stopovers (Heck i’d happily pay $250 for a stopover)
It’s just better for me to spend my money on other credit cards.
How many millions of other customers like me – a 40-year monthly flier and miles hobbyist who used AA as my airline of choice – were driven away deliberately by these imbeciles who tried to devalue a mile by 75% and then had the gall to keep calling it a mile. Are you kidding me? You ruined a perfectly decent airline with your hideous greed and the same kind of spite that had Fat Doug Parker ripping out the wiring from the entertainment systems on US Air planes while leaving the useless controls in place. An absolute wrecking crew! We warned you and you didn’t listen any more than you ever did which is why Suzanne Rubin left the sinking ship. Idiots!
I won’t put spend on a credit card to earn AA miles ever again. The only context in which I would acquire more AA miles would be:
a) if they were giving them away (below 1 cent per mile acquisition costs)
b) in the context of a transferable points currency (from my Citi Prestige, etc.)
Or maybe changes in Citi churning rules last year now end up hurting AAs bottom line. This was not in their hands.
American should go back to the old system (miles for miles) now while UA is in such hell and Delta loyalty members are also slighted.
Do something a Lemmer wouldn’t.
I bought AA stock on the hedge that the mileage program now has to count as currency.
If I loose my miles and my status and my MONEY what is the point?
A lot of the customers actually pay attention; not just the self-proclaimed points/mikes junkies. I’m actually a little surprised.
ABC,
I would actually argue that changes in Citi churning rules last year was partly in the hands of American Airlines. Because after all, churners typically go after high signup offers with the minimum amount of spend required. Typically, many of these offers were for airline and hotel credit cards and on occasion in house cards like Citi Prestige or Thankyou Premier. However, when American Airlines increased the cost of mileage with this deal, I am sure the bean counters at Citibank modeled what it would cost under the higher mileage costs to acquire a customer and likely also had analysis on the number of users who signed up and cancelled their card in the first year and overall product profitability on these customers and in comparison to those who did not cancel. As such, while American Airlines didn’t tell Citibank to implement a 24 month churning rule by raising the price on Aadvantage miles they increased the cost for Citibank and indirectly changed the financial analysis on the existing and future Citibank AAdvantage Credit Card portfolio. As such, they likely did influence the changes at Citibank.
Wjy would anyone spend on an AA card that has no bonus spend categories? At least on SPG you.can get 1.25x and on Membership Reward or Ultimate Reward cards you can get 2-5x?
But it’s mystifying why anyone would ever had any loyalty to airlines – that’s just dumb.
Spending to get elite qualifying miles and dollars is a very important reason.
I don’t travel as much anymore largely because of the devaluation. I’m not a frequent flyer junkie, but I would take some trips simply because I knew I was going to get something a little extra that was valuable. The little extra is now nothing and the value is nil. So, I don’t take trips unless absolutely necessary.
@JC, surely AA must have a model or consultants that calculated the impact of devaluation on CC sign ups. There should be great estimates from Delta and United. AA was unlikely to model the impact of altered churning rules.
I keep getting bonus spend offers on my Barclay card. But ironically the categories match the Freedom categories each quarter. 5 UR points vs 2 AA. The decision is clear.
I have not spent a penny on my AA card because it has devalued so much. And I refuse to fly AA even though I live in PHL. AAdvantage was the major reason I was willing to stick with AA
Changes making them tough to accrue and are as tough to redeem at fair prices as they’ve ever been…. hmmm, not exactly a real shocker.
As others noted, I find it interesting that you place the blame squarely on AA (specifically AAdvantage). Perhaps the downturn in new accounts is due to the lenders and not the airline. E.g. Citi’s antichurning rules and Barclay’s Nazi credit analysts.
GREAT article, Gary. Thanks for exposing Kirby and Parker for the greedy men they have become.
I just don’t get it. What happened to these two guys? When they were at US Airways, miles were truly worth something. Miles were relatively easy to accrue and award availability was good. And redemption levels were good, too.
OK, the economy was in bad shape then — so maybe they felt that they needed to roll out mileage promos on a regular basis. But come on!
When rewards are non existent, why would you want to use their co branded cards. My oldest card is a Citi American card and it will be trashed as soon as the renewal date comes…
Gary – 3 questions that perhaps could put an exclamation point on the argument:
1) Presumably devaluing would lower the cost to AA of award travel. Do we know if this is the case, and if so how much cost dropped? If cost dropped more than revenue, the devaluation still *might* have been accretive.
2) Have any other airlines made similar comments recently, especially airlines that have not devalued in the last ~12 months? If so, it could be a comment on the consumer credit cycle, and not specific to AA.
3) I know little about airline accounting, but I assume they must carry some type of liability on their balance sheet for outstanding miles. If so, is that liability growing more slowly in the current quarter than in the past?
I love the argument of course; perhaps there’s an airtight case to be made that the devaluation was harmful.
No availability of premium awards is the big issue in my view. Domestic F is hard to get on key routes to connect to an international flight.
Raising the price of awards by absurd amounts. Who knew this would drive people away from the program and make their credit cards not very good to spend on. I don’t feel any pity for these airlines that lure customers in and people invest their time and money being a loyal customer of an airline only to get the shaft later on. Their greed is catching up with them and god help them when oil prices spike or the economy hits a downturn.
Between their bad policies and TSA I just don’t want to fly anymore for leisure unless it’s on a foreign carrier that actually has customer service………What American Airlines (United and Delta included) has done is make the employee more important than the customer and that’s not the case on Gulf and Far East top carriers……….customers vote with their feet and Tesla keeps selling more great vacation sedans………….
AA increased the prices and reduced premium cabin availability.
On some routes, seems AA prefers to fill the premium cabin with non revs. On a recent long haul flight business class showed C7 and the cabin went full with non revs without ever showing award business availability.
AA business model is screwed up, no need to build any mileage balances here. Maybe they think we won’t notice.
AAdvantage used to be my program of choice, by far. It’s sad Parker is so myopic that he ruined it. Not sure it can ever come back without a serious reversal in several areas.
Wife and I had over 300,000 AAdvantage miles 15 months ago. Burned them all for Qantas A380 First. That will surely never happen again, but twas fun while it lasted.
@Playalaguna
Filling with nonrevs? An award seat is the definition of non-rev. Upgrading a pax with a paid coach seat is still revenue. Plus by presumably waiting so close to departure to upgrade the pax they maximized their window that a full fare pad might be willing to pay for the F seat.
From my perspective AAdvantage has 3 major problems.
1. Following the massive devaluation it is bad value for international partner awards.
Solution: offer better bonus sales of miles; go 100+% like LifeMiles, or United sometimes.
2. Endless lists of awards offered on the site which disappeared like 2 minutes after they were released, maybe months and months ago. If the cupboard’s bare then so be it, but stacks of (now) window dressing is a massive waste of my time sifting through what is not there for redemption.
Get real, and get your IT people to keep it up-to-date and relevant.
3. With the now more expensive product, how about releasing many more seats domestically, and lean on your partners to do the same.
Six years ago AAdvantage was my first go-to site to see if what I wanted was available (it mainly was) and I had a stack of purchased miles to use. Now it’s last on my search list, and I keep a miserly stash of miles for fear of further devaluations or more tinkering with the program.
The goose that previously laid the golden eggs is clearly constipated!
@Playalaguna
Sorry. You can disregard the previous comment I totally misread your point.
Great post Gary!
Gary is to Boarding Area what the New York Times or the WSJ is to the National Enquirer. Thoughtful and intelligent postings as opposed to Lucky and others fluff pieces.
Hyatt will see the same.
@Ben – airlines share relatively detail on their frequent flyer program accounting, though 10Ks have allowed me to piece together some modeling (which I’ve shared with clients). Airlines carry liability on their books for awards to be redeemed, American’s is about $2.5b, Delta’s $4b and United $5b. New accounting rules will be adopted by all the airlines January 1, and American should boost theirs the most.
The cost of award travel is unrelated to the number of miles American charges for seats, however if they’re able to burn more miles for the same seats they should be able to reduce their outstanding liability more quickly, similarly if customers don’t have the purchasing power for as many seats they can keep their liability down.
United and Delta have historically shared even less detail about their mileage program accounting than American has.
Some recent posts of note:
http://viewfromthewing.com/2017/03/24/can-american-aadvantage-double-airlines-stock-price/
http://viewfromthewing.com/2017/04/01/financial-analyst-claims-airlines-make-money-selling-miles-seats/
I wonder if the credit cards that offer more transferable points (UR, MR,CT) took away some applicants form the AA cards? I really like my new Sapphire Reserve card for getting 3X points for travel. Why would I waste my spend on an AA card, when it takes more miles to fly CX with AA miles? With previous points from Sapphire Preferred, I have almost enough for 2 rt in J, on SQ. I can’t be the only person who thinks like this. All you bloggers do.
Doesn’t make sense to put spend on your AA card for only 2x, when there are cards earning 3x, and even 5x.
I easily made EXP last year, and all the changes this year means it is incredibly unlikely I will requalify with the EQD requirement. What burns the most is that their s*** card with the 6K reduction in EQD for EXP would have been enough for me to requalify, but as a Canadian I’m ineligible for the card… and since AA killed their card with RBC a while back, I have no options.
I’m enjoying my final year of EXP with AA this year, and burned my last 4 SWUs to Sydney this summer.
If AA smartens up and offers the same 6K reduction to those of us who can’t get the cc… then I’ll stick with them. Looks like I’ll try to status match to United (God knows they’ll want my business after the past week!) and go from there.
Doesn’t this set Alaska up with a competitive advantage since they’re the only remaining airline giving real mileage (not to mention courteous staff that never behave like the Big 3 employees nursing contract grudges?) How could they press this advantage and do you think they will?
“…it was the one unique selling proposition for the airline [AA] over its competitors.”
The “over its competitors” part is highly debatable. United MileagePlus has always been the company’s selling point, with availability of award seats to most places that remained — in fact, remains — tops even as every facet of the company’s operation faltered, especially after the merger and during the utterly failed and mercifully short-lived reign of $mi$ek.
AA sucks. I have over 3 million miles and haven’t found a reasonable use for them in 4 years. I keep using my UA miles that have went down from 3M to under 400k in 3 years. So sad AA…
The flyer in the mail of 2x miles on all spends doesn’t even entice me. Time to close my AA cards including one I have had for over 25 years.
The AAdvantage program is now in a state of a bubble that is losing its air rather quickly. There are no reasons to acquire AA miles because in many cases they have less value than Sky Pesos.
I have cancelled my AA Citi card last September by telling the retention rep that I am fine with Citibank but completely dissatisfied with AAdvantage program and that the changes in AAdvantage was the main reason for cancelling the card. I now pay for my air travel with Chase Sapphire earning 3 points for $ spent on AA.
I still fly AA but only when it is convenient. So far it is 74K in EQM and $8.3K in EQD so it looks like I do not need a CC spending to help me with the EQD requirement. But AA already lost quite a bit of my $ that went to other airlines.
Great subject, Gary
Please excuse the length of this response (I did not have time to be brief).
program.
Citibank is very much aware of the decline in credit card use that yield AA miles to card holders.
Unlike with Citibank, the miles deal Chase Bank got with United Airlines continues to be beneficial for Chase Bank, for United and United’s customers.
On the other hand, with AA, Citibank and AA passengers got heavily misled and are continuing to be misled by AA. I will explain this later in this response.
Gary, as you already pointed out in your article, AA is losing money since its infamous devaluation. I think one reason AA is losing money is because many of AA’s customers realize that AA’s frequent flier program has been so severely devalued to the point there remains very few benefits or value of AA miles.
Some earlier comments to your article already confirmed that at least some readers (passengers) realize that AA’s devalued frequent flier program offers little incentive to use Citibank credit card for purchases. This is because the purchases will yield miles that have become virtually a fraction of their former value. I will give an example to show this later in this response.
Let us not forget that it is not only Citibank being misled or duped with buying miles from AA to give to Citibank’s credit card customers. AA’s customers are also being misled relative to AA’s so-called “bonus” for people (not Citibank) who buy AA miles. Prior to the demotion, AA’s sales of miles with the bonus included made the purchase worthwhile for many customers.
However, since the devaluation, if a customer accepts AA’s offer to buy miles at its “up to 80% bonus” the customer stands a high chance of not getting reasonable value for the purchased miles. One example where this “bonus” offered by AA is misleading is as follows: If a customer accepts AA’s offer and buys miles for the “up to 80% bonus” the customer will pay $4,425.00 and will receive 270,000 miles. At first glance, that seems like a lot of miles for about four thousand some dollars. But, with the devaluation, AA is currently requiring up to 195,000 miles EACH WAY for international business class tickets that, before the devaluation, were 50,000 miles. Said a different way, it is currently nearly 400% increase in required miles to get the same seat that a passenger could get prior to AA’s devaluation (195,000 miles compared to 50,000 miles). This example makes it clear that any attempt to accurately value AA miles is futile.
I could cite more examples how AA’s devaluation is misleading in its presentation to its customers.
Yes, I know that in AA’s contract it says that AA has the right to change its program at any time.
I have used AA for many years and hold EXP also for many years. Because of AA’s devaluation, I currently use AA only when my other current choice of airline, Air Canada and United don’t have a similar good offer. In other words, I am using AA less and my Citibank cards rarely. This will likely be my last year as EXP.
The only additional comment I wish to make about AA’s behavior is that I find it difficult to believe someone has not filed a class action for the misleading offers accepted by many AA customers.
AA has gone from first to worst. I’m fed up with their loyalty program and am looking forward to getting my balance down to zero if I can just find something of value somewhere. I’ve moved all of my flights from AA to WN and DL, except for the rare award seat. Tried to send my grandmother to other family members at Thanksgiving, and they wanted nearly 100,000 miles for a domestic coach roundtrip. Flight was $400 to buy. No thanks. Bought on another airline instead.
Dont forget your credit history and credit profile. Don’t close your credit line/credit cards. PRODUCT CHANGE.
If UA Oscar and AA Parker get canned, the world would be a better place.
While the increase in award price sucked, the bigger issue is the lack of saver level award availability which is by far the worst of any of the big 3 now. Just think how many people who don’t know any better, are now paying 3X AAnytime prices b/c they can’t get a saver level flight. In my opinion, this is the bigger devaluation.
I’ve recently been on int’l flights on AA metal that flew with empty premium cabins, for some reason AA prefers tor let planes fly empty rather than release award space – even last minute. I’ll leave my leggings home and risk being dragged out of a plane with scorpions falling overhead – so long as I have a decent shot at getting award seats.
Only idiots would pay $100/year for a credit card that gives worthless airline miles when a $0/year credit card will give you 2 cents per dollar in interest-earning cash!!!!
Yes – there are several factors causing this but I think the biggest of them all is AA’s decision to split the credit card deal between two banks where one bank can only offer specific benefits while another can offer a different set.
The very minute they made that decision the value proposition for any co-branded AA credit cards automatically became inferior to what their competitors offer. They should have went for exclusivity with Citi or Barclay, so that they could offer a cohesive and attractive set of cards that is tailored to customer segments. This will not only lead to better uptake for the credit card issuers but also lead to more bulk purchases of miles from the issuer for AA.
But nope – AA wanted a bigger contract than UA has with Chase or DL with AMEX as they are the largest airline and probably thought they had the most valuable loyalty program out there.
They missed the mark… Bigly…
P.S. I know many customers are going to dump Citi Prestige, so I am sure Citi hurting too in the premium credit card arena.
This made my day, they totally deserve this.
Put non-bonus spend on an AA card? Pay 1% in fees to build AA miles?
You gotta be pretty green or pretty dumb.
their biggest problem is not just the devaluation. but the lack of saver level awards, especially in premium cabin. you know what? I live in DFW and many times, even cannot find a decent time saver award to other hubs like LAX or ORD. Are you fxxking kidding me, AA?? Now I am just parking my miles there and hope I can use them for international travel on partners. But still… connecting to those routes through AA metal is a big issue.
I was Platinum and would spend extra To insure I flew AA or toss in a personal trip to maintain my status. The devaluation has definitely driven me away. There’s such minimal benefit to the status so I now have a few airlines I’ll travel and I just price shop. I fly just as much but last year only hit gold and looking like I won’t even have that after this year.
The AA credit card became a lot less interesting once they blocked Android Pay and discontinued the contactless solution. Throw in the lack of chip and pin, and card is useless in Europe. With most train stations becoming unstaffed, it’s becoming harder to use the card.
I’ve added Chase Sapphire Reserve recently and feel like I’m back in 21st century. I’ll likely cancel the AA card next year, as once you consider the lower value, there’s little reason to stay.
The same will happen to Hyatt
The fact that this post is getting so many comments is evidence of the I’ll feelings of AA loyalist right now.
Remember when on US Air you could get 60k roundtrip off peak awards in business to Europe in envoy? Wasn’t that long ago was it. Now it’s nearly double the price IF you can even find the seats. They need to fix this.
When you devalue miles you devalue the overall program. It’s like the scene in the movie Duets where the guy can’t redeem points at the hotel. It disappoints people.
Completely agree Kalboz. Hyatt list my business entirely. After several years as diamond with almost non-existent rewards I was giving up on them. But this latest move pushed me over the edge. I don’t stay at hyatts unless I have no choice. I will never be convinced y that anyone other than bloggers get to use upgrades with them.
Alaska started serving my airport this week. Now there are actually some flights available with my AA miles out of my airport, rather than always having to drive or purchase a positioning flight to Dallas or Chicago. AA’s radical reduction in saver award availability has vastly devalued that program for me. If I can get a card for the enrollment bonus, I will, but it goes in the sock drawer as soon as minimum spend is met.
I took a big devaluation after my wife left me.
Absolutely wrong. If you are dedicated to a particular airline then you should be able to receive he golden egg! I’m hating American now.
They were silly to follow Delta”s lead in eager program etiquette. It isn’t too late for them to reverse course.
After 3 million miles with American, I’m done with them. I’ve switched all of my business over to Alaska and Jet Blue. AA can burn in hell as far as I’m concerned. They are back stabbing Traitors.
It’s hard to defend American Airlines’ actions. Now I just book the cheapest fare, no matter which carrier. So much for loyalty!
AAdvantage redemption history:
First, transatlantic J started getting tough to find
Then, domestic Y
Then, domestic J/F
Then, upgrade space using miles, SWU’s or BXP1’s
Why collect these if you cannot use them?
My AAdvantage credit card got cancelled just over a year ago – after using it more than a decade.
@Martin
Chase isn’t as 21st century as you portray. They don’t have a contact-less card option; discontinued their version called Blink in 2014. They don’t have any Chip and Pin cards, only Chip and Signature.
They do have Android Pay as of 2016. However there are plenty of issues with actually using Android pay abroad. Changing to Chase isn’t a home run solution to traveling Europe by any stretch.
Furthermore, Chase doesn’t support ebills which every other major issuer does which many may find even more inconvenient.
AA has become US air. My east coast runs from San Francisco are all now on jet blue better service. Try their first class mint. Cheaper and better then AA. Flown over 4 million miles on AA alone and they could care less. I am now as loyal to them as they are to me.
The award availability, especially domestic in some areas, is outrageous nowadays with AAdvantage. What’s the point of earning the miles if there is no availability on a single day in several consecutive months? Even raising the award price would be better than this.
It’s wierd how serious people take their miles. It’s embarrassing really. Arrogance makes you feel like your have done something so you deserve something. In reality you pay for a service to get from one place to another. It does not alwAys work. We do live in reality, nothing is perfect. Except for the people with flight status, right?
Christine, I HAVE done something to deserve something. I have purchased items using my AA credit card instead of other credit cards offering different rewards (such as straight 2% cash back). I have flown flights on AA instead of competitors. I think the point you are missing is that, whether obtained by butt-in-seat flying or by credit card use, miles are not free. They are not a gift from the airlines, they have to be earned. And if I cannot actually use them, what was the point of earning them n the first place?
One thing AA could do is at least release awards the day of the flight or earlier. They’d rather let seats go out empty and that is what happens today.
Good article.
I still don’t understand why people don’t switch to 2% cash back for everyday spend.
I would only use airline credit cards for the signup bonus, and their current ~50k mile bonuses are not worth my time and effort.
I’ve burned most of my 500K stash and am earning elsewhere now. Used to put everything on my AA card–no more.
@Jimmy P.
–Good point!
–Right now it is still worth it for me, but just barely.
–I just flew round trip on Cathay Pacific, JFK-HKG. First on the way there and Business on the way back 180K AA miles.
–Still aspirational, but same ticket would have cost 120K a year ago.
–If I did not use points, I would probably have flown coach on Cathay Pacific with a paid ticket.
–However, the value proposition is getting less with each devaluation.
–For example, I used to regularly purchase points when they went on sale to keep my balances up. Now sales prices are higher and the value of the points is less. Plus, I trust the airlines less. So I am on the sidelines when points sales come up.
–I seldom use my AA cards to make purchases any more, because I would rather have transferable points at Chase or Amex, mainly due to fears of devaluation.
–I am very close to your viewpoint now. Life would be simpler with one cash back card and the 2% cash back credit card does have a good value proposition.
A few data points.
I canceled my AAdvantage citicard since earning on other cards is more valuable at this point.
I would have canceled my Barclaycard too except their low-fee balance transfers are useful in limited situations. I probably will cancel that when the annual fee hits again since it’s otherwise useless to me.
I shifted my priority from the AAdvantage Dining bonuses since those miles are worth less than competitors.
My last awards redemption was a frivolous trip to burn the rest of my AAdvantage account balance.
My last paid ticket was on United.
I am more interested in earning Chase UR points than AAdvantage miles since Chase UR points are more useful (valuable) towards my travel goals. Chase UR points do not transfer to American.
I have a stellar credit rating on a moderately good income. I travel for work and for fun and my loyalty to an airline is judged by how I’m treated on both. I am not my fare.
I am lifetime Platinum and 600k miles banked, which are almost impossible to use at any reasonable rate from my home airport of ORD. I put 10-15,000 per month on credit cards, but i never use an AA card anymore as the miles in my opinion are worth no more 1.0 cents.
I no longer use the AA shopping portal for the same reason unless the earning rate is at least 2-3x another portal. Maybe 1000 per month.
“Nun says:
April 14, 2017 at 9:52 am
One thing AA could do is at least release awards the day of the flight or earlier. They’d rather let seats go out empty and that is what happens today.”
Not only today. It has happened over the last year. Since nearly a year, I have been trying to get AA international business award space with little luck.
In February, I was on an AA international flight that had only about ten passengers in business. In other words, more than half the business section had empty seats on that flight.
However, when checking saver award space for that specific flight, AA wanted 150,000 miles. As a result, the flight went out with many empty seats. For that to happen shows incompetence on the part of AA management or a callous disregard for passenger loyalty.
Incidentally, AA occasionally wants 195,000 for that flight even though the seating chart shows many empty seats available.
Checking other dates for that same international flight number, I see the same pattern. There are lots of seats available (according the AA’s web based seating chart), but there is no business saver award space. Again, lots of flights go out with empty business class seats. Again, it is AA’s
incompetence or a display of callous disregard for passenger loyalty.
I’m at the tipping point wondering if any of these programs are worth it any longer.
I can occasionally find saver J awards with AA partners for int’l flights with some work and flexibility. But then I can’t get a saver positioning flight even in econ. So unless you live in a partner gateway city like ORD or LAX for JL, CX, or IB flights you are screwed. You have to buy the positioning flight to be able to use your award. I just redeemed for 2 J award tix to South America on LAN and my AA balance is now 336. I’m done with AA forever.
As a loyal AA customer that has flown over 50000 miles Per year for 10 years with the AA citi executive card and having accumulated as a couple, close to two million points. We now realize that we have been had. We are now flying other airlines and feeling better than what we get in spite of platinum in AA. Can’t even get a paid upgrade six months in advance, because AA expects better paying passengers, so they put us on a wait list. Amazing
Jimmy P., I think that switching to 2% cash-back cards and to cards with flexible bank points that can be redeemed in a variety of ways (including cash back) is exactly what people are doing. I currently have the Citibank AAdvantage card and the Chase United Airlines card, and put almost no spend on either. I’ve kept them primarily because of the earlier boarding they offer (since I often travel with a carryon) – but as I’m increasingly booking first class, I may well cancel both. I certainly don’t have either card for their points-earning potential!
Yep, since I started flying US/AA regularly a few years ago, and got the credit cards, I have been able to find ZERO flights using miles (except for BA flights to Europe that would cost more than just buying the ticket), even in coach. The miles are completely useless, I have no reason to fly American over anyone else. At least with United my low level status gets me consistent extra legroom and I can usually find a coach award seat, but really I should be flying Virgin or Jetblue whenever I can…
The program is awful. Just try to get Saaver Business Class to Europe even in the dead of winter. Zilch, nada, nothing. I cringe and want to say something (like try to book a vacation with your miles…YOU CAN’T!) on every AA flight where they try to sell the credit card. If the corporate suits don’t allow a bit of inventory then the amount of the deferred liabilities on the AA balance sheet will grow to a very large number. Ironic that the airline that started the rewards program is being so stingy with it.
American, free up some SAAver seats up front!!!
American had a great award program that kept me flying them for forty years until they killed the Golden Goose. These endless testimonials amount to tens of millions of PR damage they self-inflicted, customers like me who grew up flying them who won’t touch them now. I’ve been trying to spend my last miles for over a year and the only flights available on routes I had regularly availability require me to sit in an airport overnight enroute.
Their last Aadvantage President Suzanne Rubin represented the best of American in a bygone day, listening closely (often personally) to customers and eager to keep us happy. She curated the program with such loving care that when the Greedhogs decided to destroy it she resigned in protest. Perhaps you could interview her, Gary. She could give the final eulogy on a once great airline.
Excellent article, Gary. AA’s chickens are coming home to roost. They thought they could get away with massively devaluing Aadvantage miles, primarily by “stealth” means by all but eradicating the existence of sAAver award space across the board. Good to see people are voting with their feet, as I certainly will be doing.
…and this is why I fly Southwest almost exclusively. Southwest gives you $75~ back for each $100 you spend, if you are a top tier booking BS and redeeming WAG on CP.
AA gives you about $19 back per $100 spent as ExPlat if you value their miles at 1.7cpm.
Platinum for years and simply due to a monopoly I the routes I needed. That has changed and their atrocious service on so many occasions I can’t even recall them all… Which means I cut up my card and converted to Costco and use any other airline but them. AA execs are living in a bubble
@Gary
As many others have pointed out, I could deal with periodic devaluations (i.e. inflation) if saaver availability was at least decent.
Maybe I’m missing something, but I can’t understand why they wouldn’t allow more award availability on routes where the cash prices are so low… is there really that much of a marginal advantage from a revenue ticket where they wouldn’t want to retire the liability of miles outstanding by allowing redemptions at poor rates…(Especially on AA metal…)? For example, sub $500 RT economy tickets to Europe or ANY of the low yield Cuba flights..
Just as importantly, having people redeem the miles CREATES the very airline loyalty the brands are seeking in the first place.
I was on a flight a few days ago to DCA and the flight attendant was on the PA system touting signups for the Barclay Card, with lines like “you’ll be able to use your miles to take a vacation to Hawaii or Europe this summer!” When she came down the aisle waving the stack of applications looking for takers I commended her on being able to read her script with a straight face. “What do you mean?” she asked me. I said awards to Hawaii are essentially nonexistent at the Saaver level for either coach or first class, and awards to Europe, when you can find them, are inevitably on BA metal with exorbitant surcharges. “Well I never have problems finding flights when I book awards” was all she could muster before she hurried off.
@Evan at a certain level, where AAdvantage is at is crazy — but in some ways award availability on American is quite like availability used to be on US Airways (except that US Airways used to offer decent space in domestic first class, but that was before the forward cabin was being as well monetized).
I searched my home Austin – DFW today, American has 11 flights a day 6 days a week and 10 on Sundays, there was not a single day June 3 onward where there was even one premium cabin award seat. There’s not a single day starting today where you’ll find 2 premium cabin award seats Austin – Chicago over the entire schedule.
That’s nuts.
American wanted almost 150,000 miles (I have over 500,000) to fly overseas PLUS $800 in fuel charges. “Forget it” was my thought and I immediately paid full fare on another airline.
In addition to the inability to redeem miles at a reasonable rate, I have the following issues. The Prestige lounge benefit is about to die, and it’s almost impossible to use a BusinessExtraa upgrade anymore. I am lifetime Platinum and I really get no benefits beyond what any credit card holder gets except for free exit row seats.
I fly from ORD, so I actually have a choice. I never use an AA credit card anymore. I haven’t been able to redeem miles at a reasonable rate for over a year.
i don’t fly enough to get status on UA, but i have a Chase UA credit card which is now = to AA lifetime platinum.
AA basically has no frequent flyer program anymore.
To show you how cynical these bastards are, if you can redeem a mile-saver award on a domestic ticket, you cannot even PAY to get extra leg room. Someone who has never flown American before, or only flies them when they have the lowest fare somewhere, is allowed to pay for the extra legroom but loyal customers on mile-savers are not. It doesn’t make sense except in a world where the airline holds it’s loyal customers in contempt! I mean, just think about it – asking for the same right that a fair-weather customer gets – the right to pay to upgrade to more leg room – should be a minimum offering to a loyal customer! But if you have the audacity to use mile-savers, then screw you seems to be American’s mantra these days. I have stopped flying with these people and if the top execs move to a different airline, I will seriously consider not flying that airline any longer. Hatred of your customers is not good for long-term prospects!
I recall reading on a financial website about a meeting doug Parker had with financial analysts. He said they would make a lot more money in the future because they would not be giving away for free “with miles” anything they could sell even for a few $.
I guess that’s we are.
Their new ridiculous 9 boarding groups hurts the credit cards as well. On my last flight I got group 5 with the card. Half the plane boarded groups 1-4 and then group 5 wasn’t even called. The only reason I still have the card is for an upcoming trip where I need to check a bag.
@Jason….. Well boo hoo~ moaning about boarding groups! Your credit card is just a credit card, not a priority airline swipe card that give you privileges over other so-called elites! Why do you want to barge onto the flight before everyone else? So you can fill the o/h bin with all your crap to the exclusion of others?
Would love an eagle-eyed gate agent to (politely) call you out with “your group will be called in about 10 minutes sir, please take a seat until you are called.” So sick of those who think they are entitled to priority treatment when they have done everything to keep the cost of their flight as close to zero as possible.
Gary, you are well known in the airline travel industry. Will you consider sending to the head of AA’s loyalty program (or to anyone you know at AA) copies of the above responses from your readers?
AA receiving the reasoned responses from you might get the right people at AA to realize the damage that has been done to AA’s loyalty program as a result of the severe devaluation.
Unquestionably, AA’s frequent flier program is now (with the devaluation) contradictory and it is not working as AA claims it is. That is deceptive, no matter how AA views what was done to the program.
Your efforts, together with posted customer complaints/responses, might get the “right” people at AA to reverse the damage that has been done to AA’s loyalty program.
Thanks for viewing my request.
Coolhandluke
It doesn’t make sense to try to get elite status anymore when I can get 80% by having their credit card.
I’m not bad, they just made me that way
@David — American has read this post multiple times.
When I walked through the limits of award availability on American 18 months ago, I had a conversation with the then-President of AAdvantage who acknowledged and committed to work to improve availability (it’s not directly up to them). And that seemed to happen a little for a little while but clearly backslid.
The issue isn’t lack of awareness of customer sentiment IMHO.
@Gary~ AA seems to have a death wish for AAdvantage. The really must have, if they are aware what the big problems are and will not fix them permanently. If the head of AAdvantage is not capable of driving positive change in exchange for some big bucks each month, then he/she should stand aside and let someone else with more drive take over. Otherwise a good arm of the business will wither and be of little value to the bottom line. Of course then the management will sit up and take notice. It takes much more resources to attract new customers than it does to retain your existing ones.
I just flew to Hong Kong on AA’s few month old LAX-HKG route. My upgrade to business class cleared a few days out, but saver mileage awards never opened.
Instead, half the business class cabin was non-revs (a few had their laptops open on the internal AA sites for looking at loads for their trip back) as far as I could tell. Getting miles off the books seems much more valuable than seating a nonrev.
I’m 10 hours out on my HKG-LAX return, but F4J7Y7 still isn’t enough for them to open up any saver space at the last minute.
@Chris~ you do wonder if that is incompetence, lack of awareness or just plain bloodymindedness! Whichever, it points to an airline in disarray, to put it kindly.
Just to show what kind of mileage they want. Tried to book a business class award to Sydney over xmas they want over 700k miles per ticket 1.4million for the two of us. Conversely united only want 700K for the 2 tickets
I think the new AA has made very clear that they do not see any need for loyalty since there are only three international carriers left in the U.S. This is why Delta and United were so happy for US Air to buy AA: they knew the consolidation meant a virtually guaranteed revenue stream, regardless of their FF programs or how they treated passengers (although UA seems to have discovered there are some limits).
Perhaps they didn’t factor in the reduced value of AAdvantage miles meaning lower CC signups and usage. Or maybe they just don’t care.
AA will care now that value has diminished. But I doubt they’ll actually do what’s needed to recapture customer loyalty…
Too little competition in the US air market with only three major carriers left.
What did we expect was going to happen?
The government didn’t do it’s job preserving competition, and now we all pay for it.
Maybe we should allow foreign carriers to fly domestic routes now? I don’t know. But flying in and from the USA is horrible now.
My wife and I cancelled our AA Citi cards yesterday and made clear that the reason was the near-total lack of transoceanic mileagesaver business class awards or paid upgrades on AA. There’s no point accruing more miles with the card if you can’t use them. The Citi rep tried to dissuade me and then transferred me to another rep, who offered all kinds of “incentives” to stay with the card. We declined and cancelled anyway. I don’t know whether any of this gets back to AA, but if enough readers bail out of the card someone at AA might begin to understand that there are financial consequences for stiffing their customers.
Will be status matching to Alaska later in the year. Looking for reward flights from SEA to ORD and LAX with little luck did it for me, Credit card spend is close to 0 these days – likely cancelling soon.
I blame it all on predictably bad leadership – both Parker and Kirby, even when focused on the bottom line, devalued their product across the board (AAdvantage and in-flight creature comfort) so that there became very little reason to stick with American. We all saw it coming when the DOT, in its own predictably bad leadership, allowed the merger… American’s deterioration only reflects the situation in the country as a whole. Very sad.