American AAdvantage Is Keeping Award Charts, And More Backstory From The Program

Brian Kelly from The Points Guy interviewed American AAdvantage President Bridget Blaise-Shamai and got some interesting tidbits from her – that they don’t plan to eliminate award charts like Delta and United have – and some answers that I’d, shall we say, take issue with.

Still, Bridget offers more than usual and while Brian doesn’t press the way you know whether someone is doing a good job with questions isn’t whether they’re a prosecutor, it’s the topics they raise, and what you learn from – or about – the interview subject. By this standard he does well in the interview.


Bridget Blaise-Shamai at the Freddie Awards, C.R. Smith Museum, April 2019

More Elites Doesn’t Mean Members Like The Changes To AAdvantage

Brian asked Bridget about the move to rewarding customers more based on spend than miles,

I know a lot of people in the frequent-flyer community were very upset about that. This is the end of the programs, but it hasn’t quite been that has it?

Bridget responds that minimum spend for elite status turns out to be good, and the way she knows that is that American has more elites now than before the change. Customers must like it!

What we found is not only did our customers stay with us, the size of our [elite] population grew quite handsomely and so, I can only describe it on what we’re seeing through the data, through the actual behaviors of our customers. And so, I would conclude it’s all worked out for all the parties.

That’s a perfect example of the post hoc ergo propter hoc fallacy, I think. Just because something comes after doesn’t mean it’s because of that what came before. In fact a little bit of context about the program, about the airline, and about the overall economy gives us a much better explanation for what Ms. Blaise-Shamai is seeing in the data.

Minimum spend requirements lop off the bottom of the elite pool. Executive Platinums become Platinums and so on down, with a handful of people dropping out altogether. Minimum spend has some effect on the elite population, but it mostly means some members clustering around lower tiers of status than before.

Shrinkage of the elite pool would likely come from members getting off the hamster wheel and spreading their business across multiple airlines. However that’s clearly outweighed by the three factors driving growth in the total AAdvantage elite population since the US Airways merger:

  1. Larger route network lets customers keep all their travel on American smaller airlines don’t go everywhere, go everywhere non-stop, or fly as often which leads to customers splitting up their travel out of necessity. A larger airline will have more elites and will have more elites gravitating to higher levels in the program simply because it’s possible to take travel spread out across different airlines and keep it on one.

  2. Bonus qualifying miles for premium cabin fares Now that domestic first class and international business class count double, members earn status faster than before. American AAdvantage used to have both a mileage system and a points system for earning status, one was good for customers traveling on low fares and the other good for travelers on high fares. The customer buying the occasional premium cabin ticket didn’t benefit from the points system. Now someone buying a mix of tickets earns status faster than before.

  3. A strong economy passenger numbers have been growing, and existing customers have been traveling more. That means more elite members.

American Will Keep Award Charts

American AAdvantage has maintained its award charts which tell you the price of a saver award, and sort of tell you the price of last seat inventory (although American has six award chart price levels, only publishing three).

Alongside their chart they’ve increasingly been offering revenue-based ‘web special’ awards, which expanded in earnest last spring. These are non-changeable (but can be cancelled) and only booked online. This has meant more award availability at lower prices than AAnytime awards, but haven’t always represented reasonable value for miles.

I’ve written that eliminating award charts is the wrong way to do revenue-based redemption and it seems that American is following the right path here. Bridget says “we have an award chart as we sit here today and we have no plans of removing an award chart.” That’s important and it’s something that distinguishes American from United and Delta, though of course we wish for a reasonable amount of international business class saver availability.

Why American Isn’t A Citibank Transfer Partner

Citi issues American AAdvantage credit cards, but American isn’t a transfer partner of Citi ThankYou Rewards – or American Express or Chase for that matter. Brian asks Bridget why, “Now American miles, I know you protect them, United, you can transfer in from Chase, Delta, you can transfer from Amex. People always ask me, Citi’s in bed with AA, why doesn’t AA transfer from the Citi ThankYou program? Is that on the table?”

Bridget responds that “it’s not part of our plan. As we sit here today, we’re very satisfied and pleased by having a direct relationship with our customers on their using their AAdvantage Miles to buy travel on American Airlines. And there you have it. There’s really not much more to it. But yeah, we recognize that we are a bit different in the industry.”

And while it may be true “as we sit here today” that seems to be the least interesting part of the story. Citi Thank You transfers were definitely on the table when American was negotiating its current co-brand agreements. Citi had an opportunity to become the exclusive issuer of American AAdvantage cards (rather than carving out territory with Barclays) and to offer points transfers to AAdvantage. Citi balked at paying the premium American wanted, and American wound up maximizing revenue with a dual issuer arrangement without points transfers.

In some ways this is better for American. The growth in revenue at MileagePlus has come in some large measure from Chase points transfers, and there’s little reason to spend money on a United credit card (versus just getting the card for its benefits). If you do want AAdvantage miles its hard to get those in large measure today without an AAdvantage co-brand.

Why AAdvantage Has Two Banks Issuing Credit Cards

When America West took over US Airways they got Juniper Bank to put up cash for the acquisition in exchange for the co-brand relationship. Juniper was folded into Barclays in 2006. For some years Bank of America continued servicing its old US Airways Visa customers but unable to sign up new customers.

When US Airways wanted to take over United they thought they could repeat that play, until they learned just how large the Chase-United deal was.

Then when US Airways management took over American each airline had a card issuer (and Barclays finally acquired the old Bank of America ‘back book’). Many observers expected Citibank, which is the larger financial institution and with more cardmembers, to become the exclusive card issuer. They had a chance but wouldn’t pay up. Barclays was motivated to keep and grow its franchise. American entered into a record-setting deal by keeping both issuers and carving out where each could acquire custoerms.

Barclays is allowed to solicit cardmembers inflight and in the airport (but not within 100 feet of an American Airlines club). Citibank gets all other channels.

Brian asked whether this arrangement would stay in place long term, “Is that the long-term plan or how do you, as the head of the program, look at — the aviator cards are this; and our Citi cards are that. Is there a distinction?”

Bridget says they “look at is what is going to be relevant to our customers” and that each bank has products “really reflects on their strengths, right, in marketing. So you’ll see Citi in more of the digital and direct mail and the Admirals Club-type marketing channels, and with Barclays you’ll see them in flight and various areas of the airport and that really plays to the respective marketing strengths.”

That seems both an odd version of history (how each issuer got their respective marketing channels) and a strange description of each bank’s capabilities. Barclays in particular hasn’t done in-airport tabling the way Citibank used to. Though they can acquire cardmembers inflight and in airport, Barclays only advertises in airport they don’t offer in-airport application booths. Is the airport channel really a strength Barclays has over Citi?

Bridget then suggests that the banks have different products reflecting these strengths,

Then you think about the card proposition themselves. With Citi, the Citi AAdvantage card really has gone deeper on really spend categories that have proven to be relevant to our customers based on feedback and their spending behavior. And then with Barclays, it’s really more of a day of travel or travel related. So you’ll see things about companion certificates or Wi-Fi discounts or inflight food and beverage discounts. So together they are a wonderful combination and then just present it to the customer that they make the right decision for themselves.

The products only really changed in 2019, this isn’t why Barclays is inflight though given that was what they were able to buy it makes sense to focus on the inflight experience.

Some of the redesign though was pushed by American, it’s not the banks organically designing cards that suit their strengths. American took away the 10,000 mile annual rebate on redemptions from both Citi and Barclays and had to give in certain other areas.

People Still Redeem The Way They Always Have

You don’t go to American AAdvantage expecting to redeem miles for a rock concert. They’re a travel program. The most popular redemptions are what they’ve always been – flights – as Bridget explains,

What I see is a lot of stability. It’s a self-selection, right? You select into a travel program and despite having a host of other smaller redemption-level items, the redemption of miles for a main-cabin seat remain the most popular. Upgrades are also very popular and then you have, at a lesser degree: car, hotel and gift cards.

Brian, though, likes the experiences: “I’ve actually been to some of your cardholder experiences on the Citi card, the Madonna concert in LA was fun a couple of years ago, we were underneath the stage, it was kind of cool.” He wants to know whether we’ll see more of that from American, and Bridget says it makes sense where it “would compliment the travel.” Travel remains the priority.

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. If you’re going to waste bits on anything Brian posts, at least link the article.

    Next time, though, please just ignore Brian’s self-serving posts altogether.

  2. Strictly speaking they’re keeping award charts, but effectively they’ve made lots of flights completely non-saver or only available at the AAnytime asterisk level. This is especially true for some nonstops due to other changes like the handling of married segments.

  3. Sure, it’s good they’re keeping award charts, but really, are they? They basically have a written award chart the same way DL and UA have unwritten ones. They really charge what they want and it’s based on the price of the ticket.

  4. I listened to as much of the podcast as I could, Bridget is a master of using a lot of big words and not really saying anything. Overly cautious in her answers and of course everything has worked out great for all parties. I expect some spin from the leaders of the programs, but this was off the charts spin and avoiding answers. She did say they had feedback from last minute bookers that the old system did not reward them as much, that seemed legit and has been fixed, but of course that also goes with the overall revenue narrative.

  5. How do more elites comped Exec Platinum by way of having Hyatt Globalist enhance the elite traveler experience? As a Hyatt Globalist passed over for this promotion I’m wondering how many fewer upgrades will clear for me an AA Platinum.

  6. Keeping published award charts is a sound idea, even if saver capacity is scarce and even if it is supplemented with occasional web specials.

    Simply, people participate in FFP’s because they like to dream about aspirational awards. When FFP’s decline into dynamic pricing customers no longer have a “goal” for which to reach. AA seems to appreciate this dynamic.

  7. @gleff

    With regard to the size of the elite pool and your criticism of AA’s position:

    If I were arguing in AA’s defense, I’d say that one big problem airlines often have with customer preference is the issue of “stated preference” vs “revealed preference.” So you often *do* have to go to the data. If AA is happy with things, then AA is happy with things.

    Would you then argue that if there was min spend requirement, then the elite pool would be larger? Sure. But is it in AA’s best interest to have the largest elite pool possible, if the marginal growth is low profit customers?

    So going back to your statement of “post hoc ergo propter hoc”: That may be true, but I have a feeling it’s really hard to argue that the min spend requirement has *hurt* AA (e.g., they would have been better off otherwise.)

  8. By any objective standard, that is a God awful interview — on the part of both the interviewer and the interviewee. I think your summary is also long winded. One sentence is enough: AA has no plan to eliminate its award chart (for whatever that’s worth these days).

  9. It’s an easy advertisement for AA without giving anything away 🙂

    But gosh, Bridget sure could cut out 80% of the words and get the same point across! Comes across as corporate mumbo jumbo.

  10. @Dan – you definitely need to look at the data. I’m just saying the data doesn’t say what AA thinks it does.

    AA can be happy with it, and I’m fine with THAT. I don’t have an issue with an airline ‘firing’ elite customers as such. I only take issue with claiming that’s not what they are doing.

  11. AA is a terrible airline.and the award tickets are great provided you want to fly out at 6 AM and make connections.

  12. When I listened I wished Brian has asked her view on Citi eliminatinng nearly all travel and shopping protections from the Citi AA cards. I assume most cardholders are oblivious and haven’t changed her behavior, though I’d like to be surprised.

  13. Thanks, Mr. Gary. “..Executive Platinums become Platinums and so on down, with a handful of people dropping out altogether..”. Sitting in MIA Flagship Lounge on next to last day as EXP. I will have zero (0) status with AA come 01 FEB.

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