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:
- 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.
- 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.
- 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.