American Airlines CEO Robert Isom enthusiastically cheered the end of first class upgrades. Speaking at the Bernstein 42nd Annual Strategic Decisions Conference on Wednesday, Isom was asked by the host about frequent flyer upgrades:
[A]s you think about the technology and that in-app buy-up experience, that’s something where I know just from my own experience, maybe a couple of years ago, it would seem like you guys were kind of far behind in terms of giving away the upgrades instead of asking to get paid for them. Do you feel like you’ve closed that gap relative to the peers in the last couple of years?
Isom enthusiastically replied, “Absolutely.”
He then explained that they’ve “gone through a couple of phases of redesign: of their mobile app, and concludes that it “definitely does a better job of laying out what’s available and why there’s benefit to potentially paying some more.” And he put selling buy ups instead of giving out free upgrades in the same merchandising category as “pre-purchase bags, checked baggage.”
The problem with this at that one of the four pillars of American’s strategy is the value of the AAdvantage program. Isom even describes it as what holds the rest of the strategy together,
wrapping that all into the industry’s leading loyalty program. Everybody wants an AAdvantage mile.
But he’s devaluing those miles! Last summer they eliminated traditional mileage upgrades altogether, now just letting members spend miles as cash to pay for post-purchase buy up offers at low value per point.
And they’ve become very aggressive devaluing status, preferring to take $40 from anyone who will spend it to upgrade rather than making a first class seat available to a customer that spends $30,000 or $50,000 a year on tickets (or $200,000 a year on their Citibank co-brand credit card).
The twin pillars of loyalty are recognition and reward. Reward is your points currency, your earn and burn. Recognition is treating your best customers better. They want points, too, but those are table stakes. As Stephanie Meltzer-Paul put it in this week’s So Many Points newsletter,
Members will earn and consumer points like water (and demand points when you don’t have it), but the real emotion comes from exclusive service, access, great technology that feels personalized, and more. Points create a reason to transact, experiences create a reason to care.
American’s status members spend more, buy premium products more, and transact with the Citi cobrand more. And the single best value component of status is upgrades. The trend towards taking those away – having moved from selling only 10% of the seats up front 20 years ago, to half a decade ago, and now to north of 80% means that the main motivation for staying loyal to an airline is gone.
That leaves schedule and price and product, but schedule and price are commodities and product isn’t something that creates a durable advantage as long as competitors are willing to invest. Everyone but Delta is adopting Starlink wifi, so while United is the fastest with installs that advantage will dissipate quickly.
Ultimately, with airlines selling first class upgrades for as little as $26, it no longer makes sense to ‘chase’ status and mid-tier status is the sweet spot for extra legroom seats, earlier boarding, and some priority during irregular operations.
Looks like Isom is incapable of reading the room.
Loyalty may not mean profitability. I could fly everyday of the week, 365 a year on BE tickets and based upon ticket sales only I would still be unprofitable to an airline. Face it the days of near limitless free upgrades are gone. All of the US3, AS and JetBlue are filling the premium cabin with paid premium or paid upgrades.
Most of the upgrade offers if you wait and monitor are pretty reasonable. If you don’t want to pay out of pocket then you can play the upgrade lottery. It’s that simple.
Get over it Gary. These aren’t the programs of 20-30 years ago (or even 5-10 years ago). All hotels and airlines are trying to monetize their upgrades. The days of assuming an airline or hotel upgrade is a benefit (regardless of status) are over. Be happy if you get one but if it really matters pay for the suite or first class seat.
BTW, I agree with AA they should be doing this. Their competitors are and they are leaving money on the table. Also, there is a stickiness to the programs (likely due to routes more than anything) and frankly, for all the whining, few legacy high elite AA, DL or UA travelers will actually quit flying the airline. They have all modeled out the impact of these changes and determined they are a net positive regardless of you feeling about the matter.
This is precisely why I got away from airline mile accumulation. It’s all credit card or other non airline miles I strive for.
Being lifetime gold in a major airline hub doesn’t hurt.
They have dropped all partner J award availability on non-stop transcons LAX-JFK. Reported as just close in, but it all disappeared from AS website ( except July 4) , for the next 330 days.
Two fundamental rules in play: (1) Never leave money on the table, and (2) “Want First, Buy First.”
I’ve largely given up on “loyalty” programs and become a straight-up schedule-and-price free agent these days for exactly those reasons.
Penny-wise and pound-foolish. Everyone and every thing in the US is in a race to make it to the bottom . Learnt from our evil government.
Astonishing that Isom doesn’t understand what loyalty is all about.
The value proposition of airline loyalty is essentially gone in America. Airlines outside of the US do not offer complimentary upgrades in the same way that US carriers do, but the vast majority of foreign carriers do offer lounge access for mid-tier and higher status levels. Complimentary checked bags and “priority” boarding can be obtained through cobranded credit cards. There’s really a need for priority check-in these days; often the “priority” line is longer than the main bag drop line. Airlines want as much of the experience as possible to be DIY these days. Perhaps there’s still some value to GS, CK, and 360, but that’s for the top 1% of the 1% of travelers. As someone who was Delta Silver Medallion in 2005, I felt like a king and over 50% of my upgrades cleared. Fast forward to 2020 when I was Exec Platinum with AA and almost all upgrades cleared (and still felt ALMOST like a king), and now I see no compelling reason to chase status any longer with any airline (except Air France Platinum, but that’s just for LP mileage redemptions…admittedly a fringe case!). Being a free agent these days and prioritizing price and direct flights is so much more valuable to me than chasing status. Until airlines create a more compelling loyalty scheme, I will be loyal to no one.
Regarding, “Ultimately, with airlines selling first class upgrades for as little as $26, it no longer makes sense to ‘chase’ status and mid-tier status is the sweet spot for extra legroom seats, earlier boarding, and some priority during irregular operations.”
In principle fully agree. For us, we have an atypical travel pattern and airline usage. Most of our paid travel is overseas on partner Oneworld airlines. So we “chase” status for the OW rather than the AA benefits – for example, the fantastic first class Cathay Pacific lounges and other niceties
And on the partner airlines we have been upgraded a few times from PE to biz class, including recently.
Lol what a jerk. So glad I’m not an American flyer.
Those who want free upgrades are like the fat cat rich. Make them pay their fair share. Tax them a lot and then add more taxes. Punish them.
Upgrades should be given to the poor.
AOC for President 2028.