American Airlines is preparing to eliminate award charts, according to an interview given by the President of the AAdvantage program to the website The Points Guy. No airline or hotel loyalty program has ever increased the value of its programs for members after eliminating award charts.
American Airlines…still posts its award charts — if there’s saver award availability, the chart will tell you exactly how many miles you’ll need.
But not for too much longer, as Rick Elieson, the president of American’s AAdvantage loyalty program, explained in a meeting with TPG at the carrier’s Skyview headquarters.
“What the team is actively working on is what can I give you that would be most useful to you,” he said in response to whether AA’s award charts are here to stay.
The TPG piece is full of softballs and doesn’t press Elieson when it reports he has “no intention” of devaluing the program when they eliminate award charts. Here’s what they offer to expect instead:
Elieson compared the next iteration of AA’s award charts to a real estate website that shows you how many people have bought a property in a given area and for what price range, as well as a ticker for how many people are looking at a specific property right now.
For an airline, that’d likely materialize as a website where you enter your origin and destination, and the algorithm spits out a range of historical award prices, as well as what travelers are paying nowadays.
Award Charts Are The Cornerstone Of A Loyalty Value Proposition
In January 2020 American assured they would keep award charts. And when Rick Elieson took over the program, he again reiterated in October 2020 that they aren’t going anywhere. He said he didn’t understand the value of award charts but understood they mattered to members.
They now appear to be reversing course. But award charts are the fundamental cornerstone of a loyalty value proposition.
- Members are asked to engage in an activity first – show their loyalty, earn a currency – and trust that those points will be valuable in the future.
- In order to generate trust the program has to commit up front to what that value is going to look like. That’s especially true for airlines which have a history of abusing consumer trust.
- Without a specific promise of value, and a credible commitment to deliver on the promise, there’s little reason to accumulate the currency. If AAdvantage won’t even tell you what your points will be worth in the future, why should you believe in their value?
Award charts mean that an airline has to notify members when they make a change. They can’t just sneak in the change without acknowledging it. And the need to make changes public itself serves as a deterrent to frequent and significant devaluation.
When programs no longer have to post their changes, because the price is whatever it is on a given search, there’s no need to tell members when the underlying value of the currency devalues. When it’s opaque, devaluations happen more frequently.
Eliminating Award Charts Has Never Been Good For Consumers – Ever
It’s no coincidence that American AAdvantage didn’t devalue its miles during the pandemic. They have award charts and would have had to acknowledge the change. On the other hand let’s look at the behavior of airline and hotel programs that already eliminated their award charts.
- IHG Rewards, which has no award chart, systematically increased award prices during the pandemic.
- Southwest Airlines has straight revenue-based redemptions. Their points have a largely fixed value, but they don’t publish the value. They devalued their points 6.5% without notice.
- Delta massively increased the price of partner awards in October 2020 and that felt so good they did it again in February 2021. One way business class awards between the US and Europe rose 60% in 5 months.
- United raised the price of partner awards 10% and then added a mileage surcharge for booking within a month of travel
Ten Billion Reasons To Devalue The AAdvantage Program
American Airlines mortgaged the AAdvantage program for $10 billion. The airline has more debt than any other carrier, and now bondholders have first claim on AAdvantage revenue – even ahead of members redeeming their miles.
Now that American needs to be more transparent with AAdvantage investors, in order to protect the value of its AAdvantage-backed debt and potentially use the program again in the future as a source of liquidity, they need to be able to show continued net earnings growth. American is hardly alone here. United, for instance, borrowed $6.5 billion against MileagePlus and is driving towards doubling the frequent flyer program’s net earnings in four years.
That’s tremendous pressure. It’s unlikely that the credit card co-brand deals – the primary source of revenue for airline frequent flyer programs – are going to drive revenue growth at that level. So it’s natural to face pressure on the cost side. American’s CEO says the airline’s goal is passionately driving efficiencies.
Award Charts Are Crucial To The Competitive AAdvantage Of The Program
Airlines can’t compete in an award chart-free, revenue-based redemption environment. Their products won’t offer the same value that bank points do. At best you’ll see a penny per point, but customers with a Chase Sapphire Reserve redeem those points at 1.5 cents apiece for travel or through the bank’s ‘Pay Yourself Back’ program.
The ‘AAdvantage’ than an airline has is access to spoiling inventory that it can pass along to consumers at a deep discount through its mileage program, offering members the opportunity to generate outsized value for their miles. Without that – and it’s something that is fundamentally tied to the award chart – airlines lose their competitive advantage in loyalty.
In fact award charts are a key reason I prefer the AAdvantage program over MileagePlus or SkyMiles. And I’d note that the AAdvantage cobrand card portfolio has a greater volume of charges than either of those other two portfolios – so in eliminating award charts they’ll be copying the tactics of their less successful competitors. But why maintain your competitive advantage?
Explanations For Dropping Award Charts Are Excuses
There’s no reason to eliminate award charts to pursue revenue-based award availability. American Airlines proves that with its web special awards alongside chart-based pricing. American is hardly the first to do this. United introduced it 15 years ago with its Choices program making the points of co-brand cardholders worth a penny apiece as an option while still allowing redemption based on an award chart (until they dropped charts two years ago and began to devalue).
Yet Elieson tells TPG that award charts don’t work because he wants miles to be used for more than flights, and for revenue-based redemptions,
The carrier is working to make miles more into a currency that replaces cash across the travel journey, not just for the flight itself. “Increasingly, I want you to redeem miles for more and more things, not just awards,” he told TPG.
The current award charts list your mileage redemption options for flights only — there’s no mention of using your miles for other ancillary purchases like extra-legroom seats, upgrades, and more.
I initially found it an odd claim that “there’s no mention [in award charts] of using your miles for other ancillary purchases like … upgrades” since AAdvantage literally publishes an upgrade award chart, so I have to think there’s no discussion of using miles at a very low value to pay for the difference in fare between the cabin purchased and a higher cabin – the way that Delta obliterated mileage upgrades. With SkyMiles you now buy business class with miles for your ticket price plus one penny per mile.
This is like Delta saying they wanted people using miles for haircuts five years ago, using miles as a currency to literally buy anything… at about a cent apiece. Delta has such a strong presence in its main hubs, and has historically good customer service and operational reliability that they get away with it.
A former senior loyalty executive with extensive knowledge of United’s MileagePlus program told me that their elimination of award charts was “the day United died.” While Delta has been able to get away with devaluations, United’s devaluations have shown up in negative financial performance in its 10-Ks.
American Airlines has been taking the right approach – making miles more useful with revenue-based options alongside and as an add-on to traditional award charts. There’s no reason whatsoever to drop flight reward charts in order to allow for mileage redemption against fees or for ancillary services. But a free checked bag or an extra legroom seat as a reward for miles aren’t going to drive lifetime loyalty the way a honeymoon or special anniversary trip in business class will.
Sadly the pressure of watching peers go a different direction, combined with $10 billion in debt against the program, creates an urgency to show constantly improving financials. This will be a short-term play and a long-term drag on the program itself as well as its members.
Airline frequent flyer programs are the most successful marketing innovation in history, because they capture member imagination and offer the possibility of experiencing travel customers wouldn’t otherwise be able to afford.
Pursuing non-transparent pricing – and ultimately average value per point – is a strategy for destroying the leverage in the programs that drives their success. A straight rebate (even when designed opaquely) puts a program on par with the sandwich shop punch card and at a disadvantage to cash that earns at a higher rate, earns a rate of return when you hold it, and carries less devaluation risk (current inflation alarm bells notwithstanding).
@ Gary — I guess AA will rollout a 100,00+ mile credit card offer next week, and every blogger will shower them with praise. Glad they gave warning BEFORE we credited a single flight to AA in 2021. It is time to rethink whether our OW flights should all be credited to AS instead.
Remember the IHG bloodbath, followed by the huge increase in their credit card offer a month or two ago? Now, IHG has jacked their award prices right back up and surprise, surprise, no bloggers are complaining anymore. It works every time.
The question that follows is NOT meant to be “snarky” in any way. Is there any way you can leverage your reputation as a subject matter expert to snag a follow-up interview with Rick Elieson and get him “on the record” if your critique of TPG’s interview as being “…full of softballs… which give him a pass is valid? This is disappointing news from AA; not unexpected, just very disheartening.
Big mistake if AA makes current “saver” pricing availability less frequent for long haul lie flat premium cabin travel. That’s the carrot that holds the disproportionate spending and engagement up.
Very well put, Gary. Agree with your overlook. American will lose a lot in the short and long run, not only within itself, but with domestic and international partners.
They need to keep chart as an advantage to get ahead of growing competition. Would be dumb to destroy the golden egg worth 10 billion doillars.
It’s time to call devaluations exactly what they are: THEFT. Devalue the executive salaries and throw the bastards in jail.
Only 180k miles to go to be mile free at last. I’ll take the cash CC offers as I can make money on cash.
Trying to salvage my BDay RTW I reserved AA 1st (swivel seat 😉 ) for next month for 114,500 miles. Just checked on BA – no availability for needed date and high surcharge so pretty much stuck – but with only the $5.60 tax fee Same flight I’ve resv has availability now for over 300,000 miles 🙁
The game becomes less interesting.
When I flew extensively as a corporate jock, it was between the late 1970s through the 1980s, when mileage programs offered real value and the planes even in coach were comfortable.
Today, I refuse to chase the latest credit card deal and do not book flights based upon any loyalty towards accruing mileage. For example, despite starting my flying on AA 707 AstroJet between ORD-IDL in 1959, when I had to fly to NYC in 2019, I turned to Delta, knowing they still provided a competent meal service and offered comfortable F seats.
Exasperated with experiencing problems on every Iberia flight between MAD-ORD, I will switch back to Lufthansa ORD-FRA, and connect there to MAD. Even Lufthansa’s domestic B service is far better than Iberia’s trans Atlantic.
Collecting miles is just not worth the the game of chasing your tale in a circle.
AA’s offer to make EXP easier to maintain through 2022 (bonus EQDs) will keep me loyal one more year. I’d already been thinking my flying, all leisure, would go to best price, most convenient, and miles redemption, but the offer will make achieving EXP relatively painless. I can’t imagine not having access to the full calendar award chart though, and its loss will make AA much less valuable to me.
And the devaluation of the AAviator Silver makes it likely I’ll save the $900 I spend on the two “elite” AA credit cards and put it to use to purchase the best seat I can (with Chase Sapphire Reserve of course).
I’ve got lifetime oneworld Sapphire status–time to look to AS?
Ironically, it’s these loyalty-rewards shenanigans that are leading to a decreased loyalty among consumers, who were increasingly accumulating transferrable points rather than airline-specific or hotel-specific points even before Covid. As all the airlines and hotels work in lockstep to devalue their loyalty rewards every year or so, even the flexible currencies will lose their luster, as fewer and fewer of the transfer options will offer any outsized value. The next logical step is for more consumers to wash their hands of it all and instead focus on a respectable cashback options or still collect the flexible points but primarily with an eye toward their cash-out value. Cash, after all, can be used for any airline or hotel and the inflation rate on cash (even now) is substantially lower than that of the main loyalty points.
The real kicker with this specific report is that it’s American decreasing the value of their points. While Delta has devalued their points to near worthlessness in the past decade, at least their product is a little better now than 10 years ago (or at least roughly the same), while American’s unyielding densification and Oasis fiasco ensures that nearly every seat on their planes is worse than it was a decade ago, both in premium and economy classes. For this reason, as travel resumes, for the next several years I’ll be burning through all the airline and hotel points I’ve accumulated for decades and will never look back. If I accumulate more miles through flights or some other bonus, fine, but I no longer will be going out of my way to accumulate any company’s points and will not longer have any reason to keep their co-branded credit cards. My loyalty will reside with no particular company but rather with whoever has the best product at the best price.
If the AmEx Schwab Platinum program is about to be devalued or even eliminated, as some recent reports have suggested, then it’s time to start putting most spending on a simple Citi Double Cash card or something similar.
You just knew when certain airlines mortgaged their FF Programs something was going to happen and now the wraps are coming off as you stated its not good. It’s too bad we can’t boycott the programs for a period of time that would put their leverage in a tailspin ( no pun) plus the banks would not be too happy.
No Parker is the regeneration of “Tricky Dick” Anderson Amtrak was smart they dumped him.
Gary – as much as you whine and the few people on here express outrage it won’t change anything. Award charts are history. AA is last major airline in US to have one and, even w an award chart, you frequently saw awards that were well beyond the chart (especially international flights).
They will have web specials. If you don’t like it pick another airline (oh yeah they are ALL doing this)
As for the comment on it being “theft”. Nope they can change the terms at their sole discretion. You don’t think all the big sign up bonuses and points/miles sitting in accounts due to COVID wouldn’t matter?! It is business and supply/demand. CNBC had an article this week saying use all your points/miles now as there will be major devaluation if, for no other reason, the liability carried on the balance sheets.
I frankly liked the programs better in the 80s and 90s when they focused on actually rewarding flying. As for devaluations anyone else remember DL have 1000 mile credit minimum on every segment and the days of triple point promotions.
@Gary – I guess I’m missing something here but if American owes 10 billion dollars against AAdvantage, what good could come from making the asset worth less?
Your article is rife with spelling and grammar errors.
@B – really? We can argue over comma usage but if you’ve got a specific beef feel free to call it out specifically…
@Christian – I’m suggesting they’ll be under pressure to drive increases in EBITDA to justify the valuations and they’ll make short-sighted ill-conceived moves in doing so
I stop being loyal to one airline many years ago as miles are almost worthless today. Hard to redeem on the saver level and airfares are extremely cheap these days. I can get a fare to Europe for less $500 almost anytime. Why beat yourself up trying to collect miles for a seat you can’t redeem.
@AC is right and people will be less loyal to AA. I just liquidated my advantage account on two Q-suites bookings I’ve been looking at for next year.
I fly 75-90k miles per year (mostly J) on crappy Oasis/Kodiak configured aircraft so I can take the wife to Europe for 57.5k miles a pop. If I don’t have that incentive anymore, Salt Lake or Houston is just as easy to transit as DFW.
Sorry to all those with huge balances (but it’s own damn fault). May your AA miles Rest In Peace [as part of a 540k J mileage redemption on AA to Europe]…
Looks like the golden days of chasing points is in its twilight. 150k points these days doesnt even get you a second mini bottle of water.
They’ve even made having a cobranded card not worth the $$$.
Fun while it lasted.
At least Doug Parker is woke and supports BLM. That’s all that matters, really.
Will the next devaluation be elimination of 1.5 cents per point for Chase Sapphire Reserve redemptions?
This is going to gut the long-term program value. Fortunately, none of the execs currently at AA will be there by the time that collection happens. Keep pushing those Aviator cards, FAs!
More directly, my condolences to all in this blogging industry. It’s eventually going to be hard to manage card signups in the face of long-term value erosion. (Even the banks are on borrowed time, since Delta owns so many of the actual programs.)
Gary, you should start advertising Fidelity 2% cash-back cards and Citi Double Cash directly. Get ahead of the pack.
Once they get rid of award charts it will be easier for American to charge 50,000 miles one way for a domestic coach ticket previously 12;500 or
500,000 miles one way in business class Down Under not they aren’t already
I stopped buying miles 3 years ago after the program got insanely greedy
They basically became a Delta Sky pesos wannabe
It worked I’m using up my miles and I’m gone
It’s a great business model charge whatever you want when you want and hope the customer sucks it up
AAdvantage is the only good thing about AA compared to DL UA AS. It is insane that they want to go this route. Do they seriously think they match the service, quality or network of competitors? They need aadvantage loyalty.
I’ve said this for years now but there is no reason for anyone to pay annual fees or use airline credit cards anymore. Use Chase UR and Amex cards instead and cancel your airline cards. Calling today to cancel another AA card .
I don’t even bother to worry about EQM anymore. Just pick flights based on price, schedule and amenities. Loyalty is dead.
The abolition of award charts per se is neither a devaluation nor a revaluation.
The primary effect of eliminating award charts is to make redemptions more closely aligned with (cash) ticket prices. It reduces cases in which you would get excess value and reduces cases in which you would get poor value.
Essentially, what the elimination of charts does is to pin down the value of a mile or point more tightly.
In other words, the variance of the redemption value you’re getting falls. But the expected redemption value need not fall! Sure, it could. But at the same time, it’s entirely possible to design a system without published award charts in which the expected redemption value if higher than before.
Just another sign that airline programs are not great places to store rebate currency from purchase-related activity. And for earning rebate currency from non-airline activity, there are usually better places for me to store rebate currency than some untrustworthy airline program that has every semblance of having no fiduciary duty to its account holders’ collection of deposited (rebate) currency.
With credit cards out there effectively offering 2-6% cash back on purchases at times, more consumers should abandon putting so many purchases on the airline credit cards.
The primary purpose and effect of airline’s elimination of award charts is to increase cases in which consumers get poor(we) value from redemption of the rebate currency that are these miles.
Correction: ***“poor(er) value from redemption”***
.. and just like I predicted. When the pandemic loosened, all the “We value you.. please fly..” would end and it would go back not only to business as usual, but worse.
The fees will return, just like the middle seats have, and we go back to being screwed.
I don’t own an AA branded card anymore nor would I ever get one again. I have 700k miles left to burn through AA and then I’m done.
People are slowly learning that chasing miles, via credit cards or flights, is fools gold. Those 50K – 80K signup bonuses amount to a pittance in today’smiles. I dumped my UA and AA cards sometime back. The old days are gone and they ain’t coming back.
It’s across the board thievery. You see some of the UA points for Europe next year ? Savers at 155,000? Joke. AA doing pretty much the same right now. So it will only get worse. Really Disloyalty Programs.
And as they devalue the miles by raising the cost of award travel in miles, watch the credit card “sign-up bonus” thing become ever more gimmicky with six figure “sign up” promotions. Anyone’s guess about which year it will be when we see a 200,000 AA credit card “sign up” bonus?
This is another shear disappointment. When I first signed up to use AAdvantage Card it stated the initial award points are enough for an International flight or 2 domestic flights. But in reality, it’s barely for a short distance domestic flights. Looks like AA is going to further devalue the AAdvantage card benefits, as a consumer, I am not pleased but as long as they keep everything transparent, I will give them the credit being on the open. Not to disclose the changes of benefits is not acceptable. If that happens, I will not stay with AA
American is not a transportation company and hasn’t been for quite a long time now. They are a sales and marketing company that doesn’t want you to know what you are paying either with points or dollars and they certainly have no interest in publishing anything like an awards chart as this article so clearly lays out. In trying to book a flight to Hawai’i within about a weeks range I found 44 different prices (minimum difference $1 maximum difference $2,022…all with the same origin and destination). I also got six or eight different points options plus the even more elusive systemwide upgrade. AA could care less if you get where you are going. They only care if they can sell you the promise of maybe getting somewhere close sometime during the day you wanted to go. Ask the CEO which he hears about first…a 10 minute outage on their sales web or a plane to Paris that is 12 hours late. Duh. AA is, quite simply, the worst airline you can buy from (and the worst you can fly if they actually do go someplace). We shouldn’t be surprised.
So many great points, and interesting opinions. AA took a horrible dive when the merger took place and they adopted the absolutely atrocious culture of US Air. Customer service has declined to the point they have become a nasty group of ticket agents and gate agents (not all, but many)…
My wife and I got comp upgrades recently on an RJ flight from Tampa to DC & return… GREAT news, right? Well, among the worst flights in terms of cabin crew I have EVER had… Cabin crew could hardly be bothered, and were in fact quite pissy when we asked for water and club soda.
I’m an AA “Platinum for life” with 2M domestic miles, but AA is becoming my last choice. Unfortunately, Jet Blue and their partnership with AA has started to make them less pleasant too.
My wife booked just an AA flight, which apparently was operated by JB and she could not even book seats for herself… So, she had to cancel the AA flight and book JB directly, so she could book seats and pay for the bigger seats.
As a long time loyalist, it is so sad to see AA become such a crappy company… Recently I dropped my AA Platinum Exec card, as their clubs become more dumpy, dated, and dirty. And I am now dropping my AA Citi Cash Card too… Chase card(s) are where I’m headed.
Parker is a greedy criminal. he does not deserve to hold the CEO position. He has made one blunder after another, and AA’s lagging stock price is proof. If anyone on the Board had balls, they would fire him and try to rebuild. Ellison is a mouthpiece, period. As Vijay commented: Oh, but
“At least Doug Parker is woke and supports BLM. That’s all that matters, really.” Yes, pander to your baggage handlers and the woke millenials, and destroy the company. AA has been in terminal decline for many years, if we had a real recession is would go under. P.S. I am stuck in Dallas, and Alaska does not go to the places I travel.
I’m with Marty. As soon as my current 500k balance is gone, so am I. I will certainly let Citibank know that they will be losing my $250k in purchases to another bank.
They just lost me and from now on booking flights will be a straight cost comparison
I tried all day yesterday to book a partner ticket using AA miles. I tried directly with Alaska who told me to go to AA. At AA I kept getting 503 Error messages. I went to one world which took me back to Alaska’s booking site which did not connect to AAdvantage miles. While I was doing this the ticket doubled in cost from $221 to $447 for a one way thousand mile flight paid for with cash instead of miles. I made a mistake accumulating all my Alaska miles on the AA Plan.
I have also had this issue with hotel rooms that I was trying to book. I would find a room that I wanted to compare with another hotel, but when I came back to the original to book the room, the price was greatly increased. I have now learned to book the room, and then cancel it later if I change my mind. Unfortunately, you can’t do that with an airline due to the change fee issue.
2002FordSD,
What AA has done is very bad for the company and company’s future! In my opinion as a business owner the Upper Management to include the CEO, CFO, & so on have been lacking leadership. As I believe one person said “they are going to kill the goose that lays the golden eggs” and is so true. With Doug Parker getting into the Social & Political arena he needs to focus on proven and true business practices. Which in my opinion is have all employees well dressed & groomed, do their jobs with pride & integrity, Safety Priority One, in other words run AA as a business, if you say you are not going to cut AA Reward Program then don’t cut, & be loyal to customers. If done AA will be back in the Black soon enough. As a business owner I have found that doing those things makes or breaks your company, customer still remember what bad service they received from the competition and call my company back to do the work.