American Airlines has been selling miles at a base price of 2.95 cents apiece, before taxes, fees, bonuses or discounts. They’ve raised the base price of miles to 3.5 cents, even as the value of miles is lower than it used to be.
I value American miles at 1.3 cents. And back in October American briefly sold miles at 1.36 cents apiece. That was a mistake, but since they’d recently priced miles incorrectly I wondered if the price increase might be an error as well. However American Airlines confirms that the increase is intentional,
[T]he new price before discounts is 3.5 cents per mile. Our programs and offers are subject to reviews, and changes are implemented accordingly to ensure we remain competitive in an ever changing market.
American is currently offering a discount of 35% on the purchase of miles, from this new higher price.
Under the current offer the lowest purchase price is 2.45 cents per mile, which would be insane for most people to take advantage of.
AAdvantage allows annual purchase of 150,000 miles per calendar year, exclusive of bonuses. The airline processes purchase of miles directly, so transactions generally count as airline purchases for credit cards that offer a bonus on those. There’s a 7.5% excise tax on the purchase of miles from a U.S. airline, since those are treated as domestic airfare purchases, though in theory at least if you use your miles for international travel you should be able to get the 7.5% excise tax back.
Ever since US Airways management took over at American, AAdvantage sells miles the way that US Airways used to. Regular price only seems to exist to promote discounts against. Historically they’ve runs a series of discounts (up to 45%) and bonuses (up to 75%) – and sometimes a combination of the two – nearly every month. It’s unclear how the discounts and bonuses might change with a higher base price. Their likely goal is to maximize sales, rather than margins (since they believe they’re selling at a profit even at a penny and a half per mile) so I’d expect them to test even bigger bonuses and discounts.
Just say no to fleecing. This AAirline has its loyalty program customers down as marks to be swindled by the AA Ponzi scheme, and the raising of the price while cutting the value of the points is a sign of how little respect AA has for its loyalty program customers.
Clearly someone is doing Robert De Niro a favor in his attempt to value his miles at 4 cents each.
Profit taking time!
So they are adopting Kohl’s pricing. Triple the average price but hey it’s 50% off. At least Kohl’s cash is easier to use than AA miles these days it seems.
Even more bad news. It appears Business Class between the US and Europe has jumped from a minimum, of 57,500 miles to 65,000 miles. Just hunted through every calendar for every city they fly to across the pond between February through October.
If someone phases sign-up bonuses one per year over four years, a person can earn 60k points per year from the Citi and Barclays personal and business cards (yes, Barclays business is currently on hold). Then you have X miles per year from credit card spend. Then you have Y miles per year from the AA shopping portal. Then you have Z miles per year from flights. Next thing you know, you have a round-trip business class ticket to Europe / Asia / South America every year. And, you didn’t need to buy points. So, don’t buy points. What’s the problem?
Is this the same American that just participated in the sale of its miles at 0.4 cent or roughly 10x less? Is there any doubt that the holiday Mile-O-Rama bonanza was a colossal screw-up, whose damage this move may be designed to limit? Am I missing something? Is this the first shoe to drop as a result of the Mile-O-Rama?
No,
AA has long had plans to fleece the AA loyalty program customers. “Mile-o-Rama” had nothing to do with AA being AA in trying to squeeze lemons out of lemonade too.
Non sequitur. “AA being AA” suggests consistency — in mediocrity? — which selling their miles for $0.004 each one month and then turning around and jacking up the base selling price of their miles nearly 20% the next month is anything but.
At least Mile-O-Rama could potentially explain the inconsistency…
Buying airline miles is fine if you need a couple thousand to finalize a reservation
Outright buying miles is just a fool’s errand
AA and Marriott are run by ghost of PT Barnum