About two months ago — shortly after United eliminated published award charts — I wrote that you should expect American Airlines to begin dynamically pricing awards rather than only offering award prices sticking to a published chart.
And later in April, in fact, I showed that American is already dynamically pricing awards side-by-side with regular awards. And just over a week ago American introduced discounted AAnytime business class awards between the US and Europe.
While eliminating award charts presents a real problem for frequent flyer programs and their ability to drive customer loyalty (crucial to keep earning billions in revenue from bank partners), there’s a real issue that airlines are also trying to solve for members.
Saver awards have historically been available for seats that would otherwise go unsold, while also limited to make sure customers aren’t choosing to redeem miles rather than spending cash for tickets. With load factors at historic highs it’s difficult for airlines to deliver saver awards.
American has taken many steps to make awards, especially economy awards, more available to members. They’ve increased the allowable connection time on a valid award and they’ve assigned fare values to awards, allowing the program to buy more seats from the airline. That’s led to lower value per mile redemptions than what many members expect, but greater availability at other than the highest award prices. (It’s also made it much harder to change award tickets.)
I don’t recall American publicly acknowledging this before. Yet speaking today at the Bernstein 35th Annual Strategic Decisions Conference, American’s Senior Vice President of Revenue Management Don Casey said dynamic pricing of awards is a strategy they’re using to drive higher revenue from the loyalty program. More mileage redemptions means recognizing more deferred revenue, and redemptions at a higher mileage price does too.
This shouldn’t be surprising or controversial to regular readers, but it’s still notable to see acknowledged. Ultimately since my goal with AAdvantage miles is to redeem for premium cabin award travel on partner airlines, this has only limited effect on my redemptions — for now.
Update: The Points Guy notes that I tweeted Don Casey’s comments about dynamic redemption and suggests “American Airlines will move to a dynamic award chart” and that this represents “shifting from a fixed chart to a dynamic one.”
That’s not necessarily the case, award charts and dynamic award pricing can co-exist and in fact coexists already at American today.