American Airlines 25% Off Coupons Could Tell Us Whether Price Cuts Can Lead Travel’s Recovery

Alaska Airlines has been perhaps the most aggressive airline using promotions to discount travel and generate sales, with fairly frequent ‘buy one get one’ offers and 10% discount codes.

American Airlines is doing something different. They are targeting discounts to try to drive incremental business. They ran a targeted promotion with discounts some months ago, and now are sending out 25% off codes to some members, including for premium cabin travel (purchase by February 20 for travel by May).

25% Off To Drive Revenue They Wouldn’t Otherwise Have Gotten

The goal of course is to generate revenue for the airline in a time of uncertainty. From a customer’s standpoint if they think they’ll take a trip it could drive them to book it, and airline change fees are in most not relevant – so if plans change, worst case you wind up with an airline credit to use in the future.

American has been aggressive seeking to generate revenue through ticket sales, even where flights themselves are uncertainty, appearing to make schedule changes closer-in than rivals.

Can Discounting Drive Airline Revenue Now?

25% off is a big discount (though less than the implied discount on Alaska ‘buy one get ones’), but will it spur travel that wouldn’t have otherwise happened – or just encourage someone who would have purchased a ticket anyway to buy the same ticket for less? That’s the magic question that determines whether discounting makes sense.

  • If the major constraint on travel isn’t price, but uncertainty about where you can go, what you can do when you get there, whether those restrictions will even remain the same between the time of booking and actual travel and concern about health then discounts might not matter much. Back in late March even $13 cross country flights couldn’t fill planes.

  • On the other hand most travel now is leisure travel and that’s generally highly price-sensitive. Lower prices stimulate demand, at least to places people want to go (e.g. warm weather beach destinations, skiing, resorts).

A targeted discount helps answer the question does discounting drive incremental ticket purchases? You have a test group (receiving the discount) and can identify a control group out of the rest of your customers and compare the results.

It’s harder to answer answer the question whether discounting drives incremental travel, rather than just driving share shift (discounts luring customers away from competitors) although you can take a stab at that based on looking at the results targeting elite members of your frequent flyer program versus general members, customers in hubs, and relative performance on already competitive routes to give a few examples.

If we see American continue the practice, that will be a good sign that at least price can stimulate demand.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. United sent me an offer to upgrade to 2021 Platinum status for about $2000. I got gold status in 2020 for 2021 mostly through Chase MP purchases plus 4 trips. The offer includes the Plus Points, but few places to use them in 2021. I personally think their 2xPQP up to $1500 offer is a better deal, as it gets 2021 and 2022 Platinum status for $4500 in ticket purchases, with a conceivable path to 1K. The big problem is that there are so few places to go with a $1500 ticket price. Sure, one could buy Y tickets, but why? Hawaii in Z meets the criteria, but how any times can one visit Hawaii in 3 months. Still, it’s an interesting approach to sell higher value tickets. It doesn’t help fill the back of the plane, but may allow selling cheaper tickets in the back.

  2. I would happily pay 25% more to fly on just about any other airline. AA’s service (IE: The complete lack thereof), FA attitude problems, and idiotic policies are just so bad even at a quarter discount, it’s just not worth flying with possibly the worst airline in US history.

  3. May is too soon for my travel needs but it seems like a good promo. I got a coupon in snail mail for this type of offer but my next plane travel will be more like July or August.

  4. There are many Americans who want to travel NOW. This weekend, the airlines have seen traffic levels similar to last Thanksgiving, easily breaking a million pax a day. In a few weeks, a million daily pax will be the floor, unless we see some unusual setback with the virus. I’m expecting a VERY busy domestic summer travel season. Int’l is the wildcard because everyone thinks (foolishly) that there’s some great scientific benefit to keeping your borders closed now. Given the free changes being offered by the airlines, I think it’s better to buy your tickets sooner rather than later if you want to fly cheaply this year.

  5. They could drop the price to 100% off and we still would not fly. Not worth the risk until after we are vaccinated, and that may be months down the road, especially if a third vaccination is required for new COVID variants.

  6. People have seen how life is back to normal in New Zealand and Australia and are jealous, and how all this travel is hurting our chances of getting back to normal, spreading variants around and extending even further the misery.

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