American used to share a ton of information about the financials of the AAdvantage program in their annual 10-K SEC filing. They stopped doing that last year. They no longer tell us how many members there are in the program, how many miles were issued, sold to third parties, and remain outstanding like they did up until two years ago.
Ironically when pressed about the value of the program by an airline analyst who claims it’s worth more than the airline itself American’s CEO Doug Parker said that the airline would be talking up the contribution of AAdvantage to the airline, they certainly haven’t done that in their 10-K.
Nonetheless as a result of their newly filed 2017 SEC 10-K form we know that in the 4 years leading up to the merger, 8.2% – 8.8% of American’s seats were filled by award passengers.
When US Airways management took over that immediately dropped to 5.5% in 2014. They clearly had a different philosophy about availability of award seats. The merger closed at the very end of 2013, and immediately in 2014 award travel on American Airlines dropped.
Although American said they recognized the need for better award availability at Investor and Media Day back in September the percentage of seats filled with mileage customers has been on a downward path over the last 3 years: 6.5% to 6.3% down to 6.1% in 2017. (For 2016 Delta reported 7.9% and United 7.7%.)
American believes that their new coach connecting award availability will turn this around. While hardly an aspirational vision for providing value to members, most people do redeem for coach travel and American’s various hubs create plenty of connecting opportunities.
As a result of the negative picture of award availability painted by their SEC filing, American was pretty forthcoming with some interesting statistics to make the case that — year-over-year comparisons notwithstanding — they’re headed towards “hav[ing] comparable availability to the other big U.S. network airlines.”
American shared a bunch of statistics with me about redemptions during the first month and a half of 2018 versus the same period of January 1 – February 15 in 2017.
- “The percentage of passenger miles flown on award bookings has risen to 6.5 percent through Feb. 15, from 5.9 percent during the same period a year earlier” It’s more but pales in comparison to Southwest’s 13.8% of course.
- “Europe bookings are up 84 percent so far this year (as of Feb. 15) compared to the same period in 2017”
- Hawaii bookings are up 72 percent so far this year (as of Feb. 15) compared to the same period in 2017″
They provided a breakdown of premium and coach awards year-over-year. Here’s Europe awards for December 2016 and January 2017 versus December 2017 and January 2018 where their new approach has taken hold.
What’s interesting is that the new connecting availability is thus far coach-only, yet the needle appears to move somewhat on premium cabin awards.
And while no doubt they’re cherry picking a bit what they share, the percentage of seat miles to and from Hawaii is up from 9.1% in January 2017 to 11.9% in January 2018.
They’ve also increased the number of flight segments being booked on miles from 37,000 per day a year ago to 50,000 per day now. It’s not surprising a new philosophy emphasizing connecting availability will lead to more connecting segments booked.
Perhaps most interestingly this is the first time I can recall their sharing detail on saver versus AAnytime award bookings — saver awards are up from 16,000 segments a day to 31,000 per day, representing 63% of what’s booked (versus 43% a year ago).
To be fair this doesn’t mean that 63% of awards are being booked at the saver level because the average number of segments on a saver award is almost certainly greater than the average number of segments on an AAnytime award (since customers will choose the most direct routing when spending double or triple miles for their choice of flights, while they’ll accept more connections to save miles).
Ultimately while I wish American’s goal were more ambitious than merely doing as much or as little as what United and Delta do, it’s a start, and they believe they’re headed in that direction to hopefully reverse the year-over-year trends that we’ve seen in their 10-Ks since the merger.
This is crucial because AAdvantage contributes billions of dollars to American’s revenue, and the 10-K recognizes that it “faces significant and increasing competition from the loyalty programs offered by other travel companies, as well as from similar loyalty benefits offered by banks and other financial services companies.” They risk killing the golden goose.