This is already being much discussed elsewhere, but American has imposed a $5 fee for website award bookings.

The old argument was that reservation centers were more costly than web, an airline wanted to (a) push its reservations online to lower costs and (b) charge a fee for the ‘extra’ service of having a person handle the booking.

Now, even the cheaper online booking will come at a fee. Why? Because they’re looking for revenue sources, and because they can. Online booking is still cheaper than booking by phone, and American has a captive market to some extent amongst AAdvantage members looking to redeem their miles. With millions of awards redeemed annually, multiply those out by $5 and they’re predicting serious revenue.

Of course, AAdvantage members aren’t really captive at least in terms of their future earning choices, there are plenty of other mileage programs out there to choose from. Of course American’s bet is that the whole point of mileage rewards programs is to make consumer choice to some extent inelastic, and thus they believe a ‘modest’ $5 fee won’t drive members away to competitors that don’t charge such a fee (and there’s some change of course that other programs will follow American’s lead here).

Back in January I predicted that airlines would eventually pass on fuel surcharges like their European counterparts do. This doesn’t go that far but I do expect it’s a baby step in that direction. If this fee is passed on without much commotion or consequence, it will make perfectly good sense to add on additional fees. Somehow the old parable about how to boil a lobster seems to apply here.

An award redemption fee really does smack right at the heart of the very idea of using miles for a free ticket. What’s more, they’re imposing the fee at the very same time they’re also announcing increases in mileage award levels. Premium cabins to Europe, Asia and South America get (incrementally) more expensive. Several “AAnytime” awards get more expensive. Although in fairness the changes hardly represent a bloodbath. Of course it’s only been a few years since the last major set of changes.

Poor showing, American.