With the merger between US Airways and American Airlines, the two carriers are in the midst of working through their differences and figuring out the policies and procedures that will prevail when the two airlines actually combine into one.
We don’t know for sure when that will happen. I’m still betting it’s about two months into 2015, but there’s real risk that if the airlines aren’t ready that there will be an operational disaster — Delta and Northwest’s combination wasn’t smooth but it was much better than US Airways/America West (everyone was told to check-in online when the airlines combined, but even the website and kiosks didn’t work). And both were better than the disaster of United-Continental with missing reservations, missing miles, and hours-long telephone hold times.
Nonetheless, one of the major issues to be determined of interest to elite frequent flyers is how domestic upgrades will work.
(International upgrades is another important issue, and I don’t think American will become less generous than United or a newly-invigorated Delta there, although specifics very much to be determined).
How Domestic Upgrades Work at Each Airline Now
Seats that the airlines don’t expect to be sold are released as upgrades to elite frequent flyers.
Those seats which aren’t taken by any elite, or at least aren’t expected to be taken by an elite, are made available as a buy up offer to non-elites for cash. This is done at check-in generally.
The major difference between the two airlines is that US Airways offers ‘unlimited complimentary upgrades’ to all of its elites. If an elite member qualifies for an upgrade, they get it, free.
At American, Executive Platinum members get unlimited complimentary upgrades.
But lower tier elites – Golds and Platinums – have to pay for their upgrades with 500 mile e-certificates.
Those e-certificates are earned at a rate of 2000 miles (four 500 mile certificates) per 10,000 miles flown. Additional certificates beyond the free earned ones can be purchased.
Executive Platinums do not get free upgrades for their companions. If an Executive Platinum upgrades a companion, they have to support that upgrade with a 500 mile upgrade certificate. And they do not earn those from their flying, so they have to buy them (unless they have any accrued from when they were a lower-tier elite).
Why Might the Combined Airline Go With the American Paid Domestic Upgrade Model?
To be sure, I do not think that the airline will adopt this model.
But the argument is that they simply raise a material amount of revenue through the sale of upgrades, and they’ll be loathe to walk away from revenue.
This is doubly so after the merger, US Airways management is careful and doesn’t like spending money that they cannot show a clear connection to increased revenue from. Giving up this revenue stream would be anathema to them.
Why I Believe the Combined Airline Will Go With the US Airways Complimentary Upgrade Model
US Airways accountants may look at the revenue and want to hold onto it, but US Airways accountants have for years signed off on the unlimited complimentary upgrade system.
While American executives remain in charge of the mileage program, when placing bets on what the airline will do next it’s a reasonable (better than 50-50) choice to go with the US Airways method.
Taking away unlimited complimentary upgrades from US Airways elites would be a big blow, at least psychologically. Being asked to pay for something they used to get stings.
In addition, United and Delta offer unlimited complimentary upgrades (American’s method used to be the norm but is ‘so 1990s’). So adding a cost to elite frequent flyers that competitors don’t charge could be the push that sends some out the door.
Plus I suspect that revenue from sticker sales may have been on the decline over the past year anyway. Cabins are full up front and even Executive Platinums anecdotally are having a harder time with upgrades as American has made moves to better monetize the cabin through cheaper first class fares.
Because it’s “what US Airways does,” because their elites have capitalized that benefit, and because it’s the industry standard I’d bet that the combined airline will go with unlimited complimentary upgrades.
Why I Don’t Want to See Unlimited Complimentary Upgrades at American
The sale of stickers, combined with upgrade co-pays that do not exempt elite frequent flyers even domestically, mean that American earns a revenue premium on their first class cabin entirely apart from corporate sales and instant upgrade fares.
When Alaska Airlines considered eliminating its first class cabin, they were potentially willing to risk elites flocking away if they couldn’t find ways to better monetize those seats. They implemented fare restrictions on mileage upgrades among other changes to justify the cabin.
A more profitable first class cabin also supports a better first class product. I like American’s domestic first class far more than US Airways’. A snack basket is not a meal. I like hot towels and mints. And flight attendants who hang your coats (although I do wish they were more consistent with predeparture beverages).
Not that I like everything American has ever served in first class, of course!
Although I am a sucker for their ice cream sundae!
What’s more, I believe mid-tier and entry-level elites are better off without unlimited complimentary upgrades.
When every passenger gets free upgrades, every passenger is requesting them every time (almost).
That means elites who want to upgrade have to compete against every other elite every time.
In contrast, when elites are rationing their upgrades and have to pick and choose when to request them, they are competing against other elites doing the same thing. You don’t request upgrades every time, you don’t compete against every elite when you do, and when you choose to request the upgrade you have a better chance of getting it.
Unlimited complimentary upgrades reduce upgrade percentages for those bottom and mid-tier elites.
I like a system where we request an upgrade when we care most and have a better chance of getting the upgrade when we actually want it. Upgrade stickers serve to ration upgrades to customers who care about them most on a given flight.
I also worry that if revenue is given up in the domestic upgrade program, that revenue needs to come from somewhere.
- at best it comes from something else the program would have invested in
- at worst it means givebacks from elsewhere to compensate for the lost revenue. (Although I’d hope that April 8 constituted those givebacks already.)
I believe American will go with complimentary unlimited domestic upgrades for all elites. I think that on the whole that will be popular, but that it won’t be a good thing for those who get the upgrade (likely degraded product over time), for Golds and Platinums (who will see their upgrade percentage go down), and for elite members as a whole (who may see less investment elsewhere in the program to compensate).