The Simple Reason Revenue-Based Mileage Earning Means Fewer Miles Earned
I looked at second quarter revenue per available seat mile, divided by load factor, and came up with an average fare per mile flown for Delta, United, and American. It was meant as a rough back of the envelope to compare to the ~ 20 cents a mile flown you’d have to pay to break even in your mileage earning with the way things work now.
In the simplest version, just know that the basic earning in a revenue-based frequent flyer program has required 20 cents a mile to break even with a mileage-based earning system. And passengers aren’t paying the airlines an average of 20 cents a mile to fly.
Of course, when airlines have switched to revenue-based mileage earning it’s been worse than this — fewer miles award on average, but they’ve also taken the opportunity to diminish the value of the miles you do earn. And that puts the lie to the idea that they’re “rewarding high value customers.” They’re not, they’re only devaluing high value customers less.
How Would American’s Revenue-Based Mileage Earning Work?
Now let’s take a look at what American seems to be moving to a year from now. Here’s the expected points-earning:
Let’s look at what that means in practice. Here’s a list of the 14 lowest fares between New York and Sao Paulo, Brazil published by American Airlines.
This is a good route to look at fares for, since while revenue-based points earning will be based on fare plus surcharges there aren’t any fuel surcharges on Brazil flights.
And let’s assume a roundtrip fare of $950. This isn’t a super expensive roundtrip, but it’s not the cheapest published fare either by a long shot.
- General members see their earning cut in half.
- Golds lose 5000 miles, Platinums lose 11,000 miles.
- Executive Platinums ‘only’ lose 8500 miles.
What we see is that to ‘break even’ with current mileage earning, general members need to spend 20 cents a mile. That’s now standard across the major US airlines.
Golds and Executive Platinums, because of their mileage bonuses which are actually going up (Golds from 25% to 40% and Executive Platinums from 100% to 120%) ‘only’ have to spend 18 cents a mile flown to break even.
While Platinums have to spend 25 cents per mile to break even since American appears to be taking the opportunity to devalue Platinum benefits (mileage bonus dropping from 100% to 60%) at the same time they shift to revenue-based accrual.
It takes a roundtrip fare between New York and Sao Paulo of $1700 – $2400 to earn as many miles as AAdvantage members do now.
Results Vary With Long vs. Short Routes
Now let’s take a look at a longer domestic route, Boston – Los Angeles.
You’ll see that a fairly standard $550 fare is a real loser. It takes fares of $930 – $1300 to break even. I’ve been forced to pay $900 roundtrips for sure, but I don’t do it all the time. And that’s just to come out even.
The 18 to 25 cent per mile break-evens remain the same here. The only time that isn’t true is with flights under 500 miles, since elites now earn 500 mile minimums but those go away under revenue-based accrual.
So let’s see what happens to Boston – New York LaGuardia.
Members come out ahead on short flights. And it doesn’t take an expensive ticket at all to break even. Short expensive flights are where members win. Long, relatively cheap flights are where they lose.
Paid Business Class Travel: Not As Rewarded As You’d Think?
Customers who fly longer flights will tend to do worse than customers who fly shorter ones. That’s because on average they pay fewer cents per mile flown. Of course paid business class will mean more miles as well.
Let’s look at American’s Dallas – Hong Kong route, and assume you buy a $4200 business class roundtrip ticket.
Everyone comes out ahead, but probably by less than you’d think (and in fact, Platinums – members flying 50,000 to 99,999 miles with the airline per year – pretty much just break even).
Update: when I first posted this a few hours ago, I left out the 50% ‘class of service bonus’ from the calculation. So I had to update the chart. It’s worse than it even seemed at first:
It turns out that with revenue-based earn, it’s really the expensive business class fares on shorter flights that come out well. Think New York JFK – London. But that’s a route that frequently sees big mileage bonuses now!
Even If You Earn More Miles, You Probably Still Come Out Behind
You’ll want to understand your own flying patterns. But bear in mind that even if you can think of trips where you’d come out ahead, you actually need to average more than 20 cents a mile spent (18 cents for Golds and Executive Platinums) in order to earn more miles under American’s projected revenue-based earning structure.
And even if you’ll earn more miles a year from now, unless you’re going to earn massively more miles you’re still going to lose. Because AAdvantage miles aren’t going to become worth more. It’s much more likely that they will become worth less. We haven’t seen much change in the AAdvantage saver award chart in years. That’s likely to change.
What’s more, revenue-based points-earning has a built-in need to devalue as long as the program retains award charts. That’s because inflation alone will cause miles earning to eventually exceed what were earned before. In a few years, after we’ve seen 25% cumulative inflation, programs will be earning more miles. They’ll either need to reduce points earned, or increase the cost of awards.
Once you go revenue-based for earn, revenue-based redemptions become the logical conclusion. Because then as you spend more, earn more points, airfares are more expensive and so redemptions are more expensive too.
That’s the theory, anyway. In practice revenue-based redemptions don’t preclude devaluations, as Southwest has shown on multiple occasions, because they can — just as banana republics find it too tempting to devalue, so do airlines.