American Airlines Rolling Out a Bunch Of (Semi) Expected Changes

American Airlines is making a bunch of changes today that frequent (and infrequent) travelers need to know about.  Nothing being announced is terribly surprising, though most is disappointing.  First, the announcements, then some detail on each:

• American Airlines will officially make the move to revenue-based earning on August 1st, 2016.
• They will add a 75,000 mile elite level in 2017, called Platinum Pro.  This level will receive unlimited complimentary domestic upgrades on American Airlines, similar to the Executive Platinum level (though with the a lower clearing priority).
• American will introduce a spending requirement for elite status (12 cents per mile flown in the aggregate).
• Domestic upgrade priority will change.  The tiebreaker for upgrades in a status category will be the amount of revenue spent within the trailing 12 months.
• Executive Platinum members will get free domestic upgrades on award tickets, subject to availability.

Revenue-Based Earning:

No big surprises here.  This might be a bit earlier than we expected based on recent news.  But, if we look back to last year when they made the announcement that this was coming, I would have expected it mid-year.  American is copying the formula Delta and United have already adopted.  Going forward, travelers will earn miles based on how much money they spend on tickets, not how far they fly.

Adding A 75K Level:

Again, not a big surprise.  I’m actually a bit surprised they didn’t add this when they started making changes a couple of years ago.  US Airways used to have a 75K level before the merge, so this matches what they previously did.  This also matches what United and Delta have in place.  This is mostly a positive change in that it gives folks a chance to achieve a bit higher status level if they’re above 50K but can’t get all the way to 100K in a given year and also gives them complimentary domestic upgrades as opposed to having to burn 500-mile upgrades.

There are a couple of negative aspects here.  First, the complimentary upgrade policy will hurt Executive Platinum members.  Executive Platinum members will clear upgrades before anyone else, but we need to look at an airline like United to understand the downside here.  On United, all elite  members get complimentary upgrades on all domestic flights.  With the upgrade list prioritized on monitors behind each gate, it’s not uncommon to see 50 people or more on that list.

My upgrade percentage as a United 1K hovered in the 60-70% range for 3 or 4 years while my upgrade percentage as an American Airlines EXP was never lower than 95% in any given year and usually closer to 100%.  That’s due, in part, to the fact that all elite members on American don’t qualify for unlimited free upgrades.  They need to budget when they want to use the certificates they earn, or purchase more.

By adding 75K mile Platinum Pro fliers to the list of people who receive unlimited upgrades, it will make it harder for EXPs to change flights at the last-minute and still get an upgrade.  This is one of the biggest areas where I lose out on United.  I’m frequently changing plans close to departure due to the various business needs.  Rarely can I do that on United and still score an upgrade.  It’s another reason why I used to like American Airlines’ policy that required everyone to pay a fee to confirm a same-day change, even EXPs. The less people who can change/upgrade for free, the more likely it is that as an EXP I can enjoy a high upgrade percentage.

While there are some folks who have significantly lower upgrade percentages than me on AA, the majority of travelers I run into enjoy the same high confirmation rate I do.

Spending Requirement For Elite Status:

American is copying United and Delta on the spending requirements for elite status (see a pattern forming here?).  Going forward, not only will you need to fly a certain amount of miles, but you’ll also need to spend a certain amount to hit elite status.  Here’s how it will look:

To be clear, this is an “AND” requirement, not an “OR” requirement.  You’ll still need to meet the minimum number of miles or segments for each elite level and meet the spending requirements of that level.  For example, if you earned 100,000 EQMs on American but only spent $10,000, you’d qualify for the Platinum Pro tier.

Changes To Domestic Upgrade Priority:

American Airlines will now prioritize upgrades within status levels based on how much money you’ve spent with the airline over the trailing 12 months.  To my knowledge, this is not something either United or Delta has attempted.

While I view this change as somewhat benign, I’m not a huge fan of this change for a couple of reasons.  First, I think transparency is a beautiful thing. Customers should know what to expect and where they stand on an upgrade list.  People will be hard-pressed to figure out where they fit in a specific tier from a spending standpoint as it compares to others, which could lead to some feeling like they missed an upgrade they thought they were entitled to.  I prefer this to using time of request as a tiebreaker, since I generally purchase/change tickets much closer to my day of travel than most folks.

This also penalizes lifetime elites when their travel slows down.  For someone like my father, a lifetime AA Plat who only travels for leisure now, he’s unlikely to ever be at the top of the heap in his status category when it comes to spending.  The promise of lifetime status is that you’ve earned that status level for life.  While that’s still what they’re delivering, changes like this do chip away at the value of that elite status.

Upgrades On Award Tickets For Executive Platinum Members:

Boy, if ever there was a loaded sentence from their press release:

Executive Platinum members will be able to use their complimentary 500-mile upgrade benefits on AAdvantage award tickets for travel on American from Main Cabin to the next class

So, this is absolutely a positive, we’re just not sure how much.  It’s unclear whether this will hold for companions or just for EXPs.  And “to the next class” can be interpreted a bunch of different ways.  This is only in markets where you can use 500-mile upgrades, so no overseas travel.  I could interpret the verbiage to be couching for the fact that flights to Canada sell the front of the cabin as “business class” instead of “first class”. Or, it could have something to do with the roll-out of premium economy, in that an EXP would clear into premium economy, not business or first.  We’ll just have to wait and see.

Reading over details at View From The Wing, it seems that this will extend to companions, though I’m not sure how many at this point (my bet is 1).  And, we don’t get this for quite some time.

Where Does That Leave Us?

There’s really not much here that’s “news”.  The Big 3 continue to play a “me too” game where they very closely match each other on the various benefits and rules of elite status.

The silver lining of changes like spending requirement for elite status is that it should thin out the ranks of elites somewhat.  That appears to have happened a bit on United since they went that route though the upgrade lists are still quite bloated.  The hope here for elites is that the addition of a spending requirement negates the number of people added to the upgrade list for free with the Platinum Pro tier and the folks who received status via the various status match offers that American has been featuring.

But, Does This Encourage Customers To Travel More Or To Stay Loyal With One Airline?

It’s hard to say unequivocally, but I’m not sure these changes create more reasons for customers to be loyal.  They may generate more income, but that’s not the same thing.  And, they may not generate more income than under the current system.

There’s been no indication that American is going to introduce something similar to Delta’s rollover process for elite-qualifying miles.  Given that, there isn’t much incentive for me to fly American Airlines once I hit Executive Platinum each year.  The same could be said for folks who hit a lower tier and know they’ll never get to the next tier.

Under the new program, I can earn more systemwide upgrades (SWUs) if I earn a bunch more EQMs on AA.  And, if I lived in DFW or another major AA hub, I’d have the incentive to fly them because they have the best schedule.

That’s never been the case for me living at IAD.  The merger with US Airways gave me access to Charlotte flights, but the only other places I can go are DFW, Miami and LAX.  But, if I’m flying to Denver, United operates a whole host of nonstop flights that get me back to my family quicker, a huge priority for me.

The value proposition for me at AA was the elite program.  More valuable SWUs, and more of them.  A more generous earning program, and also easier for me to earn elite status than on United or Delta.  When elite status benefits are virtually the same, loyal customers like myself will make decisions based on other factors:

• Customer Service
• Route Network
• Price
• Flight Times

It’s interesting that customer service is the first thing that came to my mind.  I feel like that’s something AA has excelled at since I’ve been an EXP.  I have seen the overall service on the EXP desk drop a notch since the merger, both in more and longer wait times occasionally and in the overall helpfulness of some agents. Still, I would generally score them much higher than United’s 1K or Platinum customer service agents.

I believe the other 3 factors I list will be much more important for customers making these decisions in the future.  When faced with all the similarity of programs, flight times and price are likely to dictate purchasing decisions, especially when combined with the introduction of basic economy amongst all of the Big 3.  Nonstop flights and price already drive many decisions.  United seems to price the nonstop routes they don’t have competition on at a significant premium to their peers.  On connecting routes where total flight times are similar, price remains one of the few true differentiators.

I truly believe the airlines believe they can get customers to choose based on things like seat comfort or meal choice in first class, or for ground amenities like lounges.  I think they’re dead wrong for all infrequent fliers and for most frequent fliers.  It’s possible they’re right for a very small percentage of big spenders, but a lot of those travelers are choosing the best routing for expensive business class tickets to get overseas.  Few are basing those decisions on the quality of a lounge.  American trails United and Delta in outfitting their planes with lie-flat seats in international business class configurations, so they have to hope to win on route network and, to a lesser degree, price. Once everyone has lie-flat seats, I don’t think the size of a television or the quality of an in-flight meal will sway many decisions.

The airlines may ultimately be proven “right” on these latest changes, continuing to grow profits.  They may have shrunk/merged to the point that reduced competition reduces the time and effort required by the airlines to create loyal customers.  Time will tell, but I suspect there will be less focus on how to engender loyalty from their members.  Airlines are betting you’ll spend more to get more while reducing what “more” means.

I’m still a fan of American Airlines.  But, the move to be more like their peers from a loyalty perspective is likely to make me less loyal in the future.

How about you?

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