American Airlines just announced plans to join Alaska Airlines in emphasizing the value of its distance-based loyalty program as competitors United Airlines and Delta Air Lines move to a revenue-based program. The majority of travelers will earn fewer miles with a revenue-based scheme: at 5 miles per dollar, a non-elite passenger would get only 1,500 miles on a $300 transcon fare despite traveling 5,000 miles round-trip. But the top 5-10% of frequent travelers who have top-tier status and pay for first class could earn much more.
So what does an airline do when it wants to remain the people’s choice without encouraging high-value customers to leave for a competitor?
Alaska instituted new tier bonuses and booking class bonuses. It’s MVP Gold 75K members will get 125% bonus miles — the highest tier bonus among U.S. carriers next year — and booking class bonuses as high as 75% for paid first class.
American is taking a different approach: a new layer of promotional bonuses in addition to existing tier and fare class bonuses. They call themselves “the only major airline that rewards your loyalty up to three times” based on distance, status, and booking class. Technically, I think they’re up to four since this is a second booking class bonus. You’ll now earn:
- Base Miles (distance flown)
- Tier Bonus Miles (e.g., 100% for Executive Platinum)
- Booking Class Bonus Miles (e.g., 50% for first class)
- Additional Bonus Miles (e.g., 1,000 for each domestic first class segment)
So far they have only committed these additional bonus miles through December 31, 2015. Either they have plans to evaluate their performance before locking them in or this is an ominous sign that they feel they need to do something before the inevitable transition to a revenue-based program in 2016. (American previously said it wouldn’t be making any major changes to its loyalty program until the merger with US Airways is complete.)
Bonus offers range from 250 miles to 12,000 miles per segment and depend on your elite status (if any), booking class, and distance. The distance part is divided into “long flights” of 3,000 miles or more as well as non-stop options between SFO/LAX and JFK, and “short flights” under 3,000 miles.
If you’re an Executive Platinum member flying 12,000 miles round-trip from the West Coast to London, you’re already going to earn 24,000 award miles regardless of cabin class. Add the existing 50% class of service bonus for business or first class and you’ll get 30,000 award miles. The new promotion offers an extra 12,000 or 3,500 miles each way on top of that (23-80% more).
Obviously you or your employer must be flush enough to afford international premium cabin travel and I cite an extreme example, but it doesn’t hurt to be earning nearly enough for a free domestic economy class award (25,000 miles) every time you take a business trip to Europe.
American has many other hypothetical scenarios for you to explore on its website.
One Mile at a Time mentions that “American wants to reward high revenue flyers as well… but they want to do that without taking away something from everyone else.” I don’t think you can satisfy both groups of customers. Issuing more miles almost guarantees a devaluation at some future point, and “everyone else” who is earning just as much as before will in effect receive fewer miles in real terms.
Rather, awarding more bonus miles on top of a distance-based scheme seems to be a compromise. American and Alaska, as well as United and Delta, are all offering more miles to their best customers. The questions are: How big will that gap be? and Do we value sheer revenue over all else? American and Alaska seem to think their high-value customers will be satisfied with a smaller bump — at least enough to not jump ship — and that they can still capture the impact of greater revenue without necessarily abandoning a distance-based model.
Table Footnotes:
*Flights eligible for the additional AAdvantage bonus miles include flights marketed and operated by American Airlines or US Airways, and flights operated by the following partner airlines that are marketed by American Airlines or US Airways (sold as an American or US Airways flight number): British Airways, Iberia, Finnair, Japan Airlines or Qantas. Flights eligible for the additional bonus Dividend Miles include flights marketed and operated by American Airlines or US Airways. See Terms and Conditions for more information.
**Offer applies to AAdvantage members who purchase and fly on eligible published-fare First or Business Class tickets booked in F, A, P, J, R, D or I on flights marketed and operated by American Airlines or flights marketed by American Airlines and operated by US Airways, British Airways, Iberia, Finnair, Qantas or Japan Airlines; on eligible published-fare First or Business Class tickets booked in F, A, P, C, J, R, D, I or Z on flights marketed and operated by US Airways or flights marketed by US Airways and operated by American Airlines, British Airways, Iberia, Finnair, Qantas or Japan Airlines.
