Earlier today, American Airlines “accidentally” added fuel surcharges on award tickets to several partners, such as FinnAir and Malaysia Airlines. An initial memo read to Lucky stated that other partners would see these fuel surcharges added. Needless to say, this would be a huge devaluation … if it weren’t a mistake. A later memo sent to Lucky stated that award tickets would remain immune from fuel surcharges (save for the previous surcharges already on British Airways and Iberia redemptions).
For about 5 hours, though, it seemed the miles and points world had been turned upside-down with this news. I was actually on a mileage run at the time — I landed off a red-eye and saw Lucky’s initial post. During my 2-hour connection, I saw Twitter absolutely blow up trying to find information on the fuel surcharges. I wrote up a blog post on my subsequent 2-hour flight, only to see upon landing at my destination that the fuel surcharges was a mistake.
I’m dubbing those 5 hours “the fire drill.” Here are some observations from that period:
Customers hate fuel surcharges
This comes as no surprise — people hate fees in general. But there’s something special about fuel surcharges. I broke the news last month about United changing their award change and cancellation fees, including cancellations going from $150 per ticket to $200. While people were upset, it wasn’t anywhere near the level of anger toward addition of fuel surcharges. I see it this way — if you have elite status, you pay reduced or no change/cancellations fees on awards. Your increased loyalty to the airline is rewarded. Those who don’t get a reduced or waived fee likely have to strategize their bookings to avoid having to pay change or cancellation fees.
However, fuel surcharges are charged to everybody. Even an Executive Platinum or Concierge Key member has to pay them. With airlines moving toward revenue elite programs (i.e., on United, you must spend $10,000 in addition to 100,000 miles to achieve elite status), adding fuel surcharges would be a huge blow to loyalty. Spending a large amount of money on flights and having to pay a surcharge to redeem your miles is ridiculous.
In addition, fuel surcharges can make it impossible to get any value out of coach redemptions, which is what the majority of customers redeem. Using 40,000 miles + $10 in taxes to pay for an otherwise $800 fare is a great value, but 40,000 miles + $10 tax + $500 fuel surcharge isn’t. I have definitely paid fuel surcharges to get premium class redemptions but would never do so on a coach ticket.
For further reading, Gary had a great primer on fuel surcharges.
Customers hate sudden changes to loyalty programs
This seemed to be the main reason why many were upset with American Airlines, and subsequently, @AmericanAir – the social media arm of American’s customer service. Potentially adding hundreds of dollars of surcharges to an award ticket is a huge change, especially in a program where people may spend years collecting miles for an award ticket or for people who need to book tickets for a large family.
Earlier this month, Delta devalued their program by as much as 25% when they raised the prices for business class redemptions (for example, USA to Europe went from 100,000 miles roundtrip to 125,000 miles roundtrip). However, the new prices are for trips on June 1, 2014 and afterward, so at least there’s a 9+ month window to redeem at the old prices. While a devaluation sucks, I appreciated the notice.
Companies need to keep their social media representatives up to date
@AmericanAir took an absolute shellacking from several people on Twitter, mostly because they had no information on the surcharges (which, of course, turned out to be a mistake). Several responses told customers to talk to phone agents, yet phone agents didn’t know the full details of these surcharges. A brief look at the AA Twitter feed showed that these potential changes were the topic of the majority of their interactions, and further research within their own company should have been done to provide something other than a boilerplate response.
Be ready to burn your miles with little notice
This event underscores the rule that miles devalue over time and that program changes can occur in a snap. You shouldn’t have more miles than you know to redeem in the short term. I, for one, am ashamed to say that I frequently break this rule. Earning miles nowadays is easy, but my work schedule and unknown future schedule make it tough for me to burn miles on fun trips right now. I’ve even taken to using a 2+% cash back card for the majority of my credit card transactions, simply because I feel as if I have enough miles to tide me over in the short term.
Pavlov would have a field day with miles/points junkies
Just say the word “devaluation” and people’s true thoughts come out into the woodwork. American loyalists were devastated and were ready to shred their EXP cards. United flyers declared themselves “done” with Citibank churning and hopeful that United wouldn’t follow with fuel surcharges. US Airways flyers were sure that this meant the merger either was happening or wasn’t happening. Delta flyers were ready to act as sponsors to AA flyers at Devaluations Anonymous meetings. Of course, all this reversed itself once the mistake was revealed.
Yes, George, the American Express Starwood Preferred Guest card is still a good card for earning American Airlines miles.
In reference to this tweet. Yes, American Airlines are still as valuable as they were yesterday, and yes, if you want to earn them at a better rate than 1 mile/dollar spent, the Starwood American Express is the way to go (as it’s 1.25 miles/dollar when you transfer 20,000 SPG points to 25,000 AA miles). However, as the 4th point suggests, earn as quickly as you can burn.
Also, a not-so-subtle reminder that the American Express Starwood Preferred Guest 30,000-point bonus is expiring on September 3. After that, the bonus will return to its normal 25,000-point level. The 30,000-point bonus has occurred every August for several years. It is up to you if 5,000 points is worth applying now. Scott went over the card back in this post, and rather than bombard you with tons of “offer ending” posts, I’ll simply provide a friendly reminder. You can check out the American Express Starwood Preferred Guest card and any other cards in that post.