About two months ago — shortly after United eliminated published award charts — I wrote that you should expect American Airlines to begin dynamically pricing awards rather than only offering award prices sticking to a published chart.
And later in April, in fact, I showed that American is already dynamically pricing awards side-by-side with regular awards. And just over a week ago American introduced discounted AAnytime business class awards between the US and Europe.
While eliminating award charts presents a real problem for frequent flyer programs and their ability to drive customer loyalty (crucial to keep earning billions in revenue from bank partners), there’s a real issue that airlines are also trying to solve for members.
Saver awards have historically been available for seats that would otherwise go unsold, while also limited to make sure customers aren’t choosing to redeem miles rather than spending cash for tickets. With load factors at historic highs it’s difficult for airlines to deliver saver awards.
American has taken many steps to make awards, especially economy awards, more available to members. They’ve increased the allowable connection time on a valid award and they’ve assigned fare values to awards, allowing the program to buy more seats from the airline. That’s led to lower value per mile redemptions than what many members expect, but greater availability at other than the highest award prices. (It’s also made it much harder to change award tickets.)
I don’t recall American publicly acknowledging this before. Yet speaking today at the Bernstein 35th Annual Strategic Decisions Conference, American’s Senior Vice President of Revenue Management Don Casey said dynamic pricing of awards is a strategy they’re using to drive higher revenue from the loyalty program. More mileage redemptions means recognizing more deferred revenue, and redemptions at a higher mileage price does too.
This shouldn’t be surprising or controversial to regular readers, but it’s still notable to see acknowledged. Ultimately since my goal with AAdvantage miles is to redeem for premium cabin award travel on partner airlines, this has only limited effect on my redemptions — for now.
Update: The Points Guy notes that I tweeted Don Casey’s comments about dynamic redemption and suggests “American Airlines will move to a dynamic award chart” and that this represents “shifting from a fixed chart to a dynamic one.”
That’s not necessarily the case, award charts and dynamic award pricing can co-exist and in fact coexists already at American today.
American airlines suck. They should not do this, its their last straw to keep my business. Flights always delayed, dont do anything for EXP, baggage handling never on time, award availability is non existent, customer service is terrible, etc etc
Really glad I blew almost my last stash of AA miles on a trip to South Africa on Qatar in the Q-suites. Outside of aspirational partner redemptions AA miles are becoming quite worthless. At some point they’ll find a way to kill expensive partner redemptions too. I’m sure they’re not happy with my 24,000 miles in Qatar Biz for 150K miles.
What a shame! Management destroying a great airline and once a great program. AA share price will further tank if this goes into effect as more loyal customers will seek refuge elsewhere!
They have already been dynamically pricing, in my opinion.
The highest published “Level 2” economy award to Hawaii is 50k miles one way, but they were charging 90k each way from LAX to Maui last Thanksgiving week. That’s 180k round trip in economy and nowhere do I see that published on any award chart. Level 1 is 40k and Level 2 is 50k – nothing higher is published…
Sorry to take the counter position on this, but what’s wrong with dynamic pricing? It’s harder to game the system, but is that really what is in the airline’s (or hotel’s) best interest? I’m on a flight right now that cost me more miles (135K going, 180K returning) than I’ve ever spent. That admittedly sucks. But it’s obviously correlative to the financial cost of the same flights. I spent 315K for a $15K r/t ticket. World record setting value? No. But it allowed me to use miles for a trip that I otherwise never would have spent the money to do (Go Spurs!).
My point is that people need to stop whining. Hotels have always done point earning as a multiple of dollars spent. Airlines are presumably headed there. No reason redemption shouldn’t function the same way.
It’s capitalism going both ways. The market sets the pricing. If it changes your loyalty propensity, so be it. But stop whining.
American’s current management is great at destroying value in the airline and the frequent flyer program.
BC your comments are drivel
Higher pricing = lower value. Bonvoying your most engaged customers doesn’t seem like the brightest move to me, but then again I don’t have a DUI, let alone three, so my judgement is obviously different from upper management.
When the value most customers get out of each AA mile redeemed for flights is to be at or below 1-1.5 cents per redeemed mile — and that is almost certainly where AA wants to go with award travel pricing on its own planes at least — AA loyalty program customers should be ditching the collecting of AA miles from AA partner activity and move to cash-back cards and banks’ proprietary reward programs.
Since AA wants to kill the goose that laid its golden egg, AA customers should collect on the eggs before the goose is killed and the golden egg is exposed even more as a pyrrhic gold in a sleazy, customer-fleecing game of AA’s own making.
Will likely take approximately 3-5 years from implementation before American management sees the full impact from moving to dynamic pricing. However, since they have already been offering some level of dynamic pricing with multiple redemption rates for airline tickets over the last few years it may be sooner than that. This is because many customers travel only one a year or less and redeem miles at most every few years so they don’t investigate the award charts until they are close to having enough miles. Many people assume that award redemption rates don’t change from their last redemption since award prices in the past have been relatively stable.
While a few data points don’t make a trend, I can tell you that I have had several clients who recently have tried to redeem American miles for trips within the US and to the Caribbean and they were all shocked when their was award availability but not at the 25,000 mile or 35,000 mile redemption rates they were previously accustomed to seeing. When I explained that airlines had moved more towards a dynamic redemption strategy these clients who are infrequent fliers where shocked and have now said they are moving to cash back cards. After all, redeeming 90,000 miles for 1 person for a $750 ticket to the Caribbean doesn’t seem very rewarding to these clients and since they fly infrequently the number of miles they earn now is minimal since it is based on spend.
Likely current management will be gone by the time the full effect of these changes impact American Airlines bottom line. In the meantime, American Airlines management can claim how customers are more engaged since they are redeeming the miles they have, and how they are selling more airline miles to banks at a higher price and their credit card portfolios are generating even more value for them.
Stampede to cash back cards
“Ultimately since my goal with AAdvantage miles is to redeem for premium cabin award travel on partner airlines, this has only limited effect on my redemptions — for now.”
The big issue is that American’s main transatlantic partner, British Airways, charges ridiculous cash surcharges that make redeeming miles significantly less attractive. So you have to rely on AA metal, which is scarce over the pond. And given United’s upcoming devaluation, using miles to get over to Europe is a lot harder and less attractive
Wow Gary, I didnt see you defending Delta when they first did this! Now you justify how American is doing this to solve issues for its members. This is laughable! They are all copying Delta! As other readers have commented, cash back cards!!! The goal posts will continue to move…
@John not sure i follow, i do not defend eliminating award charts I’m encouraging american not to eliminate them. readers don’t often think i’m **too easy** on american!!
Sure you do Gary. Show me a positive or justifiable article you’ve done on Delta since they switched to dynamic pricing.
@John all of my pieces on Delta are ‘justifiable’ and I’ve written positively about Delta the airline frequently.
“American airlines suck. They should not do this, its their last straw to keep my business. Flights always delayed, dont do anything for EXP, baggage handling never on time, award availability is non existent, customer service is terrible, etc etc”
1. I recently found great one-way availability from US to South America and return one-way availability from South America to US.
2. None of my four flights were delayed (connection + long-haul).
That said I don’t like dynamic award pricing and will spend the remainder of my miles on partner awards if need be.
These changes will apply just for AA flights or will affect also partners flights?
Do you think that, in this change, the fixed award chart for partners will also become dynamic?
My honeymoon would be with partners airlines and I would redeem the miles in August (for July 2020)… by now, I’m really afraid if it’s gonna be possible…
BC
The Market, the market, the market. Yeah, yeah, yeah. Airlines and others have discovered big time how to manipulate “the market.” Primarily, they cut back flights to already underserved locations. They reduce the size of the seats, they reduce the size of the planes! They crowd in more and more people until every flight is a subway ride.
How exactly is the buying public supposed to have a voice in that?
The voice they are “provided” is fist fights in the aisle, nastiness to the FAs, petty mean-ness to fellow-flyers and unmitigated inconvenience and unpleasantness.
I would maintain that airlines are a national utility and not a competitive free-for-all arena for money-making on flying. Why the hell are interstate highways “free” and airlines just get more expensive and less endurable all the time?
But, then again, I feel like a lone voice in the wilderness living in the richest, only country without national health. So, people make huge sums off illnesses and class/money based health care.
And, the cost of our healthcare is about double what it would be otherwise because we bow down to “The Market” — that’s the ever sacred Market.
Oh, and don’t shoot back some silly nonsense about wanting to be like North Korea, either. That is not the point, but as an old person I have watched for many years the US degrade itself more and more in service to The Market.
I agree with BC – quit whining. I think most people on here are simply gaming the systems by using credit card sign up bonuses for miles instead of earning them the old fashioned way like I did with 8,000,000 FF miles earned from flying over 35 years.
Whine all you want about American but Delta, United and Southwest use dynamic pricing so you really don’t have a choice. I expect most international carriers to switch to this soon as well.
Bottom line, you may not be able to definitively know the cost of a ticket before you check but IMHO that isn’t a huge deal for most people. Also, I’ve never had a problem booking aware tickets on American, including first to Hawaii last Christmas. Confirmed an upgrade from coach to business (top cabin on this flight) using a systemwide at time of booking for a flight to Dubrovnik in August which almost never happens (even domestically you usually wait for a systemwide upgrade although it typically clears since you have top priority among other Executive Platinum flyers).
I love all the “they are killing the airline”. Get used to it – airlines change their programs all the time and it is almost always a devaluation. This has been going on since the 80s (remember 1000 miles a segment and Delta r/t upgrade certificates for 2500 miles that actually earned miles for using them so you could make miles, with a connection, by upgrading to first). Nothing will really change. They get you from point A to point B and if you don’t like it don’t fly them but PLEASE quit whining!!!
Considering the near zero availability except at the highest possible price, the program is basically useless today. I’ve cashed in nearly a million miles on them over the last few years (many times having to use the high anytime prices) and now just shy of one round trip at the saver rate. Once that is eventually cashed it, I see little reason to invest any spend into the program. I’ve been a user of the dining program and shopping portals, and even their credit card. I’m close to having enough for a saver round trip to Europe. Once that is there, the program is dead to me.
This is bad for Citi and their co-branded cards with them. Shy of Admirals club membership (even that is getting significantly devalued), there’s no reason to put any spend on their cards.
Hi Folks, I have a question, does the dynamic pricing extend to partner airlines (there were some comments and I interpreted it as possibly not).
I agree BA charges ridiculous fees for Business Class tickets, however Qatar, Etihad and Cathay have reasonable fees (although difficult to get award tickets).and hence I use them for Asia travels for Biz Class 140K RT miles
I buy AA miles during promotions at around 1.7cents per mile and business class trip to Asia for $2500 RT (140K*1.7 cents + taxes/fees). I just got an email that there is another promotion with AA miles at 1.7cents, if dynamic pricing applies to partners then it may not worth it.
Please advise
PS