American Airlines, the world’s largest carrier, said Tuesday that it is fundamentally changing the way it awards frequent flier miles, joining other major U.S. airlines by rewarding dollars spent instead of miles flown.
The change, also made by United Airlines earlier this year, benefits big-spending corporate travelers, who are more profitable for the airline, and hurts deal-seekers who take many cheap long-haul flights.
The change is also an outgrowth of how setting fares has changed. Years ago, fares correlated more closely with miles traveled, so miles were a good gauge of money spent with the airline. That’s no longer true. Flights of the same number of miles could cost $200 or $1,000, depending on the destination, when a flight is booked and a host of other factors.
Industry experts said the change to a revenue-based rewards program seemed inevitable, and the changes to the program overall balanced the financial needs of the airline with the desires of its frequent fliers.
“There’s no way American could make these changes and make everyone happy,” said Henry Harteveldt, a travel-industry analyst with Atmosphere Research Group. “I think these changes are very smart.”
American’s AAdvantage loyalty-program changes, which begin in the second half of 2016, affect both accumulating reward miles and redeeming them, or “earn and burn.”
While the changes are not a strict copy-and-paste of its competitor’s programs, many features are similar.
On the earning side, regular AAdvantage program members get five miles for each dollar spent, while gold members get seven miles, platinum get eight and executive platinum get 11. Those earning levels are in line with competitors.
So a regular member whose fare and airline fees totaled $1,894 to fly round trip from Dallas to London would earn 9,470 under the new calculation. That’s slightly less than under the current system, in which the same flier would earn 9,502 miles because the flight’s actual length is 9,502 miles round trip. Using the same example, a gold member would earn about 12 percent more reward miles, while a platinum member would earn 20 percent fewer miles.
In basing rewards on dollars spent, the dollars include the base fare plus carrier-imposed fees but exclude government-imposed taxes and fees, American said.
In redeeming miles, some award redemption levels will be reduced by as much as 40 percent, American said, adding that awards can be used any day with no blackout dates.
For tickets booked on or after March 22, award redemption levels to popular destinations in Mexico, the Caribbean and Central America will be reduced, American said. And the cheaper level of flights of 500 miles or less in the U.S. and Canada will be redeemable for as low as 7,500 miles one way, it said.
However, award redemption levels on other routes, like some flights to Europe and Asia, will increase “due to changes to market pricing and demand,” American said.
Buying American’s pricier tickets, like business- and first-class seats, will also speed fliers’ path to qualifying for elite status, which gets them such goodies as seat upgrades, early boarding and free checked bags.
American notes that it has the most generous multipliers among large U.S. carriers for buying those expensive tickets. For example, buying a full-fare business or first-class seat will earn triple miles, compared with double from Delta and 1.5 times as many miles from United.
In changing its rewards program, American is tinkering with what’s generally regarded as the best frequent flier program among major carriers. For example, the 2015 annual Freddie Awards named American Airlines’ AAdvantage program of the year for the fourth consecutive year.