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Old Jan 22, 04, 5:34 pm
Join Date: Mar 2000
Location: California
Programs: AA EXP 5 Mil, UA Global Services, BA Gold, DL Diamond, SPG Plat75, Hilton Diamond
Posts: 1,231
Many "experts" have analysed this promo. Here is the gist:
- AA is doing this to directly take on Jet Blue. They want to aggressively defend their turf. Remember this was done when JBLU was getting a lot of buzz for its BOS launch.
- AA has said that they do not expect to break even on this promo. In other words theories about passengers who try the service and come back and bring more revenue etc. are not at the core of this promo. If that happends good, but AA is banking on it.
- AA is branding an important message. If you fly JetBlue you only get to fly domestically on your rewards. If you fly with us, the rewards are compelling and moreover you can fly ANY destination in our global network.
- AA will create a short term problem by increasing the number of time limited awards but not a corresponding increase in award seats. In a way AA does not lose too much.
- Customers will leave with the idea that AA does offer competing rates and a vastly superior FF program.

From a customer point of view, I see it as mostly a win-win, especially with the $170 fares (with taxes about $215). With the triple bonus promo you also get extra miles and pay higher (uppper 300s to 400s).

When they started the promo the focus was local markets in NYC and BOS with limited national coverage from ads in WSJ and USA Today. However, the promo was wildly successful and many non-FFers that I spoke to are well aware of this promo by word of mouth.

AA is also sending a message to JetBlue and analysts that they can defend their domestic turf by using their international network. It is not clear however that AA has the staying power to offer these types of promos and match JetBlue fares for long. YOu can still see those $2000+ P fares on AA for JFK-SFO.

Many analysts believe that AA always made profits from its transcons routes (much better than its median yields) and that it cannot afford to take the fight to JBLU for this long. There is also the question of opportunity cost as international traffic starts growing and AA needs to deploy capacity in those routes.

For now - as a branding exercise I believe it is a great successs. As a long-term survival strategy there is not enough data. I cannot see them doing similar promos to fight JetBlue. They have to find other ways.
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