bedelman

Check out this old FT thread, a December 2001 AAdvantage mailing, and the brief discussion on my site (section: December '01 AAdvantage Mailing Insert with (alleged) errors in award structure.

In this mailing, and the corresponding web site table that followed, AA placed business->first upgrades in the 25K column. But telephone support repeatedly claimed this was an error, and several FT'ers reported being able to book business->first for 10K.

The new table on the new web page couldn't be clearer, though. Quite an increase, I agree. For anyone crazy enough to be buying full AA J fares, the 10K upgrade to first was a great carrot & way of saying thanks. Take that away and there's quite a bit less reason to buy AA J.

tismfu

I hope anyone who does not like this new policy is penning his or her letter to AA.

I would be interested to see a poll on whether this new policy will change FTers flying habits and monetary contributions to AA. My unscientific estimate from reading the 16 pages of this thread is yes, many people will.

And since FTers are representative, for the most part, of elite flyers, my guess is that this will not bode well for AA as AAdvantage now really doesn't have one compared to the other majors.

AA is quickly becoming less and less special in the air:

• Removing MRTC from 757s and A300s (what's next?)
• No E+ for elites
• Increased mileage for many AAwards
• More RJs on 2hr+ flights
• $5 for booze on int'l flights
• Terrible J product
• No IFE on MD80s
• And, of course, $250 co-pay for privilege of using YOUR hard-earned miles to upgrade a paid coach ticket
• Plus 15k more miles to upgrade paid J to F

My allegiance to AA is quickly fading. If I didn't live in Dallas I would have more options, but for those of you in NYC, ORD, etc., I think it's time to vote with your wallet and let AA know that they are now no better than the competition.

I never thought AA would join the ranks of NONEPass and the others. Welcome to the new frequent flyer program of AmericanAirlines:

NO

AAdvantage

AAJunkie

I really cannot add much here because eveyone has already hit the nail on the head with their comments. But as an AA PLT I feel it is my duty to give my opinion too:

This SUCKS!!!

Hopefully AA will come to their senses and change their mind about this ridiculous fee.

I will make EXP in December... great timing huh?

LLZ

It's definitely going to cause them discretionary travel....what AA has said now is, that to use your hard earned miles to go to Europe, Asia, or South America and upgrade roundtrip, it will cost you, at the very very least with a cheapo cheapo LHR ticket, $850 out of pocket, plus your 50,000 miles. Much more likely, though, it will be anywhere between $1000 and $1500 per person plus your 50,000!

And, zero word from AA about any improvements whatsoever to this newly "valued" business class.

Furthermore, if they think, on business trips, their suite is so sweet as to require 25K one-way they are crazy. For all practical purposes it's the same food as J, and usually not any better service. Yeah, it goes flat, but no duvet, nothing extra than the same pillow and blanket that J gets too.

Pretty outrAAgeous...

ananthar

AA managment in this case acted extremely foolishly : they could have achieved the same goals of raising revenue without alienating their frequent flyers by :

1. Keep miles only upgrades unchanged. As before only release upgrade inventory when the expected yield from paying passengers drops below $25 (AA's liability for the 25,000 miles) + cost of deep discount economy ticket, since they can now resell the economy seat. Let's assume the deep discount econmy ticket costs $200 (one-way), so the expected yield must drop below $225 for the buisness class seat before it is release to the miles only upgrade bucket.

2. Add the option to pay the $250 fee and get additional upgrade inventory. Program the yield computer to only release additional inventory when the expected yield from paying passengers drops below $275 + cost of deep discount economy ticket ($475 under our previous assumption).

This achieves AA's goal of picking up additional revenue, if possible, since if enough people are willing to pay $250 fee, only those paying the fee will be able to upgrade since there will be no more upgrade seats left by the time the yield drops below $225/seat, since they were all snapped up when the yield dropped below $475/seat. If noone or few are willing to pay the fee, miles only upgrades will have the same success rate as before. Either way, AA will appear to have only enhanced their program by adding an additional upgrade option.

skye1

Okay (as if I didn't just write the world's longest post already..sorry)
One more thought I had:

I also see people re-thinking (if they're still even thinking of AA at all) they're elite levels. I don't mean to insult anyone's intelligence here, but one Plat perk is internat'l lounge access, a perk not to be enjoyed for those now having to look stateside for MR's. Keeping that Plat Perk would be one more thing to think (Is this fee worth it?!) when depending upon international MR's to get/keep plat vs. gold.

Doing several those sale fares to europe seems like a good way historically for many to reach Plat over Gold, but will it still be, when just 4-5 of those fees alone is over $1,000. You'd have to add "Will next year's Plat vs. Gold worth the extra $1,000 that if that's what it takes me to get to Plat?" Or, you'd just have to become an even more saavvy domestic mileage runner if not.

For me, a perk of Plat is the milage bonus, getting to earn more miles that, at 6'6", I save for international upgades, that, uh, well, uh, I get to earn more opportunities to fork over even more money for, or that, uh, I get to earn uh, access to lounges that I won't be seeing as much of......


And, as of 12:45am CDT, not current Oct. AAdv. newsletter yet.

tom911

I think those of us that don't upgrade with miles have been sitting on the sidelines with this thread. In over a million actual flight miles between UA and AA, I've yet to use miles to upgrade, and don't plan to anytime soon. I know some other posters here, including some that have come over from UA, that are probably similarly situated. For the most part, I trade in miles for international business class tickets, so I'm not impacted by today's news.

The one thing that's holding me here now is a combination of the comped domestic upgrades and VIP's good on cheap fares. Start tinkering with those, and UA could be looking very good again.

brendamc

Bait & Switch - didn't think AA would sink to this - we just left Delta because of their outrageous 'upgradeable' fare; qualified for AA Plat in 1 1/2 months & get this news??? What's next - No same day International upgrades?

ElmhurstNick

I have a terrible thought. What if the real reason that AA is doing this is because on 12/2 they're going to announce LRTC on the 777/767 fleet "for competitive reasons." At that point, people are going to be killing themselves to upgrade out of LRTC, and blammo, an extra $500 per elite.

It would be like getting the revenue hit from installing WT+ without actually having to install it.

chicagorich

OK--I can see your point. Certainly the value that you are going to receive is declining, more dramatically than US residents.

I have never seen a good analysis on just what it costs an airline to operate a f/c and/or b/c cabin. I can imagine there is a small group of travelers who pay for the best all the time and don't care about ff programs. There is obviously a large business/corporate contigent who are able to choose their carriers within reason based on cost and then are offered benefits for flying on the higher business fares, etc.

It certainly doesn't cost $4000 dollars to fly a person from JFK to LHR in J cabin.

I think AA's, or any airline's problem is that the price segmentation model that was adopted 30 years ago worked fine when fare information was imperfect. AA could manage demand and price to meet its expenses.

When the internet took off, then fare info became well known and you essentially ended up with the consumer having the power and looking for the right combination of fare and amenities--usually mean getting the most for the least.

I also think that the airlines over marketed their ff programs, stoking demand by giving people miles who hardly ever stepped on a plane but creating this huge liability that would have to be dealt with somehow.

With this move to increase introduce copays or increase mileage reqmts at AA, they are reducing demand for the J product for the more seasoned traveler by adding co-pays and also making the not so frequent flier expend more of their miles to do an upgrade or get a ticket.

It was a clever way for AA to introduce inflation into the system to their "Aadvantage".

Now we'll see what work arounds that the clever group of ff members develop to foil the attempts by the dAArk side to reduce benefits too much.....


...

nako

Playing Devil's Advocate for a moment (mainly because I think that this new policy leaves quite a bit to be desired):

While FT'ers and AAdvantage members may value their miles at 2 cents, or whatever, AA's value is considerably less on them - I'd be surprised if they value miles on their book any higher than one-tenth of a cent. To that end, a 25,000 mile upgrade removes $25 from their liabilities, while giving up the opportunity to sell a seat that might net them a couple of thousand dollars. Charging $250 allows them to recoup some of that opportunity cost that is lost by allowing people to simply burn their miles to get the J seat.

That said, I see the problem with this from a larger-scale view - in terms of AA making a poor business decision from an economic standpoint.

The FAQ asks the question of why AA just doesn't raise the mileage required, and gives an answer that goes something to the effect of "Not everyone has more miles. But most everyone has more dollars, so it's just as easy." Which may be a valid answer, but I don't think it's the real reason why they're doing it this way.

Removing miles from the liability sheet helps AA, but it's not the key to their success or survival. What's crucial is cash flow - assets that are added, instead of simply subtracting liabilities that aren't really a liability until they are cashed in. They can do both by charging both miles and money.

The problem with this, from an economic point of view, is that it is short-sided. People may decide that, instead of paying $500 for a ticket to Europe, plus 50,000 miles and another $500 to upgrade to J, they'll just use 90,000 or 180,000 miles and get an award J ticket. Or, they'll buy the ticket on another airline.

In essence, the short-turn revenue gain turns into long-term revenue loss from AA. Instead of knowing they'll get $500 or $1000 from a customer, they won't get any money, because they're either burning miles or buying elsewhere.

And even if people decide to stick it out with AA, buying their discount Y ticket and sitting in coach, they've got a double whammy - AA doesn't gain additional revenue, nor do they subtract the liability of the miles.

Personally, I'm not sure what this decision means for me. I think that I'll stay with AA for the rest of 2004 and 2005 (mainly because I've planned a lot of domestic travel with them already), but after that, I'm not sure, because I'm not sure what's better.

I do know, though, that burning 90,000 miles for a J ticket to Europe sounds a lot better right now than spending $1000 and 50,000 miles for the same thing.

Mike

CharlesMD

What is absolutely so scary is the way AAdvantage can morph almost overnight into Nonepass. You go to bed one night a relatively happy customer and boom! wake up the next morning to discover your miles value has plumetted. Maybe it's time to take up another hobby like investing $$ in mutual funds!!!

Gardyloo

So what are Ms Loo & self (both Plat) going to do? Thinking out loud here...

I think we may well:

(1) Proceed with planned RTWs, probably two back-to-back, and build up a copious quantity of miles, seated in J mainly on CX and BA, get EXP for a year or two, for VIPOWs or their ilk to be used only on mandatory AA international itineraries;

(2) Switch most domestic travel to non-AA carriers (most likely AS) if we can earn AA miles on them, up to but not beyond requalification for the Plat bonus. AA on the west coast is a joke anyway. Plus, stickers will be there for those times we have to ride AA;

(3) Use the aforementioned copious accumulated miles on free J tickets on BA, CX, whoever, including OW partner transatlantic services. Hell, by all reports AY's new J will be better than some of AA's service. If we're out 90K miles anyway, why not go for a superior product?

(4) Wait for Plan B to emerge from AA. Maybe it won't happen and we too will drift off into AA limbo. Or maybe the yield management people and the marketing people will take a meeting with HR to look hard at how decision-making gets done.

Ah, well. Bedtime for bonzo I think. One eruption per day is about all I can manage.

Wheezer

I take it that it's safe to assume the expedite fees will remain in place?

martin33

It's clear from AA's response that they really *don't* get it, how people with a lot of miles operate. Those biz travelers who fly paid J for business and upgraded for leisure--- what good are "free" seats to them when they want to spend up their miles on upgrades?? or me.. I'd pay 80K miles (or 90, or whatever "too many" number they hinted at) to upgrade a cheapo ticket vs 80K miles for the same "free" ticket because the upgrade ticket earns some miles, and I just don't have so many b-i-s miles that I can use non-earning trips very often.