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Dear XXXX,

Thank you for visiting the American Airlines Web site and for your recent e-mail to AAdvantage Customer Service. I appreciate the opportunity to assist you.

We understand your objections to the $250 co-payment effective December 1, 2004 on AAdvantage Upgrade Awards between North America and Europe, Japan and Deep South America. Before we announced this change we carefully considered the impact on our members, as well as competitive practices. We are convinced that Upgrade Awards on American Airlines will still be an exceptional value, even when the co-pay goes into effect.

AAdvantage upgrade policies are extremely liberal, both domestically and globally. The majority of carriers do not permit Upgrade Awards in conjunction with many Discount Economy fare tickets, restricting their use to only the highest fare classes. We think that's inherently unfair in that customers are expected to purchase a higher fare ticket with the hope of upgrading when there's no guarantee that the upgrade will be confirmed. At American, we won't collect the co-pay until the upgrade is confirmed. And we will continue to permit upgrades from Deep Discount Economy tickets.

The $250 co-pay we have announced is well in line with the carrier that does permit mileage upgrades from discounted fares, and which charges $200-$450, based on the price of the purchased ticket.

As for our 500-mile upgrades, this year we lowered the price to $25-$30 and expanded complimentary upgrades for AAdvantage Executive Platinum members traveling on any purchased published fare. In addition, all AAdvantage elite members receive complimentary upgrades on eligible American Airlines flights, when traveling on fares booked in Y or B.

All of these various upgrade programs provide AAdvantage members with exceptional value, since they offer access to our Premium cabins for less than Premium fares.

Thank you for participating in the AAdvantage program. I hope you will continue to favor us with your business.

Regards,

XXXXXX
AAdvantage Customer Service
American Airlines


Original Message Follows:
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---Message Comments---
I am very concerned about your recent changes below.
The Advantage program to me has always been a superior program. It is a
shame to see you devalue your program and become like the others. When
there's a level playing field amongst competitors there's little reason to choose American over someone else any more.

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Effective December 1, 2004, a nonrefundable co-payment of $250 will be required to claim Upgrade Awards used with most Discount and Deep Discount Economy fares when traveling between North America and Europe, Japan and Deep South America. The co-pay does not apply to Upgrade Awards used with Full-Fare Economy and Business Class tickets.

Even with a co-pay, Upgrade Awards provide AAdvantage members with exceptional value since they can be used with deeply discounted tickets, and on systemwide routes. With fares so low, the disparity between Discount and Premium Class fares is too great to be offset by miles alone. Rather than limit Upgrades Awards to full-fare tickets only, the addition of a co-pay will allow members to continue to use their miles to upgrade even if they purchase discounted tickets.

venk

Yup, we buy tickets with AA and very often pay more for it or rationalize ridiculous pricing evn with competition which has nothing to do with the value received all because of the value associated with status and miles.

The cost of the miles is factored into the pricing of the ticket and/or the ability to maintain yields. If AA can no longer afford to provide as many miles because of the pricing and its cost structure that is a different issue than declaring acquired miles as having been given "free" and hence of no value or diminished value. While the program rules may allow AA to do it to a certain extent, the customers don't have to bend over every time they do that as some may prefer.

Steve M

(I'm sorry if this has already been answered - if so, I didn't see it)

I know that the new $250 upgrade co-pay is "non-refundable." But other than the obvious aspect of not being able to get my money back should I not take the originally booked flight, what else does it mean?

That is, if I make a change to the tickets, does the co-pay move forward along with the tickets? Does it make a difference if the tickets are just re-validated to new travel dates, as opposed to being re-issued?

skirtchasers

I have feeling this will be rescinded.

aaupgrade

And the irony here is if you want the miles reinstated to your dis-AAdvantage account then you have to pay an additional $100.

I was checking business class fares from IAD to FRA for next August on Orbitz just out of idle curiosity. I found a great Business/First rate on CO for $1700. Why would I pay $6406 on AA, or $1197.50 + 50000 miiles + $500?

Adios AA allegance. Hello to whatever airline wants to provide me a good product for a good price.

brp

I disagree, and think that Dave Noble has a point. Unless a pure MR, I fly to get there, and the miles are a nice perk. When I use my Citibank card (soon to be my new Starpoints Amex ), these are things I would be buying anyway. I don't pay more for them, although I do pay something for the card. Excepting the yearly fee, these miles do come along for free...to me, even if not Citibank.

Cheers.

JHunter

The differnce in price may be more than 700 pounds, but the difference in cost is almost certainly a great deal less if you're talking about an otherwise-empty business class seat. Not an unimportant distinction, though the real question for FT'ers is whether or not the difference in value is greater than 25k miles plus $250. The answer so far seems to be a resounding "no", where it was "yes" for just 25k miles.

PDX-PLT

I think that's the key issue here.

It seems to me, on most routes, competition for J upgrades is very intense. People wanting to upgrade are turned away.

So AA, in need of looking for more revenue, saw an opportunity hear. They could increase the milage required, in order to bring demand down to match the supply of otherwise-empty J seats. But AA gets little/no value for that, as miles are essentially no liability (worthless) as far as AA is concerned: they can devalue miles anytime they want with capacity controls, so decreasing outstanding milage balances really doesn't buy them much (outstanding milage accounts don't show up on their balance sheet, do they?).

Instead, by adding the co-pay, they can generate additional revenue while bringing down demand for J seats. If there were alot of empty J seats going wanting, they probably wouldn't bother. But someone with a sharp pencil in AA worked out that this would be a net positive ROI.

I don't like it, but to me it's preferable to eliminating the upgrade opportunity from discount fares, like it is on other carriers.

LewDog

AA: Whatever.

So freakin' typical of this industry. Set the precedent of an unsustainable business model, then when the times get tough, blame it on your best customers and punish them into submission.

Again, whatever. G-d bless whoever can spend $7500 on J-class transatlantic and doesn't need a "free" upgrade.

justageek

But for any given flight, many of us choose AA over another airline with lower price, fewer connections, better schedule, etc., if we feel that AA offers us more "bang for our miles" compared to those other airlines. Therefore we are sacrificing money or time (which equals money) to get miles on AA, and are thus essentially "buying" them.

brp

Yeah, I agree with you here. I know that I do that. Although I usually won't sacrifice schedule since they are pretty good for where I want to go, I will sometimes pay a little more, and have an extra connection.

I was really thinking more aboutthe credit card miles. I really do view those as free (less the yearly fee, which is not substantial if one charges enough).

Cheers.

pinniped

You're still buying them.

You're passing up guaranteed no-strings no-fee 1% rebate cards. There are also dozens (hundreds?) of other rewards cards and strings-attached (but potentially >1%) rebate cards. You could get into all sorts of opportunity-cost comparisons vs. other popular programs like SPG.

But for this purpose, keep it simple: you're basically buying 'em 1 cent per mile and $50 per year because that's the current level of rebate for the no-strings-no-minimum-cashback-on-your-next-statement-no-annual-fee card. Is that a good value? Yes - it's great for many FT'ers. But AA is redrawing the line significantly with their program changes.

askworldtraveler

This answer may be buried in the 32 pages - however here is the answer to my question regarding upgrading using Old Miles.....

"Thank you for your recent email to AAdvantage Customer Service.

The $250.00 copayment is only applied to a 25SS upgrade award. This
award is an upgrade on a discounted fare ticket. When using old miles
for an award, the terms of that particular award will apply.

Thank you for participating in the AAdvantage program. I hope you will
continue to favor us with your business."

just an fyi...with my moderator hat off....

tt7

You bet they do ..... and if they don't, I can tell you without even looking at their financial statements that those statements are materially mis-stated.....

As to what 'value' AA places on that liability .... $1.2 billion at the end of 2003.

Portland1k

Recently, AA marketing has shown that given two ways to increase revenue, they will always make the wrong choice. Remember a few weeks ago when they asked for $10 just to talk to an agent via phone? Well that one could have been implemented by just offering a discount to anyone that books via the web (Jet Blue anyone?). Same effect, different method only they took the wrong route and as such, annoyed such a large number of customers that one wonders if that one will stick.

Then along comes this one. As an EXP, I find that the efforts to market to me are weak at best. In fact, I just returned from LHR using my last VIP upgrade and my fare while not the lowest, was around $1300. I had a nicer seat, free drinks, Bose headphones, got to use the fast lane at immigration at LHR and could take a free shower at Arrivals. I can bring my own noise reduction headphones, can pay $25 to use the Arrivals shower and if I take the later evening ORD flight, I don't have a long wait at all at immigration mid-morning. So the only thing that I would be paying $500 for to do this again in December would be the free booze, food and seat (and I could have just booked row 31 in coach to get semi-comfortable). So tell me marketing wizards at AA, what exactly do you expect me to do? I can give you $500 to book row 31 too so do the math....it just doesn't add up. Would you rather get $1300 and spend a few $$ to put me in J class or would you rather get $500 and no more (perhaps the $25 for the Arrivals shower is worth it) or perhaps lose my business in total?

The one and only marketing rule that always works is differentiation. I've said it 100's of times - if everyone looks the same, then price becomes the deciding factor. If AA stands apart with the business traveler (not the business traveler who IS willing to spend $6-8k to go to LHR), then they WILL gain business and loyal customers.