Colin

they'd rather sell those Tuesday J redeye flights to Europe for $2K roundtrip than give the seat for free. fine, fine. that's the new normal. i'll adjust. just won't be collecting any more AA miles.

rrgg

OK, but in many cases this is not a real comparison. UA charges more miles but we know that many AA flights ever available in J to the EU are via BA LHR with a very high YQ. Some would rather pay the extra miles than $950+.

fly747first

Bingo!

George Purcell

Been an AA member since 1998, lifetime gold. Consistently paid a premium to fly with AA when required; I've never flown United and had maybe two Delta flights in 30 years. I only had about 400,000 miles when the US Air crowd took over and I figured it was time to liquidate. So I did--a J ticket to Egypt, a couple of domestic last minute for funeral/illness and (after WAY too much searching) a J ticket to China booked last December. I'm down to around 50K, enough for another last minute domestic if needed.

And that's pretty much where I am staying. I'm shifting my two Citi AAs to other products, keeping a grandfathered 10K Barclays, and putting very little more miles in my AA account. From now on I'm going to shift credit card rewards to either Chase or Amex reward points.

I booked my first flight to Europe on a non-Oneworld carrier for the first time in many, many years.

As far as I am concerned, it's pure free agent time. I'll figure in lifetime gold benefits into a calculation for purchasing AA tickets but no more. And that decision, and the decision to quit accumulating AA miles, is driven almost completely by the reduction in AA awards.

Fanjet

Then perhaps AA should not be the choice for them. In fact, if someone were to ask me which airline FFer program they should choose if their objective was to get free tickets (in Y or J) to Europe, my suggestion would be UA, not AA. And in the case for DL, I believe flying partner metal to Europe in J is now 170K miles for the low category (if it is available) versus 110K miles plus the BA fuel surcharges. And there seems to be more inventory loaded for the BA flights.

eponymous_coward

I disagree, having spent a fair amount of time on AS (and thus getting insight into BOTH airlines' J Europe saver inventory). DL seems consistently better at own inventory to Europe recently, followed by BA (hello surcharges!) followed by AA.

UA and *A are better than DL and ST for sure (especially during peak season).

Also, DL actually has real domestic saver inventory. That makes them more usable than AA in the USA, unless you live in an AA hub/OW gateway city or can use AS to do the connecting domestic saver flight. If not, well, you can add on buying an AA flight to the BA fuel surcharges (ch-ching!), or getting to Asia on CX/JL (and then you have to figure in the time cost of making sure being on two tickets doesn't hose your travel).

I might also point out that DL and AS have added value to the low ends of their program for the casual flyer in recent years- 5k/7.5k/10k redemptions, that don't require you to have the credit card. This is helpful for people who are occasional flyers, who aren't inclined to wait 15 years to bulk up their account to get to Europe... and how awful is giving an occasional customer the ability to redeem at 1-2 cpm for advance fares, anyway? Is it REALLY important to have that $75-100 cash fare paid for instead of letting a couple people on the flight redeem miles off your books?

I agree. I'm nowhere near as gunshy at collecting WN as I am AA because I know I could use them somewhere, with relative ease. In the two years since that OMAAT article, WN's still quite usable.

No, I'm not going to be able to use them to fly to exotic locales on a plane where the shower pours hot and cold Krug and caviar, and I get a butler. But that's OK compared to "well, unless you want to pay fuel surcharges or go to Asia/the Middle East in J/F, good luck, sucker".

I'm at a pittance of AA miles, and I'll stay that way until something changes.

AANYC1981

Miss the days of this:

dgcpaphd

Your post is right on! So many people now feel that way about AA's decision to severely devalue its loyalty program.

AA was the number one frequent flier program only a year ago.

What happened that caused AA management to gut its perfectly good and profitable loyalty program? AA intentionally shot itself in the foot, so to speak.

In addition to dissatisfied and angry AA customers, I suspect that Citibank and Barclay Bank are also miffed at the program devaluations.

Citibank and Barclay Bank are out millions of dollars from buying AA miles from AA to "give" to bank credit card customers. However, bank customers are not using or signing up for the credit cards as expected or projected. This causes the miles the banks bought to be worth less than they paid to AA.

Based on GAAP, when the banks issue their financial statements, the banks will have to show a loss based on the lower value of the miles they bought from AA. That should make for an interesting computation.

Shareholders of the banks will not be happy with AA when they have to take a loss for the write down of the value of the miles the banks bought from AA.

AA management most likely feels it made a good business decision to convince the banks to pay AA millions of dollars for miles that are worth only a fraction of what they were worth prior to AA intentionally devaluing the loyalty program.

AA got its own customer base angry. It also did a number on the banks.

ckx2

AAdvantage is still a great FF program. Especially with the changes to revenue based earning and the upcoming upgrade lists based on EQD spending.

beachfan

The upgrade change is a zero sum game. No more upgrades, no less, just who they go to.

The AAdvantage miles given is a decline overall.

But if you are getting more upgrades and sufficiently more miles to pay for AAnytime awards, then it's improved for you.

777topdog

Not to put the thread back onto the title, but do most people believe it is the AAdvantage devaluation that is hurting AA profits?

I for one fly much less, and have put all my AA flights (based on price and value that I saw) onto my AS account. As well I have flown Delta and found their product to be pretty darn good. And am using up my points on AA partners because there is no AA space available.

Is there other cost issues out there that could be the root of the problem? We all know the one major cost fuel is cheaper, but are there other issues that we are not thinking about that made for poorer profits then expected.

diver858

Question for the bean counters: How does AA accrue for the value of outstanding miles? Redemption of miles? While the Aadvantage program may be selling fewer miles, it appears that customers are redeeming more miles per award ticket, suggesting a greater return on miles sold. Should this be the case, could it more than compensate for the loss of income from the sale of miles?

ashill

Is more miles per award ticket just reflecting the crummy saaver award inventory and thus more anytime awards? That would be my guess more than more customers redeeming high-value awards.

dgcpaphd

WARNING - BORING (BUT ACCURATE) ANSWER TO QUESTION ASKED

It is a convoluted computation when "miles" are recorded in financial statements of airlines.

Clearly, miles have an impact on airline profits.

One simple way to look at the situation is when AA sells a ticket (ignoring sales of miles to banks and others).

A small part of the ticket price (roughly 2% or less) is allocated for future miles redemptions as a liability or deferred income (rather than current income) in the financial statements. When miles get used, the deferred income is reduced, proportionately, and income is recognized in the financial statements. There are other elements of the miles recognition but this is one simple way to explain the matter. Said succinctly, as miles get used, AA recognizes income for that portion of the miles. As a sidenote, there really isn't any "free" ticket. "Award" tickets are mileage tickets that passengers (or banks) have paid in advance (in some form) to the airline.

When AA blocks saver awards and requires "anytime" awards, more revenue is recognized from those customers who exchange a higher number of miles for the "anytime" award ticket.

AA blocking saver awards and only offering anytime awards, initially seems like a good business decision. This is because more deferred income is recognized currently when a greater number of miles are redeemed.

However, it is not a good business decision for a number of reasons. The main reason for it being a poor business decision is because blocking saver awards and requiring double or triple miles for the same seat angers loyal customers. Customers have responded to AA's severe devaluation by flying other carriers, not using the higher award redemptions and canceling or not using AA sponsored credit cards.

Even on the day of departure, AA continues to block saver awards on countless flights. Consequently, roughly one third of business or first seats go out empty because customers are not willing to redeem them for a higher amount of miles required for those empty seats (anytime award rates).

The decision to allow business and first seats to go out empty while not releasing saver awards does not seem logical. It is a text book example of a poor business decision. The available business and first seats that go out empty, could increase AA's revenue as a saver award, thus reducing AA's deferred income. Refusal by AA to release saver awards when there are empty seats available at the time a flight departs is inexplicable.

I realize this explanation is complex, but, the flyertalk member being quoted above did ask for an explanation.

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diver858

Thank you, dgcpaphd.

This could indeed explain why no one at AAL HQ is bothered by the OP's report: income is replaced by "inflated" (relatively speaking) award redemption rates, should also apply to other carriers who have devalued award programs over the past couple of years.

While it may be giving management WAAAAY too much credit, this is an effective method to deplete stockpiles accumulated by credit card churners and low revenue mileage runners, who are already being squeezed by the tightening of credit card requirements, recent move to revenue-based mileage and elite qualification. As others have suggested, the long-term hope is that the current drought will eventually lead to more saaver award availability to loyal, BIS customers - even if the "good old days" are long gone.