Why I’m Afraid of American Airline’s Increased Mileage Earning
Lots of bloggers have already posted about the details of AA’s increased mileage earning for premium fares. Essentially, everything stays the same, except that people booking first or business class fares earn even more. Sounds like a win-win situation, right? You can’t earn fewer miles than before, so how can you lose?
I always get nervous when it becomes easy to accumulate miles/points in a given program. When it gets easy to earn so many miles, the programs do what comes naturally, which is devalue the programs. Recent examples include Hilton and United, and we all remember those as bloodbaths.
Imagine this, if AA announced double miles for everyone, does that mean you’re actually getting twice as miles? Well, sure, instead of earning 1,000 miles, you’d nominally earn 2,000 miles, but since they’re printing twice as many miles, they’re sooner or later going to cut the value of those miles in half (or worse). It’s not sustainable for AA to just give everyone more miles.
Really, what matters is that you earn more miles than other people. But AA’s announcement isn’t good for me since I don’t buy premium cabin tickets, which means that I can only lose from this announcement. Other people will earn more miles while I earn the same number, so I effectively am earning less than I was before.
More generally, I’ve been more nervous about AA than most bloggers because it’s been so easy to accumulate AA miles recently. The Citi Exec cards were/are a prime example, but increasing mileage earning for some customers without decreasing mileage earning at all for others can fundamentally change the economics of a program, so I’d expect a future corresponding decrease in the value of miles. In addition, at some point, miles will combine between US Airways and AA, which means that there will be even more miles floating around and competition for award seats.
We’ve been shielded from a major devaluation thanks to the merger, but I would not be surprised if winter were coming…
Printing more miles means increasing award prices. But this is such a relatively small number of miles at issue compared to the total printed each year that it won’t in and of itself be a driver of award chart change.
I do think we’ll see changes to the chart, but not because of this promo… just because some awards are so underpriced relative to the competition (eg premium awards to Asia). We won’t see it implemented right away, but it has to happen because the best values do not last over time.
I fly about 10 times per year for business, Boston to Manaus, Brazil in Business Class. I purchase my tickets using the AA.com website. And for this routing the fare offered on the site is in the “I” category, so it is considered a discounted Business Class fare. I went today, 12/15/2014, the day American announced the policy change in accumulating miles and the “discounted fare” had more than doubled from what it had been last week. The economy fares are about the same. That is a huge change and feels unreasonable.