This post had been worked on and mostly written before the surprise changes made to both programs this morning. Because of that, it has been edited to better reflect the current situation and to look at the future situation.
The Upcoming AA/US Award Chart
This morning, US travelers woke to find that US Airways and American Airlines had made very exact changes to their award program. There was not really overlap and non of the changes are enough to make people forsake the programs entirely. The most detrimental of changes effect the travelers who are looking to get the most value out of their AA or US Airway miles. To see the changes made, check out this post from this morning.
If anyone thinks that the changes made this morning reveal the final award chart for the new American Airlines, they are most certainly mistaken and probably very optimistic. While I do not have any inside knowledge of what is going to come, I know that these changes are not the final pieces. Unfortunately, these changes made this morning only bring us more of an anxiety over what will be unveiled with the final award chart. Let’s look at some things that could give an indication of how bad it may be.
Whenever a loyalty program makes changes that are done quietly and with little advance notice, it is clear that they are/were hoping that the changes may slip by most of their customers. It is also clear that they imagined that any notice may have had many customers book the awards that they are trying to change and that might have been too costly.
Another bad part about making a quiet, sudden change like this is that it had not been done in the same fashion by Delta, United, or Southwest when they made their devaluations. Since AA/US Air is the last last of the big airlines to make any devaluation changes, they have had the advantage of watching the public reaction to the other airlines’ changes. They know that any devaluation is going to be met by dismay. Significant changes are going to be met with an outcry and possible bolting of their elites. The one thing that was a saving point for the other airlines is that they had given ample time for bookings to be made. Since AA/US Air did not give any such notice on their award gems, it is fair to expect that this is definitely not the last and it will be much worse when it does happen – for that, they will give some sort of notice.
Mass Mile Production
In the case of the Delta devaluation, that was really only a matter of time before that would happen because Delta had been minting Skymiles at an excessive amount for a while. Remember the days just a couple of years ago where credit card bonuses were at 100,000 miles/points? American Express had offers for their Platinum card and Premier Rewards Gold card that were 75,000+40,000 and 100,000 miles. On top of that, Delta kept running transfer promos ranging from 25% – 50%. The best was that any amount over 100,000 Membership Reward points would give a 50% bonus PLUS 25,000 Medallion Qualifying Miles (enough for Silver Medallion). That was obviously unsustainable and Delta needed to do something substantial to start reducing the miles from their books.
Fast forward to where we are today and we have two large frequent flyer programs that will be merging. With US Airways, you have an airline that has been “selling” miles (via sharing/purchasing promos) at least once a year at 1.1 cents per mile. They ran that promo and the promo that puts the purchasing price at 1.88 cents per mile several times since October (including this week). American Airlines has begun to sell miles through promos more often as well, including their best promo offer of 50% they offered in December.
There have been thousands of people who have taken advantage of these promos. That means that there are hundreds of thousands more miles in the two programs than there were this time last year. Once these programs are merged, it is going to create a massive base of frequent flyer miles that exist and have not been spent. There is no way the program will allow that many miles to be redeemed at current levels. With Delta, it did last for quite a while, but their miles and award calendar were terrible to use. It forced a lot of people to redeem their miles at higher tier levels, thus wiping miles off the books a lot faster than it would otherwise. With AA, their partner availability and calendar are good enough that I do not anticipate this being the case with them.
Credit card bonuses
The next thing we have the is the credit card bonuses from Barclays over the last couple of years. People have been able to get multiple bonuses on the US Airways Mastercard – even on the same day for the same card! We also have the Citi AAdvantage cards that use to be at 75,000 miles and people could also get two of those bonuses on the same day.
Most recently, and something that adds to my fear of what is to come, is the 100,000 AA mile offer from the Citi AAdvantage Executive card. Not only did thousands of people apply for this card, but many of them applied and received the bonus again and some for a third time. My guess is that the miles that have been given out through this card total a minimum of one billion miles. That is a lot of miles to have on their books. These were just recently earned so most have not been spent.
Shopping portal bonuses
Last year, eBags ran a promo that was giving 35 AA miles per dollar. This promo also generated millions of AA miles. There have been smaller offers as well, but this was the big, recent one.
The Competition’s Charts
It is a sure thing that the new AA management team has been keeping a close eye on the aftermath of the United and Delta devaluations. If we look at the new charts, here are some things of note:
- Premium cabins were most affected – if you were relying on your United and Delta miles to get you into international business/first class cabins, the required amount of miles went up.
- Partner awards went up – Delta has yet to release their award calendar for flights departing from zones other than the US so it is not known what it may look like for partner awards. United truly gutted their premium awards on partners, doubling the mileage requirement in some cases.
- Cutting the award earning – Delta has announced that they are cutting the amount of miles a majority of their travelers will earn, starting in 2015. This will make people rely even more on credit cards to earn their miles.
So, What Is My Fear?
My guess is that AA/US Air will release their new award chart sometime after July 1. The chart would most likely go into affect in early 2015 which would give travelers a few months notice. This would be in keeping with the other airlines’ devaluations (as far as notice being given with sufficient warning).
My fear is that they will at least equal United’s award levels for premium redemptions. Delta does not allow award bookings in international first class, so it would more than likely be United’s chart that AA compares itself to. As for the redemptions, I also fear that they will totally gut partner redemptions. Cathay Pacific has one of the nicest first/business class cabins and availability is pretty good. You can currently fly Cathay Pacific first class one-way for 67,500 to Southeast Asia! That is a great redemption! To put things in perspective, United requires 130,000 miles one-way! That is double the amount that AA charges for partner redemptions to the same zone.
In addition, AA has some incredible partners with excellent premium cabins. Below is a list of some with reviews about them (most of the reviews link to One Mile At A Time who has some of the best reviews of these aircraft):
- British Airways
- Cathay Pacific
- Etihad Airways
- Japan Airlines
- Malaysia Airlines
- Qantas Airways
- Qatar Airways
- TAM Airlines
If you check out those reviews, you will find that you can book some amazing awards with your AA miles! Here is AA’s current partner award chart:
With a couple of exceptions, you can fly to most places in the world on AA’s partners using no more than 67,500 miles (one-way). That is definitely an amount that is not going to last for long, especially when it is the only airline left with that kind of award. In fact, just to put it in perspective again, that amount will not even get you into a business class cabin on United awards using partners! That’s right, the same amount for first class on an AA partner will only get you a seat in economy on United partners.
The recent Citi AA Executive bonus of 100K also shows us that something like this is coming before the year is out. My reasoning behind this is that Citi has just pulled in thousands of customers who are paying $450 for their card for the first year. I know the timing of when this bonus was released (end of January) is not a coincidence. Citi knows that they are not going to be able to keep the vast majority of these customers for a second year. They also know that to have a new award chart released within the next couple of months will cause a stampede of customers using the award news as a reason to cancel those cards and be issued a prorated refund on that annual fee.
The only people who will come out relatively unscathed with the new award chart will be those who redeem their miles for economy class. With the other airlines, those levels just went up a couple of thousand miles and AA will most likely follow suit.
What Does This Mean For You?
These are simply my speculations and fears from what we have already observed. No one knows exactly what is going to happen with AA, but we know that this morning’s news is not the last we have heard on the AA/US award chart. My advice to you is to begin to make plans on what you are going to do with your AA/US Air miles. If you are in a position to book soon, do it. If not, chart out what you need as far as miles and get it done.
If you are planning on booking economy tickets with your award miles, I think you should be ok. They may go up a couple thousand but nothing drastic. I would even venture to guess that AA/US Airways will keep their off-peak awards intact (like 40K miles to Europe with AA during off-season). They may decrease the allowable season or increase them slightly, but I think they will stay mostly untouched.
If you are not certain what you want or your plans are not set in stone, still try to make bookings before the middle of the year comes. These flights do not have to take place before then. If you do need to cancel those flights later, you will need to pay a $150 fee. With AA, it is actually better to book more people out of the same account. If you need to cancel for a family of 5, for example, you will only be on the hook for $250 total since they only charge an additional $25 per person fee after the initial $150, if the award miles came from the same account.
I know it is frustrating. Many people save miles for years for that special trip. To have the rug pulled out from under them is never pleasant. Use this opportunity to start planning some trips that you may not have taken otherwise. Pick a place (or a race) and just start booking! Your miles will never be more valuable than they are today.