We’ve hinted at it in previous columns, but the other shoe has finally dropped. According to an announcement made before Thanksgiving, American Airlines will become the last of the big three major airlines to dole out miles solely based on how much you spend rather than how far you fly. American and US Airways have only recently completed their merger, and this led to a slight delay in American’s decision about how the combined entity will move forward with its loyalty program.
Many predicted American would join the chorus, and they did. Alaska Airlines is now the only major U.S. carrier offering miles based upon distance flown—at least for the time being.
Traditionally, airlines have offered miles based upon how far you fly. This has been a boon for travelers who fly long distances, but from an airline’s point of view, it might not have rewarded the right fliers. Airlines are businesses and they have shareholders to answer to; this new rewards model certainly favors the shareholders’ interests.
Mind the gap: American allows some breathing room
There is a bit of a silver lining, however. American does not plan to change its program until sometime in the second half of 2016, which gives travelers a bit more time to rack up miles the old-fashioned way.
Also, American is not adding a spending requirement for achieving elite status, which was one of the changes implemented by United and Delta. Under that rule, fliers must spend a set amount of money in addition to flying a certain amount of miles to earn elite status with the airline. Its absence might make American’s other changes a bit easier to swallow.
How much and for whom?
The new system is made more complex by the fact that miles are awarded through a formula that takes into account both the cost of your ticket and your status level with the airline. Moreover, the “cost” is not the total amount that you pay for the flight, but rather the base fare, excluding taxes and surcharges imposed by airports.
In the case of American, no-status fliers will earn five miles for every dollar they spend, Gold-status fliers will earn seven miles per dollar, Platinums will get eight miles per dollar, and the highest tier, Executive Platinum, will be rewarded with 11 miles per dollar. To figure out the exact number of miles you’re getting, you’ll need to know the base fare of your ticket. You can make an educated guess because it’s usually close to the total amount paid.
Loyalty takes on new meaning
In the past, many fliers were willing to pay a premium to fly with their preferred carrier to keep their miles and status safe. The recent changes may cause travelers to shift their loyalty to what is most convenient—taking into account such factors flight times, types of aircraft, airports, onboard amenities, ease of upgrades, and lounge access—or cheapest. And airlines will be offering their best benefits not to their most frequent (“loyal”) customers but to those who spend the most with them.
Airline company shareholders will argue that, indeed, those are the customers to target with rewards, but in reality, high-end travelers may choose the flights that best fit their needs since they are paying top dollar rather than staying with the same airline all the time. The entire concept of loyalty is upended in this new system since many travelers may opt for the cheapest flights rather than sticking with the airline that once gave them the most benefits.
Redemption gets costlier, too
As with similar program modifications by Delta and United in recent years, American also took this opportunity to raise the amount of miles needed to buy upgrades. For example, it used to cost 67,500 miles to fly first class between North America and Hong Kong; now it costs 110,000 miles one-way. Business class between the U.S. and Europe jumps from 50,000 miles to 57,500 miles each way.
Fortunately, domestic economy class awards mostly remain the same, and a new option for flights under 500 miles allows fliers to redeem 7,500 miles for coach and 15,000 miles for a premium cabin on those short-haul routes—another sliver of silver lining.
Should you cash in everything now?
Don’t fret. Some experts have been crying wolf—urging you to unload all your miles—for a decade. But there’s no need to rush to redeem all your miles on trips or merchandise, even though some redemptions are becoming more expensive. Keep earning and burning as needed, but if you do have a trip coming up soon, try to book it before March 22 (when American’s new award chart takes effect) so you can cash in at the lower mileage rate.
No one ever said frequent flier programs were easy to understand, but airlines sure do like to make things complicated. This change will surely not be the last, and just like the stock market, miles gain and (mostly) lose value frequently, so pay attention to how and where you earn your miles, and make the most of them when you can.
