Late on Friday I wrote about leaked changes to the American Airlines upgrade program for 2025.
The day after the American Airlines earnings call, executives held a question and answer session for employees. One question came up about mileage upgrades and how elite members were getting passed over – because waitlisting for an upgrade takes away the option to pay a discounted cash upsell amount – and so non-status members buying cheap upsells are trumping elite customers.
The company’s Vice President of Revenue Engineering took that question, and shared more than he was supposed to because they’re planning an announcement for a couple of months from now. I now have the full detail of his answer.
The employee asked about the inability to confirm upgrades in advance of travel, and non-elite members jumping ahead of those trying to upgrade by taking cheap buy up offers.
Status members are not happy with the mileage upgrades right now. 99% of the time they have to wait list it first and see if they get it. They can be waitlisting these days 9, 7 months in advance no update until the day of.
When you go ahead and waitlist them that also doesn’t give them an upsell option…so all these people that are getting upsell upgrades online are in fact going ahead of our status members.
First, here’s how CEO Robert Isom framed the way they think about the usefulness of AAdvantage miles.
When we talk about loyalty overall, it takes many forms… it’s ultimately something we do to encourage loyalty to the company, and attraction to the company, and also it’s something quite frankly where we can sell miles to generate more demand for our product. It’s a form of distribution…
In the loyalty programs, in terms of tiering our best customers..these tiers are set up in an assessment of their value to the airline, profitability to the airline, and ultimately when we talk about amenities like boarding priority and upgrades or the ability to change itineraries or even as in the case of our ConciergeKey status customers where they have people that are tracking their travel it is all based on making sure that we provide them with a sense of value that they appreciate.
There’s always a balance between what we sell outright and what we reserve for our customers in terms of making amenities available for the purposes of status. That’s something that we always have to work through, and the kind of input that you bring up…those are the kinds of balances and tradeoffs that we need that input to make sure that we’re making the right decisions ultimately. Clearly we don’t want to alienate that customer. We want that customer returning.
The one thing I will say though, and this is based on real research from outside independent parties, when you generate loyalty at American Airlines I can guarantee you that the value of the miles that you earn, and the miles you can redeem, have the highest level of utility and value measured in a monetary sense of any airline that’s out there. I’m really proud of that.
Isom is saying that AAdvantage miles are worth more than most other currencies, so they aren’t feeling too much pressure, and they want the immediate revenue from upsells to the extent they avoid losing more revenue alienating customers.
According to their Vice President of Revenue Engineering, what they’re doing is letting members pay for an upsell using miles starting next year:
We are going to be be launching upgrade offers with miles Q1 of 2025. So, that will happen relatively soon. And another great use of your miles, so for those customers that have those miles nad want to use them, they’ll be able to do so. So, more utility better product.
And… oops… Isom notes that he wasn’t supposed to say that!
And you know that we’re announcing that to the world right now right? … For everyone that may be listening in we have some great news coming up… I wish we could have five minutes back.
Regarding the changes to upgrades using miles, an American Airlines spokesperson told me on Friday,
We’re always looking for ways to give customers more certainty with their upgrades, including the option for an instant upgrade using miles as a form of payment, which we intend to offer in early 2025.
I don’t personally expect that we’re going to like the value that this represents for the miles being charged – since it’ll likely trade off directly with revenue American might get upselling for cash. Miles might be worth around a penny apiece when spent this way, though it’s possible that (as with some of their other offers) the value a member receives for their miles could vary with that member’s AAdvantage status, either initially at rollout of this feature or in the future.
