American Airlines is making clear that it would rather sell first class seats than give them away as complimentary upgrades. That may make perfect business sense, but it also chips away at one of the core reasons travelers chase elite status in the first place. Is this a penny-wise, pound-foolish approach or does the “if you want first class pay first class” mantra win out?

American Airlines Wants To Sell First Class Seats, Not Give Them Away To Elites

American Airlines CEO Robert Isom is not exactly hiding the strategy: American wants to sell more premium seats and give away fewer of them as complimentary upgrades to AAdvantage elites.

As flagged by View From The Wing, Isom recently spoke about American’s premium strategy and the airline’s belief that customers are increasingly willing to pay for first class, premium economy, and extra-legroom seating rather than relying on upgrades.

American, despite often lagging its peers in execution, has no reason to leave money on the table if passengers are willing to pay for the seat and in my experience, prices it a level that makes it very hard to turn down. For example, on a recent trip I was offered the following buy-up during check-in from Palm Springs (PSP) to New York (LGA) via Phoenix (PHX) and Chicago (ORD):

PSP-PHX – $68
PHX-ORD – $169
ORD-LGA – $194

Honestly, the pricing is compelling…about $50/hour, which is my threshold pricing to upgrade on a domestic flight without a lie-flat bed.

I knew I wouldn’t get upgraded as a Gold member, but the $169 for the Phoenix – Chicago flight struck me as a great deal.

And from American’s perspective, the logic is simple: a first class seat sold for cash is more valuable than a first class seat given away to an elite traveler at the gate.

That is especially true as American adds more premium seats to aircraft and tries to close the revenue gap with Delta and United. The airline is not investing in more premium capacity because it wants to hand it out free to Platinum Pro and Executive Platinum members. It is doing so because it thinks more people will buy up.

That’s bad news and good news at the same time.

This Makes Sense For American

Let’s be fair to American Airlines: this is a rational business move.

If customers are willing to pay for first class, American cannot be begrudged for selling first class. Airlines are not charities, and elite upgrades are not contractual entitlements. Complimentary upgrades have always been subject to availability, and if fewer seats are available because more people are buying them, that is the market working.

In that sense, elites cannot really complain that American is selling the product it has long tried to monetize.

For years, U.S. airlines trained travelers to expect domestic first class as an upgrade lottery prize. That was a strange model. First class cabins were often full of passengers who had not paid for first class, while airlines simultaneously complained that they needed to improve profitability.

Now the model is changing. Premium cabins are a revenue product that is working thanks to smarter pricing and incessant buy-up offers.

But It Undermines Elite Status…

The problem is that this also undermines the value of elite status.

Complimentary upgrades have long been one of the emotional hooks of airline loyalty. Even if the upgrades did not always clear, the possibility mattered. You stuck with one airline, endured worse routings, paid slightly more, concentrated your spend, and in return you had a shot at first class.

If that shot becomes increasingly implausible, elite status starts to feel less compelling…it was a key driver that moved me to step off the United Premier 1K hamster wheel last year (and I’m very much enjoying life as a “free agent” flying whatever airline suits me best).

Yes, elite members still receive benefits: priority check-in, priority boarding, preferred seats, fee waivers, better phone support, same-day flight changes, and mileage bonuses. Those benefits have value. But let’s not pretend they carry the same emotional weight as sitting in first class.

An upgrade is tangible. It changes the experience, turning a miserable flight into a tolerable one or a tolerable flight into a pleasant one. Upgrades are the sort of benefit that makes a traveler feel recognized…and spend more money on future tickets.

If American sells nearly every premium seat and leaves elites fighting over scraps, AAdvantage status becomes more transactional and less aspirational and that may cause more people to act like me…forget elite status, I’ll just buy what makes the most sense.

Airlines want customers to be loyal, but they also want customers to pay for everything that used to make loyalty feel special. At some point, travelers will ask what elite status is really worth if the best benefits are increasingly monetized away. American may respond that the most loyal customers are precisely the ones willing to buy premium cabins, not wait for free upgrades. That is probably true for some high-value customers. But it is also a very different value proposition from the one many AAdvantage elites signed up for…and there is really no need for elite status if you are buying first class tickets anyway, right?

CONCLUSION

American Airlines is doing what makes sense for American Airlines: selling more premium seats and relying less on complimentary upgrades. I cannot fault the business logic. If customers will pay for first class, American should take the money.

But this does erode the value of elite status. Complimentary upgrades were never guaranteed, but they were a cornerstone of the loyalty bargain. If American keeps shrinking that upgrade pool, elite status becomes far less interesting. I don’t think there’s any turning back, but Isom’s euphoria over denying elites complimentary upgrades may turn out to bite.

image: American Airlines