American Airlines announced this week that they would allow frequent flyers to spend their way to frequent flyer status. I welcome this news and it’s different than what United offered.
Anything You Can Do, I Can Do
There is safety in numbers. American, Delta, and United have matched new and increases in elite status requirements over the years from $10,000 spent annually up to $15,000. The levels nearly match each other with only slight variances among them.
The strategy when making unpopular changes with frequent flyer programs is to avoid disparaging the competition as much as possible and then increase the requirements to match. This includes the earning and burning of miles and points. If all the choices are the same, customers can’t run from one carrier to another and benefit. Thus, the entire airline industry benefits equally from the increases.
No single carrier has a competitive advantage in the world’s largest commercial air travel market.
The courts have seen several cases pursuing the loyalty programs for honoring their own word and have all failed. While this appears to be its own form of collusion, the courts have turned a blind eye.
We have all been stuck in the same program regardless of the logo on the tail. To this point, American Airlines’ differentiation has been limited to the alliance membership they hold.
United Changed the Game
United Airlines announced a couple of weeks ago that elite status requirements would change. Elite spending requirements per tier would increase but the distance flown was no longer important and segment requirements have been reduced.
Additionally, two game changers were introduced. The first was the ability to qualify solely by spending (and completing at least four flights on United) but the spending levels are well above what the elite levels require. The second is the ability to add elite qualifying spend and segments from partner flights based on distance and earning.
While it is perceived that only frequent flyers traveling on expensive tickets purchased by their company would benefit, that’s not necessarily the case. Frequent flyers from American and Delta already know that partner tickets can add outsized value to those seeking requalification.
I welcome being able to qualify based on spend. If a traveler flies loyally every week on expensive but short routes, why should they be penalized for the distance of the flights?
American Adds Similar Changes But Without Added Spending
American added similar distance waivers this week for top spenders but without adding additional revenue requirements for their current tiers nor reducing flying requirements for those who achieve elite status via traditional methods.
This is a “best of both worlds” solution. Adding distance waivers allows those who want to continue to qualify at lower levels to do so, but it also adds the ability for travelers who may be able to exceed them to have a fair status for their spending.
In my opinion, if qualification was the sole factor, high distance waivers put American Airlines Advantage program above Delta (who has them only for spending $250k on their co-branded American Express card), and United who requires more miles.
Luckily for those two carriers, they run a better airline than American so they don’t have anything to worry about.
Differentiation is Key
When everyone has the same frequent flyer elite program structure it hurts airlines. What stops a frequent flyer that can earn status with their carrier from switching when the requirements and benefits are roughly the same? Nothing.
Why fly American if Delta has the same requirements and benefits? Differentiation must be clear, detailed, and added value for both parties. Alaska still has the most generous program, still awards miles based on distance, and has an amazing collection of partners, but their network beyond the west coast makes them a non-starter for most of the country.
One way that Fort Worth-based American Airlines could stand out is by improving the customer experience. This starts with great customer service from flight attendants that interact with the passengers but moves to the hard product as well. American Airlines is already the largest airline in Latin America but offers sub-standard business class and scant premium economy options. The carrier could customers more service options.
I loved the distance waiver when United introduced it and love it even more now that American has something similar but without the additional spending requirements for normal qualifications. But what seems to be the most progress of all is that the three largest US programs finally have some differentiation and are moving away from matching each other. That’s better for flyers as they aim to compete for our business.
What do you think? Do you like the American distance waivers? Are you a flyer that’s affected by this?