American Airlines has eliminated its award chart and gone dynamic (sort of) removing any remaining veil surrounding its loyalty program and the airline’s ambitions.
American Airlines Eliminates Its Award Chart (*Kind Of)
American Airlines moved from a (semi) fixed award chart to a dynamic (kind of) award pricing. Let me first explain the difference between fixed and dynamic awards and why neither its previous nor current award charts qualify.
Fixed Award Chart
The term fixed award chart means that a single rate applies to an award flight between two points (in this case, regions of the world.) For example, American Airlines traditionally charged 57,500 miles between anywhere in the continental US and anywhere in the European region. The price for a short 5-6 hour flight from Boston to Dublin is the same as a 13-hour Los Angeles to Istanbul (if American operated such a flight.) It’s a great deal for those on the west coast, but not as good for those on the east coast.
The good thing about a fixed award chart is that the goalposts don’t move. Members of the program can save up for a trip over time and receive a predictable value for participating in the program. The negative side of the fixed award charts is that a limited number of award seats are available so even those willing to pay more do not have the option to do so.
American Airlines’ prior award chart was mostly fixed but had some variables for fuller flights to allow those with more points the ability to secure the flights they wanted even if the price was higher.
Dynamic Award Chart
A Dynamic award chart adjusts the price of an award in line with demand. Flights with fewer available seats cost more than flights with a high number of available seats. Southwest, Spirit, and JetBlue Airways all use dynamic awards whereby the value of a point is more or less fixed at about 1.4¢ (Southwest and JetBlue) down to about a cent on Spirit.
Oddly enough, “dynamic” is essentially fixed to the cash price of the flight. If a flight costs $140 on Southwest or JetBlue, you should expect to pay 10,000 points. If that price drops tomorrow to $80, the cost will drop to 5,714 points and if it goes up to $200 it will cost 14,285 points. The goalposts move as the flight prices change and what might have cost you 20,000 points last year could be 30,000 this year or 15,000 depending on the price available at the time of booking.
Kind Of/Sort Of
With American’s prior award chart, it was kind of fixed, in that awards often cost more than the stated chart because all of the cheap seats have been purchased. However, in a dynamic system, the awards will also go down to as low as possible. For example, during the pandemic, trans-continental flights from Los Angeles to Boston sold for as little as $16 each way. On Southwest, this flight would have cost 1,142 points in a true Dynamic award program, but American didn’t lower the program below its floor of 5,000 points.
Due to busy flights with few open seats, it’s hard to tell just how low American will go and how truly dynamic it will be. This writer assumes its past behavior will predict future performance: The program has no upper limits for how dynamic it will be, but does have a basline minimum for how low it will go in a new dynamic program. It was kind of fixed before, and it will be sort of dynamic now.
A Sea-change In Loyalty Programs
As I mentioned in this article for Forbes, American’s Loyalty Points program represented a sea-change whereby loyalty programs removed some of the veil of just how important transactions with its partners are to the carrier. It adjusted earning for elite status to include more or less all transactions (except service adjustments, credit card sign up bonuses, etc.) The carrier had added a revenue component to elite qualification years ago, but now the airline has made it clear that it’s a business and it wants more share of your transactions.
There was a veil that lasted for some time that frequent flyer programs were there to reward frequent flyers. If a flyer was loyal to an airline long enough, they’d get that free trip to Hawaii by flying the airline over and over. With the shift in Loyalty Points (I believe based on nothing other than hunch that United is next to move in the same direction) that veil went away. And now, much to the chagrin of flight attendants pitching credit cards, that goal post of a trip to Hawaii is no longer in view. It could be, it might be, no one really knows.
Dynamic award charts lift the final veil that American Airlines and its Loyalty Points are anything more than an ATM, that loyalty is a one-way street, and that the business is really a marketing program that happens to own an airline. The financials have made this clear for years, and it’s true of most of the major flag carriers in the US, but American is simply now saying the quiet part out loud.
Loyalty programs like American Airlines Advantage/Loyalty Points have always been about earning money from customer transactions with the promise of future travel goals. By obscuring the value behind images of palm trees, loyalty programs had the advantage of driving marginal purchases through that veil. But with a question mark for award prices and a dyanmic when it’s conveninent approach, will consumers continue to perform for the airline?
What do you think? Without the goal posts, how long before consumers no longer see the value in driving their marginal business toward the airline? How long before other carriers do the same?