American Airlines offers an incentive for business customers called American Business Extra. In case you missed my post from yesterday detailing business incentive programs and their benefit using the Skybonus example, check it out first here.
My favorite program
Why is American Business extra my favorite program? The value of American’s award chart (especially now with US Airways flights eligible) is much higher than that of Delta. Additionally, the value per point is significantly higher. Earning in the program is a LOT less complex than Delta’s Skybonus. With every ticket sold as American ticket stock (001-XXXXXXXXXX) you earn “2 Business extra points per $10” in airfare. Why they didn’t just say 1 point per $5, I have no idea (actually it’s because the rate was formerly 1 per $10, and they doubled it).
Here is the award chart for Business Extra. An important distinction is that American counts US domestic awards as one region with Mexico, drastically increasing the value of this, the lowest available award. The domestic US value is increased for Business Extra points because the cost of traveling to Mexico City (high on my list) can be as much as $600-800 depending on the time of year and departure city and is included as a possible destination for just 2000 points the same amount required for flying from Chicago to Milwaukee.
Because the award chart is one continuous form (see here), I have broken the awards into saver level (some forward notice required) travel from the regions and excluded the “AAnytime Awards” because the point to dollar value would rarely be worth it.
At a price of $500 maximum for a domestic US ticket, each Business Extra point is worth a quarter. If you use the ticket from a smaller US city (we used Omaha last time) and you redeem for a Mexico City itinerary valued at $600-800 each point could be worth as much as $.40 per point.
There are some equally good short haul redemptions to consider.
Sticking with Omaha (because it can be an expensive market, not everyone lives in big coastal cities and I try to show value for all), I recently shopped flights to Curacao and to Lihue. Dates in the spring OMA-CUR went as high as $925, and Lihue went to $1100. That makes coach redemptions for the Caribbean a value of $.385 per point, and Hawaii $.366/point. Northern South America tends to be on par if not slightly lower than the Caribbean rate.
But getting to where I would spend my points, here are redemptions for Europe, Southern South America (Argentina, Chile, Brazil, Uraguay, Paraguay, etc.) and Asia.
I included first class for Asia because of American’s new first class product which is on par with major International carriers.
Using a price point of $800 for a European ticket value (the same as used when looking at Skybonus) in coach, and $2500 for business class, Business Extra has a value of $.18-35/point. South American tickets are closer to $1000 and $3000 based on recent searches giving a value of $.22-41/point.
Asia, however, creates a value of $.31-62/point. The highest value is in the first class availability, the excellence of the product and of course the absence of a Delta first class (they only offer a business class product).
Comparing Skybonus to Business Extra
Yesterday we used an example whereby Joseph, an office manager that typically books travel for his business, purchased a ticket for Denise (an office employee) at a cost of $568 + $10 in taxes. This ticket would result in 117 points regardless of whether this is a coach or business class ticket.
In order to establish how much value this returns to a business travel manager, I would use the same base values for cost of a coach ticket as yesterday.
Assuming that the ticket was coach and Joseph wanted to redeem for a coach award in the domestic US, the Skybonus points would be worth $.005 with comparison to $.25 for Business Extra points. However, it really doesn’t matter whether you have 100 yen or $1 if they buy you the same Coca-Cola.
Based on our example, Denise’s ticket would net 3,408 points at a value of $.005 = $17.04 worth of value. Based on the same ticket purchased on American, the fare would return 117 points at a value of $.25/point or $29.25 in value. A stark contrast in favor of Business Extra. However, if the same ticket were purchased for first class there would be a total of 17,040 Skybonus points and a net benefit of $85 which blows the same $29.25 for Business Extra out of the water.
The real question is whether or not your employees tend to fly business/first class or whether or not they fly coach. If they fly coach, there is no question that Business Extra is the better way to go.
Don’t Lose Sight
The redemption is more important than the earning potential. I don’t collect Virgin America Elevate points because they don’t fly to a city close enough to me for me to use them. Keeping in mind that I prefer to earn in coach and redeem in business, my arbitrage is greater with American. For example, using only coach tickets for myself and my employees, to earn, but redeeming for a business class flight to Asia, I would have to book $36,000 in revenue tickets (without any bonuses which often come into play). On Delta, I would have to spend over $111,650! That’s insane.
I know that those numbers look big, let’s make it more practical. For a coach award on American in the mainland US, I would have to spend $10,000 (something a business might do to fly a team out for one meeting), but on Delta, it would be $14,166.
The real difference between the two is that for Delta, the best value is to earn in business class and redeem for coach. For American, the best value is to earn in coach and redeem for business.
The question you have to ask yourself is which you fly more and where you want to end up when it is time to redeem.
I have access to 9 referral links (a good friend generously contributed 4 of theirs as well). For signing up for the program via the referral link both the referrer and the referred receive 1,000 Business Extra points. Compared with the Skybonus referral points of 5,000 or 6% of a domestic US ticket (assuming the referral also flies before the end of April), the American Business Extra bonus of 1,000 points (no travel required) is significantly more valuable. The signup bonus nets at minimum 3 Admiral Club passes or equates to 50% of the required points for US Domestic ticket.
Have you joined Business Extra or another program? How has your experience been?