Nov062015

What if AA goes revenue-based? This dummy’s guide.

American Airlines AAdvantage has changes in store for 2016 with a revenue-based model for earning frequent flyer redeemable miles, according to Jon in NYC, who posted leaked AAdvantage 2016 changes on TravelingBetter.com.

Here is what a restructured American Airlines AAdvantage program might look like in 2016.

AAdvantage Elite Status

  • No minimum spend for elite
  • No $-based elite earning (but bonuses for higher spend)
  • No change to level for elite
  • No change to segment qualification.
  • Systemwide Upgrades SWUs for Executive Pplatinum cut from 8 to 4 but with definitely possibility/mechanism to earn more.
  • earning of 500-milers goes from 4 every 10K to 4 every 12.5K.

Elite Qualifying Miles – EQMs earn rate:

  • Full fare First/Business F/J 3 EQMs per mile flown
  • Discount fare First/Business 2 EQMs per mile flown
  • Full fare Y/B 1.5 EQMs per mile flown
  • Discount Main Cabin 1 EQM per mile flown

Redeemable Miles – RDM will be entirely reworked in late 2016. ($$ x status)

Rumors have been flying around for the past couple years about AAdvantage changes to a revenue-based ,since Delta Airlines and United Airlines adopted revenue-based miles earning. The basic concept is frequent flyers earn redeemable miles based on the airline ticket price. This is a model that rewards flyers on higher-priced tickets with more redeemable award miles.

American AAdvantage Redeemable Miles

Currently redeemable AAdvantage miles are earned based on the flight miles flown and booking code for the class of service. This is the same standardized system that has been around for 30 years.

The potential changes leaked today indicate

  • American Airlines AAdvantage will retain the one mile flown earns one elite qualifying mile (EQM). Assuming other factors are unchanged, 25,000 flight miles = 25,000 EQM.
  • RDM redeemable miles earned will change to a revenue-based system similar to Delta and United sometime in 2016.
  • No minimum annual spend will be required to earn AAdvantage elite tiers for Gold, Platinum and Executive Platinum. These thresholds currently stand at 25,000 EQM for Gold elite; 50,000 EQM Platinum; 100,000 EQM Executive Platinum.

The good news is there is no indication in the leaked changes AAdvantage will adopt a minimum spend for attaining elite status and earning EQM will not be affected when flying American Airlines and codeshare flights.

I earned American Airlines AAdvantage Executive Platinum elite with a fast-track promotion spending less than $1,500 in airline tickets last month with three round trip flights between California and Scandinavia. To earn United 1K requires a minimum of $12,000 in qualified spend, in addition to flying 100,000 miles. To reach Delta Diamond Medallion requires 120,000 miles + $15,000 in spend. The spend component only applies to U.S. members of these frequent flyer programs.

AA Codeshare Flight Numbers and British Airways Operated Aircraft

British Airways flights are affected by officially released AAdvantage changes announced this week for BA operated and marketed flights to 50% and 25% base miles as of February 1, 2016. The changes reduce EQM earned for British Airways discount economy flights when they are not marketed as an AA codeshare.

This screenshot from aa.com shows several flight options for a Stockholm ARN to San Francisco SFO ticket. Every flight on the page is either an AA operated flight or an AA codeshare flight for British Airways or FinnAir operated flight segments.

AA.com ticket search for Stockholm ARN to San Francisco SFO

AA codeshare flights

A $454 round trip ticket from Stockholm to San Francisco is a discount economy booking code ticket. There are 12,556 flight miles for a round trip ticket routing ARN-LHR-SFO-LHR-ARN.

An AAdvantage base member earns 12,556 EQM and 12,556 RDM redeemable miles for this flight under the current earning rules for AAdvantage.

In a revenue-based RDM AAdvantage program, the redeemable miles earned will likely be far lower than 12,556 RDM.

Will American Airlines AAdvantage copy the same miles earning rates as Delta SkyMiles and United Mileage Plus?

Delta SkyMiles and United Mileage Plus both have a revenue based frequent flyer program. In both programs, a base member without elite status earns 5 redeemable miles (RDM) for every $1 spent on the base fare of an airline ticket purchased through the airline’s websites. The higher your elite status, the more miles earned per $1.

Delta Airlines SkyMiles

  • General member = 5 miles/$1
  • Silver Medallion = 7 miles
  • Gold Medallion = 8 miles
  • Platinum Medallion = 9 miles
  • Diamond Medallion = 11 miles

United Airlines Mileage Plus

  • General member = 5 miles/$1
  • Premier Silver = 7 miles
  • Premier Gold = 8 miles
  • Premier Platinum = 9 miles
  • Premier 1K = 11 miles

American AAdvantage only has three elite levels with Gold, Platinum and Executive Platinum. A system of 5, 7, 9, 11 miles might be a logical system to adopt, if matching UA and DL. That is purely my speculation.

[Update November 7: Another leak after this post was published shows the possible earn rate for an American AAdvantage revenue-based model as:

American Airlines AAdvantage

  • General member = 5 miles/$1
  • Gold = 7 miles
  • Platinum = 8 miles
  • Executive Platinum = 11 miles ]

 

Example of Earning Revenue-Based Redeemable Miles

Delta Airlines/Skyteam Air France and KLM

San Francisco SFO – Budapest BUD

SFO-BUD $687 DL Nov 17-27

Earning Delta SkyMiles Redeemable Miles (RDM)

Delta Airlines San Francisco SFO to Budapest BUD economy V booking code with a flight routing of 13,199 miles.

Ticket price $686.80. Base fare for earning redeemable miles = $553 USD.

Redeemable Miles (RDM) earned in Delta SkyMiles on this $553 base fare ticket range from 2,765 RDM miles for a Delta SkyMiles base member to 6,083 RDM for Delta Diamond Medallion.

For three decades, the general rule for earning redeemable miles in frequent flyer programs was one flight mile earned one redeemable mile for award tickets. Since the financial crisis of 2008, the greatest change in frequent flyer programs is the bulk of frequent flyer miles earned shifted away from redeemable miles earned for actually flying on a plane to redeemable miles earned through credit card spend. The financial system co-opted travel loyalty programs in a big way since 2008. While this has been a boon for credit card marketing travel bloggers and the minority of travelers who play the manufactured spend game, frequent flyer programs in general have become far less lucrative for the casual traveler.

Delta MQMs are still based on distance flown, and MQSs are still based on segments flown.

The 2015 Delta SkyMiles flyer on the San Francisco-Budapest ticket still earns 13,199 MQM (Medallion Qualifying Miles) towards 25,000 MQM needed for Delta Silver elite, however, as a U.S. member in Delta SkyMiles, you still need to spend $2,447 to reach the $3,000 MQD (Medallion Qualifying Dollars) to earn Silver Medallion elite status.

Or buy a Delta credit card and spend $25,000 for a Medallion Qualifying Dollars waiver to elite status. Delta Airlines link: Earning 2016 Medallion Status.

MQD Waiver: The MQDs requirement for the qualification year will be waived if you make $25,000 or more in eligible purchases in 2015 with your Delta SkyMiles Credit Card from American Express. That spending is tracked everywhere you see your MQDs.

EARNING 2016 MEDALLION STATUS

Delta Airlines SFO-BUD ticket exemplifies the change from past practices when a flyer earned 13,199 redeemable miles based on 13,199 flight miles for this round trip flight San Francisco to Budapest. A Delta SkyMiles base member in 2015 earns only 2,765 RDM for the flights. Delta SkyMiles Diamond Medallion only earns 6,083 RDM for this $687 ticket.

Basically, you need to have a Delta SkyMiles credit card strategy as a casual traveler, if you want to reach high elite status without Delta high elite flight spend requirements.

Any safe haven for U.S. frequent flyers in 2016?

American Airlines was a safe haven for budget flyers in 2015 with all AA economy fares earning 1 RDM for 1 flight mile on AA flights and AA codeshares.

If the leaked details about 2016 changes to American Airlines AAdvantage turn out to be true, then AAdvantage elite status for 2017 will still be inexpensive to earn with no minimum annual spend requirement changes similar to Delta SkyMiles and United Mileage Plus.

Budget flyers like me will still be able to fly 50,000 EQM or 100,000 EQM spending only $2,000 to $4,000 and re-qualify for AAdvantage high elite status with flight benefits like international airport lounge access and upgrades. There is no way I will spend $10,000+ on airline tickets in 2016.

Now if my $3,000 in American Airlines/Oneworld ticket spend earns only 15,000 or 33,000 redeemable miles…well, the future of Loyalty Traveler may become…

Please sign up for this credit card airline offer from my affiliate link and help me spend more money on my airline tickets.

About Ric Garrido

Ric Garrido of Monterey, California started Loyalty Traveler in 2006 for traveler education on hotel and air travel, primarily using frequent flyer and frequent guest loyalty programs for bargain travel. Loyalty Traveler joined BoardingArea.com in 2008.

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Comments

  1. Great post, thank you!
    Based on the headline (“the dummy guide”), I thought this would be something like: “Basically, everything good about AA is going to end, so during 2016 you better concentrate your efforts in earning status with Alaska”.

  2. Great post. The only person on BA to keep it real while everyone else pretends this isn’t as bad as it sounds.

    Bad form on AA for changing so late in the game.

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