American Airlines AAdvantage Changes – Effect on Redeemable Miles

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A couple of days ago I published a post discussing how the recently announced changes to the AAdvantage Program would affect award redemptions by European based AAdvantage members (American Airlines AAdvantage Award Chart Devaluations – Euro Travelers’ Viewpoint) and it wasn’t pretty. In this post I’m going to show how the changes to how we earn redeemable miles, being introduced from late 2016, makes everything doubly bad. Yep, I’m full of good news this week!

I’ll start out with a quick recap of how mileage earning works with the AAdvantage Program as it stands (pre any changes).

One term you’ll see me mentioning quite a few times is “Redeemable Miles” or RDM – this just refers to miles that can be used for booking/purchasing award flights.

The AAdvantage program as it stands

The AAdvantage program in its current form is a distance based loyalty program, which means that passengers earn RDM based on the distance they travel.

Travel on American Airlines

• Each passenger earns 1 RDM for every mile flown – irrespective of fare code/ticket price.
• Passengers in Business Class and First Class earn an additional 50% “class of service bonus”
• AAdvantage Elite members earn a bonus depending on their status:
  • Gold – 25%
  • Platinum – 100%
  • Executive Platinum – 100%

Travel on Partner Airlines

• Each passenger earns RDM based on the fare code on which the passenger is traveling. On most partner airlines the cheaper the fare the fewer RDM are awarded. The actual number of RDM earned varies from partner to partner and full details can be found here.
• Passengers in Premium Economy, Business & First Class will earn “class of service bonuses” ranging from 25% to 50%.
• AAdvantage Elite members earn a bonus depending on their status:
  • Gold – 25%
  • Platinum – 100%
  • Executive Platinum – 100%

Example

So, for example, an AAdvantage Gold member flying a round trip between Los Angeles and London (approx. 10,900 miles in distance) on American Airlines in Business Class would earn:

• Base RDM = 10,900 Base – distance traveled
• Class of service bonus – none
• Elite Bonus RDM (25%) = 2,725

Total RDM Earned = 13,625

But all of this is about to change. From “late 2016” (i.e when American’s IT department can figure out how to recode the software) American is completely changing the way we earn Redeemable Miles.

The new AAdvantage program

Sometime towards the latter part of next year (speculation says Q3…but who knows?!) American Airlines will be moving from a distance based loyalty program to a price based loyalty program for travel on tickets issued by American Airlines.

For travel on tickets issued by partner airlines the distance based model will be retained.

Per AA.com:

Earning in 2016 and beyond

In the second half of 2016, award miles for travel on American marketed flights will be calculated based on what you pay for your ticket (base fare plus carrier-imposed fees, excluding any government-imposed taxes and fees) and your elite status; the higher your status, the more you’ll earn.

5 miles/U.S. dollar – AAdvantage member
7 miles/U.S. dollar – Gold
8 miles/U.S. dollar – Platinum
11 miles/U.S. dollar – Executive Platinum

Earning award miles for travel on most flights marketed by partner airlines will be based on a percentage of the flight distance and the fare class purchased. Exact calculations will be available in the future.

Not only will miles now be awarded based on the cost of a ticket but the bonuses are changing too. The very last question in the FAQs (here) asks:

Will I still earn class-of-service bonus miles and elite status bonus miles when these changes are implemented?

And the answer:

For American marketed flights, where we are awarding miles according to the base fare of your ticket.

The class-of-service bonus will no longer be a separate bonus, but is part of how we’ll calculate the base miles earned when multiplying the base fare by 5 (and more for elite status members).

Elite status members will earn bonus miles according to their elite status level:

• Members who don’t have elite status will earn five award miles per dollar spent
• Gold members will earn a 40% bonus (two additional award miles per dollar for a total of seven)
• Platinum members will earn a 60% bonus (three additional award miles per dollar for a total of eight)
• Executive Platinum members will earn a 120% bonus (six additional award miles per dollar for a total of 11)

Thats a very long-winded way of saying:

For tickets sold by American Airlines there are no other bonues to be taken into consideration. They’re all wrapped up in the number of miles/dollar you earn based on status.

For tickets sold by partner airlines, the existing methodology will prevail.

So what does this mean in practical terms? Going back to the example of the AAdvantage Gold Member I used earlier:

• Airline selling the ticket: American Airlines (so the new AAdvantage rules will apply)

• Class of Travel: Irrelevant – AAdvantage now calculates RDM based on ticket price alone

• Distance: Irrelevant – AAdvantage now calculates RDM based on ticket price alone

• Ticket Price (excluding taxes): $1,054 (based on a random set of dates I used on AA.com)

Under the latest changes to the AAdvantage Program, AAdvantage Gold members will earn RDM at a rate of 7 x the price of their ticket (excluding taxes).

New System: 7 x $1,054 = 7,378 RDM

Old System = 13,625 RDM (see earlier in this post)

That is a 46% decrease in Redeemable Miles earned.

How would the calculation work for other Elite Status Holders?

AAdvantage Platinum:

Old System: 10,900 Base Miles + 10,900 elite bonus miles (100%) = 21,800 RDM

New System: 8 x $1,054 = 8,432 RDM

A decrease of 13,368 RDM earned – equivalent to a 61% drop!

AAdvantage Executive Platinum:

Old System: 10,900 Base Miles + 10,900 elite bonus miles (100%) = 21,800 RDM

New System: 11 x $1,054 = 11,594 RDM

A decrease of 10,206 RDM earned – equivalent to a 47% drop.

What if you have no status at all?

Old System: 10,900 Base Miles

New System: 5 x $1,054 = 5,270 RDM

A decrease of 5,630 RDM earned – equivalent to a 52% drop.

It Gets Worse!

I haven’t really addressed what happens when you calculate the RDMs that passengers earn on American Airlines’ partner airlines – and that’s because each airline has its own rules so it would take a while to wade through each separate airline.

What I can say, however, is that while the way we earn miles on partner airlines isn’t changing, the number of miles we will earn has been dropped in quite a few cases.

The number of miles we earn via travel on British Airways marketed flights has already been devalued and now we’re seeing lower earning rates on partners like Cathay Pacific and JAL as well. So, if you were thinking that you’d find a safe haven by flying just partner airlines, think again – American Airlines beat you to it.

Overall

If you take a look at how American Airlines have slashed the number of redeemable miles we can earn alongside the huge percentage increases in the miles needed to redeem various awards, you start to see a picture of just how big this devaluation has been.

As annoyed as I am with American for hitting us so hard with these changes it pales into insignificance compared to how annoyed I am with the bloggers who are trying to portray these changes as “not so bad”. There are a few of the bigger blogs out there who have been spouting nothing but nonsense when passing judgement over these changes.

Based on my example above, an Executive Platinum member would have to pay almost $2,000 in base fare and carrier fees on a LHR-LAX-LHR trip before they would earn as many RDM under the new system as they would have earned under the old (where it didn’t matter how little they paid). How can anyone possibly say that these changes aren’t very very bad?

I get that these bloggers have connections with the airlines that they wish to protect but treating the rest of us like fools by trying to persuade us that these changes are anything but terrible is misleading at best and deliberately disingenuous at worst.

For the average miles & points collector these changes are a massive blow to future travel plans and a lot of the more aspirational awards are now virtually out of reach. Solo travelers may just have to save up their miles a bit longer but, if you were planning on earning enough miles to take your family of 4 on vacation in style, you can forget about doing that any time soon.

In the next few days I’ll try to pull together all the data from my travels this year to create a fuller picture of how these changes are going to affect future earnings. From the quick look I’ve had I can see that going forward, if my travel patterns were to stay the same as this year, my earnings would be significantly reduced – and if that’s the case for an AAdvantage top-tier status holder I dread to think what the results for lower-tier elites and non-elites will be.