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American CEO: Spend-Based AAdvantage Program ‘Not on the Plate’

SmarterTravel

The conventional wisdom among industry-watchers, including myself, is that American will follow Delta and United in converting AAdvantage to a program that awards miles based on dollars spent rather than on miles flown. The business case for such revenue-based programs is simply overwhelming: Unlike mileage-based programs, they proportionately reward an airlines’ most profitable customers, as they should. It’s not a question of if, it’s a question of when.

As to the timing of a spend-based program’s introduction, my best bet was that it would take place next year, at the same time the current AAdvantage program is merged with US Airways’ Dividend Miles program. Combining those two events—the two programs’ merger and the launch of a redesigned program—seemed like the most logical and efficient approach to the problem. Why subject customers to two separate wrenching disruptions when you could consolidate the changes into a single transaction?

My thinking is apparently at odds with that of Doug Parker, American’s CEO. As reported by BusinessTravelNews, Parker, speaking at this week’s Global Business Travel Association conference in Los Angeles, directly addressed the question of a redesigned AAdvantage for the first time since the American-US Airways merger.

The move to a revenue-based program, he said, is “not even on the plate right now. We have to get the two frequent-flyer programs merged first. If it makes sense to make that innovation, we may do that, but to try to change the program now would be foolish.”

If Parker is to be taken at his word, that means that the conversion of AAdvantage to a revenue-based program will be a two-step process. First, AAdvantage and Dividend Miles will be consolidated into a single mileage-based program, presumably retaining some features of both legacy programs. And then, sometime thereafter, that new program will be replaced by a yet newer program, in which earning and spending will be aligned.

In my view, that amounts to doubling down on disruption and confusion.

Of course, if you are among the majority of travelers who will be disadvantaged by revenue-based earning, the delay in adopting that model will be most welcome. American may even use the delay to its advantage, poaching customers from Delta and United when their revenue-based schemes take effect early next year.

Whatever happens in the short term, spend-based schemes are the future of travel-loyalty programs. To deny that is delusional. And to delay that is … well, Mr. Parker’s decision.

Reader Reality Check

Assuming American’s move to a spend-based program is inevitable, should they just get it over with, in one fell swoop, or do it in stages?

This article originally appeared on FrequentFlier.com.

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