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Rumor: AAdvantage Will Go Spend-Based

For the great majority of travelers, a traditional mileage-based loyalty program, which awards points and elite status on the basis of distance flown, delivers more value than the revenue-based schemes recently adopted by Delta and United, which base earnings directly on the price paid by program members for their tickets.

The revenue-based programs have become the new industry standard for the most compelling of reasons: They reward customers an airline’s customers precisely according to their contribution to the company’s bottom line. That was always the intent behind loyalty programs, with flown miles used as a proxy for dollars spent simply because accurate revenue-tracking wasn’t technically possible in the programs’ early days.

As the technology improved, new programs were launched by Virgin America and JetBlue that tied earnings directly to spend; and existing programs reinvented themselves to do the same. Today, among the largest U.S. programs, only American and Alaska Airlines still operate mileage-based programs. But there’s now reason to think that American is planning to follow the herd and convert its AAdvantage program, the world’s largest, to focus on spend as well.

The Future of AAdvantage

Now that American has successfully completed its merger with US Airways, the world’s largest airline faces a crucial decision: whether to follow Delta, Southwest, and United in converting its mileage-based loyalty program to a scheme that rewards travelers according to their spend. I had predicted that American would elect to remain the only one of the Big Four to continue awarding miles on the basis of distance traveled. Why? Because it’s more rewarding for the average traveler, delivering more value to more consumers and, ultimately, higher stock prices for shareholders. The current AAdvantage scheme, in other words, is a competitive advantage.

For its part, American in its most recent earnings calls refused to provide any clues as to the program’s future, on several occasions reiterating that the airline would comment on its plans only when it was ready to do so, and not before.

So until this week, AAdvantage-watchers could only watch and wait, speculate and hope. The hope, among the overriding majority of American loyalists, was that the program would continue in its current form, albeit with the inevitable tweaks at the margins. Yesterday, however, those hopes were undermined by a rumor that AAdvantage is in for considerably more than a routine tweaking.

On the travel website, it was reported that American is in the process of training customer-contact personnel on upcoming changes to AAdvantage. While most of the changes affect elite qualification and upgrades, the bigger news for the majority of AAdvantage members is that the program will shift to a spend-based earning scheme in late 2016 or early 2017.

These are rumors, to be sure, as yet unconfirmed by American. But as rumors go, I find them highly credible. And as is often the case with rumors, they raise as many questions as they answer.

Until American releases full details of the changes, including the new award charts, it’s impossible to gauge the overall effect of the shift to a spend-based program.

In the meantime, AAdvantage members should hope for the best but prepare for the worst, as the history of such conversions shows that average travelers typically find themselves with fewer miles and free flights when earning is tied to spending.

AAdvantage may be the industry’s most generous program. Enjoy it while you can.

Reader Reality Check

Are you prepared for the end of AAdvantage as we know it?

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