American Airlines' Frequent-Flier Upgrade

AA's looser frequent-flier program makes it easier for customers to redeem miles and could set a new standard for other carriers' reward offerings

By Dean Foust

Editor's Note: An earlier version of this story had the incorrect location of AMR Corp.'s headquarters

For many road warriors, the frequent-flier programs operated by airlines were the ultimate "wallet on a string" trick: Travelers found it easy to accumulate the miles but impossible to redeem them. And even when they could, they found that even the simplest free trip required "spending" double or triple the miles they anticipated.

But American Airlines' (AMR) recent decision to allow members of its AAdvantage loyalty program to redeem their miles for one-way tickets—and for just half the miles of a round-trip flight—may have marked a turning point in how the major carriers treat their best customers. American's move shows the extent to which airlines now realize that these loyalty programs have become more than just a cheap-and-easy way to reward their best customers, but are now arguably their biggest profit centers—and may be critical to their survival. And after years of milking these programs, airlines may start taking more steps to ensure that travelers don't become jaded and drop out.

Setting a New Standard

"American Airlines has changed the dynamics of reward offering in the United States," says Jay Sorensen, president of The IdeaWorks Co., a Shorewood (Wisc.)-based airline industry consultancy. "The other major carriers will have no choice but to match this."

Industry experts say the move by American, which boasts 62 million loyalty members, will reverberate through the airline industry for some time to come. While other carriers may have no choice but to match American's new offering, how quickly they can do so isn't clear. Rob Friedman, president of American's AAdvantage marketing programs division, says it took slightly more than a year to reprogram its computers to handle one-way redemptions, and presumably should take rivals the same. "This gives us a tremendous ability to leapfrog our competitors," says Friedman, who called it "one of the most significant enhancements we've made this decade."

What all this means for travelers is that it could become easier—and cheaper—in coming months and years to use the collective 20 trillion miles they've banked with airlines. And the changes that Ft. Worth (Tex.)-based American announced in mid-May could be just the beginning. Under terms of the new program, American is allowing members of its AAdvantage program to book a one-way trip for just 12,500 points, half the 25,000 points required for a round-trip ticket, which was the minimum redemption before the changes.

One-Way Ticketing

That's a good deal if you're a parent driving your kid back to college, and will leave him or her your car before flying back. Or if you want to put together a trip with three legs—say, visiting one relative in Florida, then another in Texas, before flying back home. Or even to book a round trip where one of the legs occurs during a "peak" period when many flights are normally full (to get a guaranteed seat during peak periods, you'd need to use 25,000 points to guarantee yourself a seat, using an AAnyTime award) and the other leg is during an "off-peak" period (when 12,500 points is enough to get you a MileSAAver seat).

Under the old system, you'd have to "purchase" a premium AAnyTime award for both legs, burning through 50,000 miles. Now you simply reserve two one-way trips, using a total of 37,500 points (25,000 going one way, and 12,500 coming back).

Some travel gurus think the change should also just make it easier to find free seats, period.

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