A foolish man once said, “We will cut our way to growth.”
American Airlines is finding out that its massive devaluation to its AAdvantage loyalty program last March is taking a toll on its profit.
There is some disagreement over exact numbers, but View from the Wing pulls this nugget from a recent AA SEC disclosure–
Other revenue is now expected to be $5.24 billion, up $330 million year-over-year. The first quarter reduction versus prior guidance is primarily due to lower than expected AAdvantage credit card acquisitions as first quarter promotions were not as effective as planned.
It may be easy to dismiss this news as just a bad quarter or the fact that CITI has tightened its terms and conditions to cut down on churning cards, but let’s face it: the AA program has taken a huge beating.
Oh, Delta has too. Let’s not forget that. At least AA gave us notice.
But there is something fundamentally dishonest about the AA program. I again refer you to View from the Wing who points out that AA simply is not releasing award space on its own flights. With variable-priced AAnytime (standard) awards, flying on AA metal is often ridiculously expensive.
With few compelling award chart sweet spots and virtually no saver space on the routes that matter to most people — domestic flights (though int’l flights are no better) — AA is simply not worth investing in from the redemption side. Better to direct your spending into flexible currency like Chase Ultimate Rewards, American Express Membership Rewards, or Starwood Guest.
If you’re stuck with oneworld, AA still makes a lot more sense than British Airways, Iberia, or Qantas in almost all cases. The zone-based award chart and general lack of fuel surcharges (except on BA and Iberia) means that longhaul redemptions still remain much more lucrative than with other oneworld programs. But not like before. And with AA essentially devaluating unofficially by not releasing much saver award space, the value derived form this program continues to shrink.
No wonder profit is down. There is a happy-medium somewhere and it appears AA has drifted too far from it.