Dear American Airlines:
You were the first airline to introduce a frequent flyer program, in 1981. As the innovator in this area, customer loyalty is something you understand better than most other airlines. Your program has been (and remains) among the best available in terms of rewarding loyal frequent flyers for their business. Personally I miss having Executive Platinum status – no other airline has made me feel as valued and appreciated as AA.
As you know, there is a trend emerging among the remaining legacy carriers – specifically Delta and United – where frequent flyer miles will be awarded by ticket price rather than distance flown starting January 1, 2015. While rewarding the biggest spenders is a noble goal, the AAdvantage program already does this via Concierge Key, the invitation-only program for AA’s most valuable customers.
Consolidation in the airline industry has reduced competition, both in terms of airfares and loyalty programs. I see the changes announced by Delta and United to be an opportunity for American. The travel community expects some changes when you introduce the merged AAdvanatage/Dividend Miles program in 2015. Some even expect that you will mirror the mileage earning changes announced by Delta and United this year. In contrast, I see this as an opportunity for you to differentiate yourself.
Frequent flyer programs provide significant value to airlines as well as to consumers. Selling miles to credit card companies, hotel chains, rental car companies and the like afford an opportunity to offset the costs of the free flights provided to consumers when they redeem their miles. But consumers are increasingly savvy – many have taken note that they will earn less miles in the Delta and United programs starting next year. What better way to stand out and establish market competitiveness than keeping your program based on miles flown, rather than on dollars spent?
The pressure from shareholders and other interest groups to produce profits can be enormous. However, there is also value is not “killing the goose that lays the golden egg.” Frequent flyer programs have proved to be a benefit both to consumers and airlines. Delta and United have taken a short-term view and gutted the value from their programs to reduce costs in the moment. I encourage American to take the opposite approach, preserving value in the AAdvantage program – thereby giving it a considerable competitive edge – by not changing the metric of how miles are earned by flying.
Doubtless this is an argument that is taking place inside American and the AAdvantage program right now, as you structure the merged program for the future. Consumers are hungry for an alternative to Delta and United’s cuts – will AA be the outlier, attracting business from short-sighted airlines, or will it follow the pack in a race to the bottom? My hope is the former, and if that is the case AA can count on my full support going forward.