Randy Petersen's Opening Remarks – May, 13 2014

Randy Petersen's Opening Remarks – May, 13 2014

Actually, it’s not so funny and someone should have asked me. Before I explore a recent announcement for frequent flyers, let me first frame it with a confusing scenario. Yes, this is about the American/US Airways merger. I’m on record as being a fairly positive fanboy of Doug Parker and have nothing but respect for him and Scott Kirby as they move from US Airways to American Airlines. At the same time, I’ve not been a fan of how Scott deflected my interest in the low award redemption statistics for the US Airways Dividend Miles program in the past, by referring to them as not being relevant or a good measure. And I wasn’t so pleased with the move by Dividend Miles some years ago to eliminate bonus miles for Preferred status members citing, “new revenue initiatives to help expedite the airline’s return to sustained profitability …” That announcement resulted in a SaveDividendMiles initiative, which eventually won the hearts of US Airways executives and the change was rescinded.

That (elimination of bonus miles) happened under both Mr. Parker and Mr. Kirby’s watch at US Airways and included a two-month notice of change. Two key points here – they gave notice of a change, and over time, they listened to why the change was not in the best interest of US Airways.
According to the terms and conditions of the US Airways program they did not have to offer up any notice: “US Airways may change, temporarily suspend or discontinue any or all aspects of the Dividend Miles program at any time with or without notice.” But they chose to give notice.
Fast forward to the March issue of this magazine and the announced changes by Delta SkyMiles. According to Delta’s terms and conditions: “Delta and its program partners reserve the right to change program rules, benefits, regulations, travel awards, fees, mileage award levels and special offers at any time without notice.” But Delta offered up 10 months of advance notice for their changes. So regardless of official policy, there seems to a modicum of respect to offer some sort of advance notice of changes.

So, let’s take a look at the rules of the American AAdvantage program that mimic those of their brethren in the industry by stating, “American Airlines may, in its discretion, change the AAdvantage program rules, regulations, travel awards and special offers at any time with or without notice.”

Flashback: In 2008, AAdvantage announced changes to their program. As before that date, and even in more recent years, they made an announcement of the changes and gave an effective date for the changes. In 2008, some changes were announced including upgrade co-pays and a new and unusual fee – members booking an award ticket online would now have to pay a $5 processing fee. This announcement was made in May 2008. The online award booking fee was to go into effect on June 21, roughly a month’s notice, while the award level increases and other changes were to go into effect on Oct. 1, 2008, roughly a four-month advance notice.

Where am I going with this? It’s easy. With the same program terms and conditions regarding program changes, programs generally provide some sort of notice; and in this case, both the merging programs of US Airways and American Airlines have given notice of upcoming changes.

But why now, in one of the most scrutinized mergers in history and with so much on the line, did one of the most respected travel loyalty programs in the world (still with some goodwill capital left) make such a blunder in making so many small-ball changes with no notice? When I say small ball, I’m referring to the fact that the changes are not as drastic nor complete as what is being expressed by the social masses about the AAdvantage program.

While the buzz from AAdvantage is all about the speed in which they are trying to parallel both programs of AAdvantage and Dividend Miles, this is clearly something that suffers from the larger vision of what AAdvantage 2015 will look like. No one with the experience of these two airlines could possibly believe that expediency is more important than communication. What makes it all more confusing is that American Airlines has won awards for their social media prowess such as the SimpliFlying Awards for Social Media Excellence.

It is often said that you only get one chance to make a first impression. This first impression of how American executives intend to create the largest and most valuable travel loyalty program in the world has failed. In their own prior actions as executives of both American and US Airways, they exhibited an ability to understand that regardless of the legal policies in place, which are often there for good reasons, there still needs to be a reasonable and rational approach to customers, especially those as valuable as AAdvantage program members.

Doug, Scott, Suzanne, Fern (all senior or loyalty executives of American Airlines): I ask that you look over how changes to your loyalty programs were handled in the past and compare/contrast that to your most recent changes. When you look at this with the background of loyalty you’ve earned from your frequent flyer program members, it seems that someone missed the most important part of any relationship – communication – consistent communication. You are big boys (and quite a lady) and you don’t need to come out with an apology. We live in a social world where actions speak louder than words, and frankly if I were you I might be simply too embarrassed to admit a mistake. But what I’d tell you if you ask me, is to revert back to something in the American Airlines past. In 2008, when you gave notice to members for a new $5 processing fee for booking an award ticket, when the time actually came for that policy change to go into effect it did not happen. You gave no notice that there was a reconsideration to the announcement and you quietly removed the $5 award processing fee for booking award tickets, and if I recall did not issue a formal announcement.
You are riding a great streak right now, which the results of this year’s Freddie Awards clearly highlight. Why risk what you have by starting the new AAdvantage program with a very dangerous new policy regarding how you communicate change to your customers? As I said when starting this note, it’s not funny and someone should have asked me.

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