Will AA follow UA and DL

Discussion in 'American Airlines | AAdvantage' started by TRYING2BPLAT, Jun 19, 2013.  |  Print Topic

  1. TRYING2BPLAT

    TRYING2BPLAT Silver Member

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    For revenue elite status? Do you think it is just a matter of time before AA/US will follow the other 2 to add revenue to the requirements to be elite? That for sure will cut down on elite and MR? What do you think? I hope not because that would surely affect a lot of people who travel on a discount fare like me.
     
  2. DestinationDavid
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    DestinationDavid Milepoint Guide

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    The industry has been moving this way for awhile and many folks have been warning it would come. When DL crossed the threshold awhile back it was the first domino, and it was only a matter of time before others started to follow. When I saw the first Tweets about UA adding this for next year I literally just blinked and moved on. No shock.

    Do we know definitively? No, not till AA announces.

    Is there writing on the wall, just like the months leading up to the US/AA merger announcement, that would indicate what is likely coming down the road? My vote is yes.

    Should AA implement a spending requirement it will likely be my last year of loyalty with AA. I am a leisure traveler so I cannot reliably predict how much money I will spend each qualification year. I already know I'm likely to move to UA for use of the better network Star Alliance offers. Status won't be a goal or issue for me any longer, just get me to the next cool place I want to visit.
     
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  3. Gtitan
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    Gtitan Gold Member

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    At some point, but I doubt right away until it gets through the merger stuff. YMMV
     
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  4. Wandering Aramean
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    Wandering Aramean Gold Member

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    The converse theory is that they have to announce a new program anyways so they may as well just rip the band-aid off and make the changes.
     
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  5. Gtitan
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    Gtitan Gold Member

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    Good point oh Wandering One.:)
     
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  6. Mike Reed

    Mike Reed Gold Member

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    AA already recognizes elites by revenue - EQP.

    No, it's not strictly revenue based, but for flyers on higher fare class tickets, they can qualify 50% faster by getting 1.5 EQP/mi, meaning EXP at 66,666 EQM.

    Sent from my iPhone using milepoint
     
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  7. Wandering Aramean
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    Wandering Aramean Gold Member

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    And both DL & UA gave extra MQMs/PQMs to higher fares, too. Didn't stop them from getting more explicit in their approach.
     
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  8. Gtitan
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    Gtitan Gold Member

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    Correct, oh he that Wanders, the moves from United and Delta were not about rewarding the higher fare elites, but rather were about firing the cheap elites. It was not enhancing revenue as much as cutting costs (that tangentially may enhance revenue if you dig in the weeds a little).
     
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  9. LETTERBOY
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    LETTERBOY Gold Member

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    Yes, of course they will. It's when, not if.
     
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  10. TRYING2BPLAT

    TRYING2BPLAT Silver Member

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    Just like Destination David, I will be a miles collector and not elite and will open more to collect Chase points than miles directly with the airlines.
     
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  11. newbluesea
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    newbluesea Gold Member

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    Of course that was very possible before all these changes were put in place no? :)
    Chase points will not give you status on AA as far as I can tell.

    The new changes IMHO were instituted to curb the $3000 spend mileage runners who make the corresponding top tier and collect $5000 worth of upgradeable instruments among perks.

    A bit unfair? yes... but certainly quite understandable.
     
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  12. Tenmoc
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    Tenmoc Gold Member

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    They will do it. I agree it is when vs if.

    I am hoping it is not until the merged new program, but either way it is what it is.

    I am pure leisure all on my own dime. Will I make status sometimes and not others, yup. Just as I do now.

    The one thing I can see is people upfaring trips later in the year to make the requirements if they are close. Or "what they heck, i'll go on another trip" just for the extra spend and of course RDM they get from it.

    Some will go. Some will stay. etc.
     
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  13. Canadi>n
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    Canadi>n Gold Member

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    But that's why they had to go to a revenue based metric too. That or remove the COS bonus form EQMs as AA has always done and adopt the EQP approach. This way they will cull the numbers of mid-tier elites, though I suspect there will be many who elude the spend targets by virtue of having an MP cc and meeting the spend requirements there, or those who have achieved lifetime Gold (MM) or higher. This will definitely trim the number of 1Ks, but only marginally. I don't think too many people other than MPers and FTers strive to achieve that status for under $10K, or more like $5K-$6K.

    If AA/US falls in line with this, then it will lose an opportunity to poach more elites from UA, though these are relatively low yield but steady fliers it, so it is a bump in the bottom line. (For every 1,000 1Ks or Diamonds AA poaches, even if they spend the lowest amount to earn ExecPlat status, it's another $5-$6 million + each year minimum.
     
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  14. Mike Reed

    Mike Reed Gold Member

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    If any revenue requirements are put in place that are higher than what I already spend and that affects my potential status, I'll re-evaluate. I don't think I'm a bottom-spending top-tier elite but I'm certainly not in the realm of CK, either. I typically qualify on 100 segments but I've come out at over 100K EQM in past years with bonuses. I've still had the segments, though, so even without the DEQM bonus I'd still have re-qualified.

    This year, for example, I'm at 61 EQS on AA at the midpoint of the year (along with Elite requal on FL already, but that's pretty simple) but less than 50K EQM and just over 35K EQP. I've re-qualified at the PLT level already and with my planned remaining travel I'll definitely have another 40 segments to hit the EXP mark because from AUS nearly everything I fly is 4 segments round trip. My spend is definitely over $10,000 per year, likely over $15,000 per year, but less than $20,000. So a $10K spend requirement probably wouldn't affect me, a $15K might not, a $20K would mean I'd have to actually pay attention.

    I will say that Choice/Choice Plus fares have been MUCH more common for me this year given my travel patterns.

    I don't spend as much as the person making 10 J TATL/TPAC flights each year, but I have a definite impact on revenue, even if only filling a seat so their fare buckets fill up faster.
     
  15. Canadi>n
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    Canadi>n Gold Member

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    Even the best MRer can't make ExecPlat or 1K or Diamond for $3K. Those days are long gone. From the east coast a transPac runs $900 at the lowest, $1100 most of the year, and yields maybe 14K-16K. That would require six such trips a year at between $5.4K and $6.6K. And I doubt the upgradeable instruments we get can really be valued at $5K. Even on the open market, an eVIP fetches about $200, so that's $1.6K for the eight we get. As to valuing the UDUs on NAmerican/Caribbean flights even more speculative. The only other benefits that might translate into lost revenue would be on checked bags (and most around here do carry-on), maybe a few dollars a flight for comp'd food and drink, and award change fees. However, I contend that ExecPlats actually earn AA extra money given we only get upgraded when F/C seats are known to be going out empty, and once we're upgraded our coach seat can be sold a second time (or used for overbooked passengers and thus allaying the payment of denied boarding compensation).

    So while low-yield top tier elites may not generate as much as higher-yield corporate customers, they provide the airlines with an annual regular flow of cash from customers they don't have to seek out. The cost is marginal in all cases.
     
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  16. jetsetr
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    jetsetr Gold Member

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    Just a comment on the part I bolded from your OP. However, the difference is that currently, EXPs tend to clear very early (or on some premium transcons, a few hours before). So I would argue that AA may be predicting that the seats would go out empty (not purchased at last minute walk-up fares), but that doesn't mean that they are maximizing their revenue potential by releasing those seats to EXPs (and Plats and Golds using 500-mile stickers). I argue that UA's method of dishing out the CPUs, as much as we may loathe it, yields UA more revenue in the short term; what remains to be seen is if UA's strategy yields greater lifetime value.
     
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  17. jetsetr
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    jetsetr Gold Member

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    Non sequitur, and I may post this in the UA thread as well, but it's an interesting strategy that UA chose to announce and pursue PQDs precisely when it seemed that AA/US was most vulnerable. Basically, by UA making this move now, they've essentially given cover to AA to make this move themselves, without fear of customer reprisal or penalty. It would have been interesting to be a fly in the wall in the UA strategy sessions during the internal PQD debates to see if some thought that trying to put a "squeeze" on AA was worth the delay in implementing PQDs (and thus delaying the revenue recognition from such).

    And to be explicit, what I mean by "squeeze" is, UA could have delayed PQD rollout and taken a wait-and-see approach as to what the new AA would look like. If AA implemented its own "EQD" system, then UA could have been in a position to re-poach customers who may have defected from UA post-3/3/2012, and marketed and touted its better network and alliance partnership strengths as key consumer advantages. In addition, UA, by delaying PQD rollout, may have forced AA (if they were considering EQDs) to delay its own implementation, thus denying AA additional revenue opportunities, and keeping them in a weaker, post-bankruptcy financial position.

    In the end, I guess UA is price-signalling (but not officially colluding) to AA that it wants them to "jump into EQD pool" so that revenues are raised for all of the major carriers, and thus UA must be betting that by raising the base PQM cost to consumers at each elite level, that even if UA is forced to compete with AA and DL on other metrics that drive value, UA will at least have increased revenue, reduced cost, thinned the cheapo elite herd, which enables them to provide better execution and delivery of elite benefits to higher tiers without necessarily improving the actual elite benefits themselves.
     
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  18. ARLVACP

    ARLVACP Silver Member

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    Remembering that Doug P will be running the show at the new AA and US has allowed you to purchase status for a couple of years now, imagine the decision whether to match UA/DL will be a bean counter decision based on rev projections... IOTW, i don't see a match as a given.
     
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  19. paladinua

    paladinua Silver Member

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    It seems like Parker brings a different model to the table, given as others have mentioned: US sells their status, and US has also in the past been seen as a clearing house for miles/Star Alliance awards. Further, a combined AA/US risks alienating their AA elites.

    It still seems to me to be a question, as to whether load factors will be impacted... Generally the less expensive fares are available because airlines want to fill seats, to gain that marginal benefit. We've seen load factors increase as two competing trends have occured - the economy has gotten better, and airlines have been restricting capacity. United has gone from flying 757s to A319s on some routes. I'd think cyclically, there will be again be increases in capacity, perhaps route-specific. Does the alienation of low-fare frequent fliers impact this growth?
     
  20. Canadi>n
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    Canadi>n Gold Member

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    AA knows its loads and has a dynamic model that releases F/C upgrade seats in the same way it balances fare buckets. If there was a high possibility that those seats would be sold, they would not be released into the upgrade pool. They may miss the mark a couple of times, but these models are pretty good otherwise AA would not release the seats as early as it does. (Note complaints on the UA and AC fora about how R space -- the upgrade bucket -- is zero'd out until a day or two before flight time rather than at the elite threshold upgrade windows.)
     
  21. Canadi>n
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    Canadi>n Gold Member

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    This has actually worked against US within the STAR alliance. Carriers like LH and SQ have severely limited access to their award inventories to US members because of the way it sells miles.
     
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  22. cova

    cova Gold Member

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    I think we got a hint at one of the FTU's that US would be next (after DL) with revenue based elite program. Well UA was next. AA/US could delay it to get business from UA/DL. AA fares have been high lately - so good revenue - maybe not $.10 per mile (which seems to be the standard now for Elite Qual Revenue). But at the end of the day - AA likely will follow suit.
     
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  23. jetsetr
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    jetsetr Gold Member

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    My point was and is that AA could choose to sell TODs and monetize a la UA.
     
  24. basiface

    basiface Silver Member

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    Wouldn't surprise me. With the Airbus purchase and If/when they do this I'd have to reconsider my options. Like a few others here most of my flying is leisure and out of my own pocket. Booking higher fares to make status isn't an option for me. I've never tracked my spending but it's probably between 3-4K per year and if that's not enough to keep my Platinum status I'd contemplate considering myself a free agent and go with whomever has the lowest fares. I can get a cc for most of the perks that come with Gold status. I know I'm a low profit customer, but I'm a LOYAL customer and my consistent spending is valuable. If you chase all the loyal people who sit in the back away it's going to hurt your bottom line.
    All that being said, like many others I'm holding my breath to see what the "new" AA will be like after this merger. I fly AA because of the quality of their service and programs, not because they're the cheapest because sometimes they're not. If the services and programs become less of a priority for the new management then being loyal will become less of a priority for this passenger. Off the top of my head I can think of three other carriers that fly from the bay area to Chicago. Steps off soap box...
     
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  25. Aktchi
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    Aktchi Silver Member

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    I am sure this is how it happened, but I don't get the logic behind LH+SQ's action. After all, only those award seats were booked that they released themselves. US paid them the asking/negotiated cash price. What difference does the miles game between US and its customers make to them?
     
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