American Airlines rolled out a new loyalty program on January 4th, 2022. The new elite program is built on a concept called loyalty points. This is opposed to the previous program that used EQMs (Elite Qualifying Miles), EQSs (Elite Qualifying Segments), and EQDs (Elite Qualifying Dollars). Loyalty points are now the single measure that is used to determine your elite level. While this undoubtedly makes the program easier to understand for the average user, is it actually better for most users? Below is an explanation and analysis of the changes to the American Airlines loyalty program.
What Are the Changes?
Elite Levels
The first and most obvious change is to the elite status tiers. Instead of requiring different amounts of EQMs or EDQs, plus a minimum threshold of EQDs, now you just need a certain number of loyalty points. The number of points required for each elite level is shown in the graphic above. Previously, elite status required a mix of EQMs/EQSs and EQDs as shown below. As you can see, the mileage requirements for the old levels are much lower (especially at the upper ends of the elite status spectrum). At the same time, points can be earned from a wider list of activities than flying. All spending requirements with the airline have been eliminated. The end of this post will analyze if these changes are better.
How to Earn Loyalty Points
The next change is in how points are earned. Previously, miles towards elite status were only earned by flying. With the new program, there are now numerous other ways to earn points in addition to flying.
Earning miles and loyalty points via flying is now a function of how much is paid for flights rather than how far one flies. American awards 5 miles per dollar spent on airfare (excluding any fees and taxes). As an elite member, a bonus on top of the base 5 miles per dollar is awarded. This ranges from a 40% bonus for Gold members (resulting in 7 miles/dollar) up to a 120% bonus for Executive Platinum members (resulting in 11 miles/dollar).
In addition to earning loyalty points from flying, there are multiple other ways to earn loyalty points. This includes the following:
- AAdvantage shopping portal
- AAdvantage dining
- Credit card rewards from spending
- Hotel partner bookings (where you elect to receive AA miles instead of hotel points)
- Car rental partners (where you elect to receive AA miles instead of car rental points)
- Retail partners like Reliant Energy, Shell, Xoom, etc…
While almost any miles you earn will count towards loyalty points, there are some notable exceptions to that rule. Those exceptions include:
- Bonus miles awarded by AAdvantage during promotions
- Miles gifted, bought, or transfered between members
- Miles awarded as category bonuses or new member welcome bonuses on credit cards
Loyalty Year Timeline
Another change that will be less noticeable to users is the loyalty year timeline. This marks the beginning/ending of when a member can collect loyalty points towards status. While this had previously aligned with a calendar year, the loyalty year will now start on March 1st. As mentioned, it’s still a 12 month period so it won’t affect too many people. The only real impact is that those who want to maintain a level of status don’t have to figure out how to fly enough during the end-of-year holiday season. They will be able to do this in January – March when planes are much less full and prices are cheaper.
Choice Rewards
The final change that I want to highlight is something that American calls “Choice Rewards”. These are the best benefits that American provides to its highest-tier elite status members (Platinum Pro and Executive Platinum levels). Under the former program, frequent fliers could receive one or two of the following once they achieved the stated level:
The biggest change to Choice Rewards is that they will no longer be automatically awarded when you achieve Platinum Pro or Executive Platinum elite levels. Instead, members will have to fly a minimum of 30 flight segments and achieve Platinum Pro or Executive Platinum. An additional minor change is that instead of there just being two levels of Choice Rewards at Platinum Pro and Executive Platinum, there are further levels of Choice Rewards available. Additional rewards will be available at 350,000, 550,000, and 750,000 loyalty point levels.
Why Did American Airlines Make the Change?
The first question is, “Why would American make these changes”? This change is in contrast to most other loyalty programs of US airlines (as they still use the EQM, EQS, and EQD formula). American Airlines doesn’t have a reputation for leading the US airlines industry in any type of innovation. Therefore, they had to have a good reason to make the change. While the minutes of the internal discussions will never be published, this makes financial sense for the airline.
At the end of the day, loyalty programs are big business for major airlines. American Airlines, for example, makes almost no money from actually flying people. According to American’s own regulatory filings for 2019 and Q1 2020, the airline barely breaks even (or even loses money) on the revenue and costs of actually flying people. As seen below, American Airlines actually lost money on flying people in Q1 2020 and the totality of FY 2019.
It should be obvious, however, that the airlines have another source of revenue. If they didn’t, they would be out of business quickly. This is where the loyalty programs come in. These programs make a lot of money for the airlines. You might ask how much is a lot? In American’s case, “a lot” is about $2.2 billion in the fiscal year 2019. For this reason, any change to loyalty programs are changes to the whole profit centers of the airline. Therefore, large changes to these programs are designed to drive greater revenue.
Increase Demand and Price for AA Miles
You may be wondering how American’s loyalty program makes $2.2 billion per year while their flying operation makes them almost nothing. The answer is selling their loyalty points/miles. American’s AAdvantage program (the name of their loyalty program) sells their miles to a whole host of banks, credit card issuers, shopping portals, rental car companies, and many others. Because customers value the miles for the promise of free travel later, this encourages engagement with the bank, shopping portal, rental car company, etc…
Now that we know how the loyalty programs make money, how does the change to loyalty points improve the profit potential? Prior to this change, the points sold to and awarded by partners were redeemable for travel only. These points didn’t enter into the elite status equation in any way. Elite status was based purely on flight activity with American and its airline partners. Now, loyalty points are used for determining elite status, thereby making the miles it sells more valuable. American can now charge its partners a little more for each mile they sell since it is now redeemable for travel and also affects your elite level with the airline.
Finally, this change makes points more valuable/desirable and increases the threshold of the number of points required for different elite levels. Both of these combine to drive the demand of AA points up leading to American Airlines being able to sell more miles from its loyalty program.
Is It Better? – Scenario Analysis
There is no one size fits all answer to “Is it better?” While it might be better for a high credit card spender, it might be less beneficial to someone who flies a lot. Similarly, it might be easier to attain Gold status but harder to reach Executive Platinum status. In order to provide some analysis, I will answer the “Is it better?” question for the made-up scenarios below. Find the scenario that best matches your situation to try and answer the question for yourself. Or better yet, rerun the analysis with your own numbers.
Scenario 1 – 2019 Executive Platinum Flyer
With everything that has happened over the past two years, I am rewinding the clock to 2019 and examining an individual who flew enough on American flights to earn Executive Platinum. This required that the individual earn 100,000 EQMs and spend $15,000 on American Airlines flights. While there are many combinations of ways to earn 100,000 EQMs, we will assume this is a business traveler whose company pays for economy tickets. This means the individual flew over 100,000 miles in the air. That works out to over 22 round-trip flights between Washington D.C and Los Angles within a year if you don’t fly anywhere else.
Under the new program, this traveler would earn 165,000 loyalty points (11 points/dollar spent * $15,000 spent = 165,000). With this amount of points, this individual would have earned Platinum Pro status and not Executive Platinum status as before. Furthermore, they would still be about 35,000 points short of Executive Platinum requiring approximately another $3,180 of spending with American Airlines.
Scenario Outcome: Not An Improvement
Scenario 2 – 2019 Gold Flyer
Next, let’s take a look at the opposite end of the loyalty program spectrum and look at the flyer who would have received Gold status from American Airlines in 2019. This individual would need to have earned 25,000 EQMs and had over $3,000 in spending with American Airlines.
Under this new program, a Gold traveler would earn 21,000 loyalty points (7 points/dollar * $3,000 spent = 21,000). Again, the 21,000 points is 9,000 points short of the 30,000 required for Gold status under the new program. Those additional 9,000 points would require about $1,285 in additional spending with American Airlines.
This trend continues across the board. If an individual only flies for their elite status, more flying and spending will be required under the new program than the old program. The only improvement in the new program over the old program is for Executive Platinum members who fly enough to earn the additional Choice Rewards. Only 1 Choice Rewards was awarded at Platinum Pro and 2 more at Executive Platinum in the old program. There was no opportunity to earn additional rewards. There is now the opportunity to earn these, although it comes with a minimum spend of almost $32,000 on American Airlines tickets. While I am sure there are some people out there who spend this type of money on flights, it is a very small proportion of the population.
Scenario Outcome: Not An Improvement
Scenario 3 – Average Travelers with AA Partner Engagement
In the above two scenarios, we have proved that it takes more than just flying AA to earn status quicker under the new loyalty program. In this scenario, we will examine a traveler who:
- Takes 4 round-trip flights on AA per year (average flight cost of $350)
- Has no elite status when starting out
- Rents two cars and chooses to earn AA points on the rentals
- Books one of the hotels during the year through Rocketmiles or AA Travel
- Has an American Airlines credit card and spends about $20,000 per year on it
- Uses the AA online portal occasionally and purchases $500 of items through it
The above seems like a lot of criteria compared to just flying, and it kind of is. However, I don’t think anyone could argue that this is out of the range of very feasible for almost anyone. Under the old program, this individual wouldn’t have earned elite status. The $1,400 in flights would have been over 50% of the spend required for the lowest Gold status without even starting to consider distance flown. Under the next program, this individual would earn:
- Flying – 7,000 points ($350 * 4 * 5 points/dollar)
- Rental Cars – 1,000 points (500 points/rental)
- Hotels – 3,000 points (multiple options for 3,000 per 1 night stay as shown above)
- Credit Card – 20,000 (1 point/dollar spent)
- AA Shopping Portal – 2,000 points ($500 * 4 points/dollar average)
All the above combine to 33,0000 points. This is above the 30,000 point threshold to earn Gold status with the American Airlines loyalty program. It is obvious from this example that American is encouraging engagement with their whole program and partners under the new loyalty scheme. When individuals do this, they come out ahead of where they would have been previously.
Scenario Outcome: Improvement
Scenario 4 – Elite Status Maximizer
While this isn’t a normal use case, it’s a fun scenario to work through. As elite status is now available through other avenues than flying, it provides an opportunity for individuals who would never get elite status through flying to generate it in other ways. Looking through some of American’s partners, the below are some options to maximize the earning of loyalty points:
- AA Shopping: The maximum per dollar payouts on the platform at the time of writing are 20 points/dollar at FTD (a flower and gift shop). Over the course of a year, you could generate American Airlines Gold status by purchasing $1,500 worth of items from this shop resulting in 30,000 points.
- Rocketmiles: While 2,000 and 3,000 point bookings are fairly common on Rocketmiles, it’s not uncommon to find 6,000 point hotels. You could earn 6,000 points for a stay (even a 1 night stay). You would need to book only 5 of these stays within a year to earn Gold status.
As you can see, there are multiple ways to earn American Airlines status beyond just flying. The two examples above aren’t the only options, and the options change all the time.
Wrap-Up
As described in this post, it’s a mixed bag when it comes to the changes in the American Airlines loyalty program. The changes will be beneficial to some and unfavorable to others. In the end, only time will tell how the updated loyalty program will affect one’s ability to gain elite status with American Airlines.
