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What’s in the Renewed American Airlines AAdvantage Program?

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Jun. 23 2016, Updated 8:05 a.m. ET

Overview of AAdvantage

American Airlines’ AAdvantage frequent flyer program started in 1981. It’s one of the oldest and largest existing card programs in the industry with about 100 million members. The airline has recently decided to shift its card plan from a mileage-based to revenue-based model.

American Airlines (AAL) isn’t the first one to do this. Rivals Delta Air Lines (DAL) and United Airlines (UAL) already have their revenue-based models in place.

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Key changes to the program

According to the new model, which will start on August 1, 2016, American Airlines will change its frequent flier program to award miles based on ticket price rather than distance flown. Card members will earn five miles for every dollar spent. Below is a breakdown of the earnings:

  • General AAdvantage members: 5 miles per dollar spent
  • Gold members ($3,000 and 25,000 miles or 30 segments): 7 miles per dollar spent
  • Platinum members ($6,000 and 50,000 miles or 60 segments): 8 miles per dollar spent
  • Executive Platinum members ($12,000 and 100,000 miles or 120 segments.): 11 miles per dollar spent

Clearly, elite and corporate clients paying full price for tickets will benefit from the new scheme. Customers who buy bargain tickets will be on the losing end. The revenue-based model will also help prevent savvy value-minded customers from tricking the reward system through elaborately constructed long-distance, low-priced routes called mileage runs.

More changes ahead

On January 1, 2017, the airline plans to add a fourth tier—Platinum Pro—to its loyalty program. This will entitle status holders to additional benefits, including 9 miles per dollar spent, two free checked bags, and complimentary auto-requested upgrades on eligible flights within North America and between the United States and Central America.

This is a shift to reward the most valuable customers rather than the ones who merely book a lot of miles on cheap fares to earn status. This will help AAL in the long term since it should be able to deliver a better customer experience.

You can gain exposure to airlines by investing in the PowerShares Dynamic Leisure & Entertainment ETF (PEJ), which holds 5% in Southwest Airlines (LUV), 4.6% in Delta Air Lines (DAL), 4% in United Continental (UAL), and 4% in AAL.

Next, let’s look at American Airlines’ key strengths and weaknesses.

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